UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
NETWORK ACCESS SOLUTIONS CORPORATION
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(Name of Issuer)
Common Stock, $0.001 par value per share
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(Title of Class of Securities)
64120S109
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(CUSIP Number)
Wayne A. Wirtz
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
(210) 351-3736
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(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 7, 2000
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box [ ].
(Page 1 of 8 Pages)
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CUSIP No. 64120S109 13D Page 2 of 8 Pages
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1) NAME OF REPORTING PERSON SBC Communications Inc.
I.D. # 43-1301883
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2) CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3) SEC USE ONLY
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4) SOURCE OF FUNDS: WC
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5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
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NUMBER OF 7) SOLE VOTING POWER 2,956,984
SHARES --------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER 0
OWNED BY --------------------------------------------------
EACH 9) SOLE DISPOSITIVE POWER 2,956,984
REPORTING --------------------------------------------------
PERSON WITH 10) SHARED DISPOSITIVE POWER 0
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11) AGGREGATE AMOUNT BENEFICIALLY OWNED 2,956,984
BY EACH REPORTING PERSON
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12) CHECK IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES
CERTAIN SHARES [ ]
- -----------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 6.1%
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14) TYPE OF REPORTING PERSON: HC
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Page 3 of 8 Pages
Item 1. Security and Issuer
Common Stock, par value $0.001 per share, of Network Access
Solutions Corporation, 100 Carpenter Drive, Sterling, VA 20165.
Item 2. Identity and Background
(a) and (b) The Reporting Person is a Delaware
corporation, with its principal office and principal place of
business at 175 East Houston, San Antonio, Texas 78205-2233.
Other than executive officers and directors, there are no persons
or corporations controlling or ultimately in control of the
Reporting Person. The Reporting Person is a communications
holding company whose subsidiaries and affiliates provide
communications services, including landline and wireless
telecommunications services and equipment, directory advertising,
publishing services and Internet access services.
(c ) Per Instruction C, the name and present principal
occupation of each executive officer and director of the
Reporting Person is set forth in Exhibit I hereto and
incorporated herein by reference. The business address of all of
the individuals listed on Exhibit I is c/o the Vice President and
Secretary, SBC Communications Inc., 175 East Houston, 11th Floor,
San Antonio, Texas 78205.
(d) During the last five years, neither the Reporting
Person, nor, to the best of its knowledge, any of its directors
or executive officers has been convicted in any criminal
proceeding (excluding traffic violations or similar
misdemeanors.)
(e) During the last five years, neither the Reporting
Person nor, to the best of its knowledge, any of its executive
officers or directors has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction
resulting in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws, or finding any violation with
respect to such laws, and which judgment, decree or final order
was not subsequently vacated.
(f) Each executive officer and director of the
Reporting Person is a citizen of the United States, except for
director Carlos Slim Helu, who is a citizen of Mexico.
(g) Delaware.
Item 3. Source and Amount of Funds or Other Consideration
On March 7, 2000, the Reporting Person used $75,000,000.00
of its working capital to purchase 750,000 shares of Series B
Convertible Preferred Stock of the Issuer.
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Page 4 of 8 Pages
Item 4. Purpose of Transaction
The Reporting Person and the Issuer entered into a Stock
Purchase Agreement, dated February 4, 2000 (the "Stock Purchase
Agreement"), pursuant to which the Reporting Person agreed to
purchase, and the Issuer agreed to sell, 750,000 shares of the
Issuer's Series B Convertible Preferred Stock for $75,000.000.00.
The Stock Purchase Agreement further provided that, so long as
the Reporting Person owned all of the shares of the Series B
Convertible Preferred Stock purchased pursuant thereto (or all of
the shares of the Issuer's Common Stock received upon the
conversion of the Series B Convertible Preferred Stock), then the
Reporting Person shall have the right to elect its designee as a
member of the Issuer's Board of Directors, with such director
having no vote until the conversion of the Series B Convertible
Preferred Stock into Common Stock is effected. The purchase and
sale of the Series B Convertible Preferred Stock was consummated
on March 7, 2000, following the receipt of regulatory approvals
and the satisfaction of the other closing conditions.
Under the Certificate of Designations of the Series B
Convertible Preferred Stock (the "Certificate of Designations"),
the shares of the Issuer's Series B Convertible Preferred Stock
are convertible, at any time, at the holder's option, into shares
of the Issuer's Common Stock at a conversion rate of 1:3.2258.
The shares of the Issuer's Series B Convertible Preferred Stock
are also subject to mandatory conversion, at the Issuer's option,
at any time between the second and fifth anniversary of their
issuance, at the same conversion rate of 1:3.2258, provided that
the average closing price of the Issuer's Common Stock in the 30
days preceding the conversion date is at least $31.00 per share.
The closing price necessary for mandatory conversion and the
conversion rate are subject to adjustment in the event of certain
extraordinary events such as a reorganization, share exchange,
reclassification, subdivision or combination of shares, and stock
dividend. The Series B Convertible Preferred Stock pays
dividends at a rate of 7.0% per annum on the stated value of the
Series B Convertible Preferred Stock ($100.00 per share) either
in cash or shares of Series B Convertible Preferred Stock into
Common Stock.
With a conversion ratio of 1:3.2258, the 750,000 shares of
the Issuer's Series B Convertible Preferred Stock that the
Reporting Person holds are immediately convertible into 2,419,350
shares of the Issuer's Common Stock. In addition, on June 4,
1999, as part of the Issuer's initial public offering, the
Reporting Person had purchased 537,634 shares of the Issuer's
Common Stock. The Reporting Person, then, for purposes of
Section 13 of the Securities Exchange Act, is the beneficial
owner of 2,956,984 shares of the Issuer's Common Stock, or
approximately 6.1% of the shares of the Issuer's Common Stock
that would be issued and outstanding if the Reporting Person were
to convert its shares of Series B Convertible Preferred Stock.
Concurrently with the execution of the Stock Purchase
Agreement, a Right of First Offer Agreement (the "Aust Right of
First Offer Agreement") was entered into by the Reporting Person;
Telefonos de Mexico, S.A. de C.V. ("Telmex"), which also
purchased 750,000 shares of Series B Convertible Preferred Stock
from the Issuer; the Issuer; and the Issuer's Chairman, Chief
Executive Officer, and President, Jonathan P. Aust ("Aust").
Aust granted SBC and
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Page 5 of 8 Pages
Telmex a right of first offer with respect to future sales by Aust of any
securities of the Issuer that Aust owns beneficially or of record. The right
of first offer is contingent on the Reporting Person and Telmex owning all of
the shares of Series B Preferred Stock (or any shares of Common Stock
received upon conversion) that they acquired under the Stock
Purchase Agreement.
A similar Right of First Offer Agreement (the "Spectrum
Right of First Offer Agreement") was entered into by the
Reporting Person, Telmex, the Issuer, and two shareholders of the
Issuer, Spectrum Equity Investors II, L.P. ("SEA") and SEA 1998
II, L.P. ("SEI"). SEA and SEI granted the Reporting Person and
Telmex a right of first offer with respect to future sales by SEA
and SEI of any securities of the Issuer that SEA and SEI own
beneficially or of record. The right of first offer is contingent
on the Reporting Person and Telmex owning all of the shares of
Series B Preferred Stock (or any shares of Common Stock received
upon conversion) that they acquired under the Stock Purchase
Agreement.
A Registration Rights Side Letter (the "Registration Rights
Side Letter") was entered into by the Reporting Person, Telmex,
SEA, SEI, and two other shareholders of the Issuer, FBR
Technology Venture Partners L.P. ("FBR") and W2 Venture Partners,
LLC ("W2"). SEA, SEI, FBR and W2 (collectively, the "Prior
Shareholders") consented to the participation of the Reporting
Person and Telmex in any registration statement in which the
Prior Shareholders participated. The Reporting Person likewise
consented to the participation of Telmex and the Prior
Shareholders in any registration statement in which the Reporting
Person participated, and Telmex did the same with respect to the
Reporting Person and the Prior Shareholders.
A Summary of Operating Agreement was entered into by the
Reporting Person, Telmex and the Issuer, pursuant to which the
parties agreed to negotiate definitive agreements concerning the
Reporting Person's and Telmex's purchase of digital subscriber
line and other local telecommunications services from the Issuer.
The Reporting Person and the Issuer were parties to a Loan
Agreement, pursuant to which the Reporting Person lent the Issuer
$15,000,000.00, which accrued interest at the Prime Rate plus 2%
per annum, until regulatory approvals were received for the
closing of the Stock Purchase Agreement, at which point interest
accrued at 7% per annum. Telmex and the Issuer were parties to a
similar Loan Agreement, pursuant to which Telmex lent the Issuer
$15,000,000.00.
The foregoing description is qualified in its entirety by
the Stock Purchase Agreement, the Certificate of Designations,
the Aust Right of First Offer Agreement, the Spectrum Right of
First Offer Agreement, and the Registration Rights Side Letter,
which are referenced in Item 7 of this Schedule 13D and
incorporated in this Item 4 by reference.
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Page 6 of 8 Pages
Item 5. Interest in Securities of the Issuer
(a) As of the date hereof, the Reporting Person could be
deemed to own beneficially an aggregate of 2,956,984 shares of
the Issuer's Common Stock.
(b) The Reporting Person has sole power to vote and dispose
the shares of Common Stock that the Reporting Person beneficially
owns.
(c) See Item 4.
(d) Not Applicable.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
See Item 4.
Item 7. Material to be Filed as Exhibits
Exhibit No. Description
I Directors and Executive Officers of SBC Communications
Inc.
II Stock Purchase Agreement, dated as of February 4, 2000,
between the Issuer and the Reporting Person.
III Certificate of Designations, dated February 4, 2000,
with respect to the Issuer's Series B Convertible
Preferred Stock.
IV Right of First Offer Agreement, dated as of February 4,
2000, among Aust, the Reporting Person, Telmex and the
Issuer.
V Right of First Offer Agreement, dated as of February 4,
2000, among SEI, SEA, the Reporting Person, Telmex and
the Issuer.
VI Registration Rights Side Letter, dated February 4,
2000, from SEA, SEI, FBR and W2 to the Reporting Person
and Telmex.
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Page 7 of 8 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: March 7, 2000
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
James S. Kahan
Senior Executive Vice President -
Corporate Development
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Page 8 of 8 Pages
EXHIBIT INDEX
Exhibit No. Description
I Directors and Executive Officers of SBC Communications
Inc.
II Stock Purchase Agreement, dated as of February 4, 2000,
between the Issuer and the Reporting Person.
III Certificate of Designations, dated February 4, 2000,
with respect to the Issuer's Series B Convertible
Preferred Stock.
IV Right of First Offer Agreement, dated as of February 4,
2000, among Aust, the Reporting Person, Telmex and the
Issuer.
V Right of First Offer Agreement, dated as of February 4,
2000, among SEI, SEA, the Reporting Person, Telmex and
the Issuer.
VI Registration Rights Side Letter, dated February 4,
2000, from SEA, SEI, FBR and W2 to the Reporting Person
and Telmex.
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EXHIBIT I
DIRECTORS AND EXECUTIVE OFFICERS
OF SBC COMMUNICATIONS INC.
The name, present principal occupation or employment, and the
name of any corporation or other organization in which such
employment is conducted, of each director, advisory director and
executive officer of SBC Communications Inc. ("SBC") is set forth
below. The business address of each director and executive
officer is SBC Communications Inc., 175 East Houston, San
Antonio, TX 78205, unless otherwise noted. Unless otherwise
indicated, each occupation set forth opposite an executive
officer's name refers to employment with SBC.
Name Present Principal Occupation or Employment
Directors
Edward E. Whitacre, Jr. Chairman of the Board and Chief
Executive Officer
Royce S. Caldwell President - SBC Operations
Clarence C. Barksdale Vice Chairman, Board of Trustees,
Washington University
James E. Barnes Chairman of the Board, President and
Chief Executive Officer, MAPCO Inc.,
Retired
August A. Busch, III Chairman of the Board and President,
Anheuser-Busch Companies, Inc.
Ruben R. Cardenas Partner, Cardenas, Whitis & Stephen,
L.L.P., Attorneys
William P. Clark Chief Executive Officer, Clark Company
Martin K. Eby, Jr. Chairman of the Board and Chief
Executive Officer, The Eby Corporation
Herman E. Gallegos Independent Management Consultant
Jess T. Hay Chairman, HCB Enterprises Inc.; Chairman
of the Texas Foundation for Higher Education
Bobby R. Inman United States Navy, Retired
Charles F. Knight Chairman and Chief Executive Officer,
Emerson Electric Co.
Mary S. Metz President, S. H. Cowell Foundation
Toni Rembe Partner, Pillsbury Madison & Sutro LLP
S. Donley Ritchey Managing Partner, Alpine Partners
Joyce M. Roche Independent Consultant
Richard M. Rosenberg Chairman and Chief Executive Officer
(Retired), BankAmerica Corporation
Carlos Slim Helu Chairman of the Board, Telefonos de
Mexico, S.A. de C.V.
Advisory Director
Gilbert F. Amelio President and Founder, AmTech, LLC
Exhibit I - Page 1 of 2
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Name Present Principal Occupation or Employment
Executive Officers
Edward E. Whitacre, Jr. Chairman of the Board and Chief
Executive Officer
Royce S. Caldwell President - SBC Operations
James W. Callaway Group President - SBC Services
Cassandra C. Carr Senior Executive Vice President -
External Affairs
James D. Ellis Senior Executive Vice President and
General Counsel
Charles F. Foster Group President - SBC
Karen E. Jennings Senior Executive Vice President - Human
Resources
James S. Kahan Senior Executive Vice President -
Corporate Development
Donald E. Kiernan Senior Executive Vice President, Chief
Financial Officer and Treasurer
Edward A. Mueller President - SBC International Operations
Stanley T. Sigman Group President - SBC National
Operations
Exhibit I - Page 2 of 2
Exhibit II
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NETWORK ACCESS SOLUTIONS CORPORATION
AND
SBC COMMUNICATIONS INC.
February 4, 2000
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TABLE OF CONTENTS
Section 1: Defined Terms....................................................1
Section 2: Terms of Purchase and Sale.......................................7
2.1 Conveyance of Stock..........................................7
2.2 Purchase Price for the Preferred Shares......................7
2.3 Number of Preferred Shares to be Issued at the
Closing....................................................7
Section 3: Closing..........................................................7
3.1 The Closing..................................................7
3.2 Deliveries by SBC............................................8
3.3 Deliveries by NAS............................................8
Section 4: Conditions to NAS's Obligations..................................9
4.1 Consents.....................................................9
4.2 Litigation...................................................9
4.3 SBC Representations; Compliance with Covenants...............9
4.4 Deliveries...................................................9
4.5 SBC Change in Control Event..................................10
4.6 Telmex Agreement.............................................10
Section 5: Conditions to SBC's Obligations..................................10
5.1 Consents.....................................................10
5.2 Litigation...................................................10
5.3 NAS's Representations; Compliance with Covenants.............10
5.4 NAS Change in Control Event..................................11
5.5 Adverse Developments.........................................11
5.6 Deliveries...................................................11
Section 6: Representations and Warranties of SBC............................11
6.1 Organization and Standing....................................11
6.2 Authorization by SBC.........................................11
6.3 Litigation...................................................12
6.4 Finders' and Brokers' Fees...................................12
6.5 Investment Intent; Qualification.............................12
6.6 Representations Not Misleading...............................12
Section 7: Representations and Warranties of NAS............................13
7.1 Organization and Standing of NAS.............................13
i
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7.2 Authorization by NAS; Consents...............................13
7.3 Corporate Documents..........................................14
7.4 Licenses; Qualification......................................14
7.5 Litigation...................................................14
7.6 Exclusive Dealing............................................15
7.7 Compliance with Applicable Laws..............................15
7.8 Title to Preferred Shares; Absence of Liens..................15
7.9 Financial Statements.........................................15
7.10 Conduct of Business in Ordinary Course.......................16
7.11 No Material Adverse Effect...................................16
7.12 Absence of Defaults..........................................16
7.13 No Conflict..................................................16
7.14 Capital Stock of NAS.........................................17
7.15 Finders' and Brokers' Fees...................................17
7.16 Taxes........................................................17
7.17 Subsidiaries.................................................17
7.18 Representations Not Misleading...............................17
Section 8: Covenants of SBC.................................................18
8.1 Cooperation..................................................18
8.2 Confidentiality; Press Releases..............................18
8.3 Definitive Operating Agreement...............................18
8.4 Consent Relating to Registration Rights......................18
8.5 Further Assurances...........................................19
Section 9: Covenants of NAS.................................................19
9.1 Cooperation..................................................19
9.2 Access to NAS Information....................................19
9.3 Ordinary Course Operation....................................19
9.4 Board Representation.........................................19
9.5 Confidentiality; Press Releases..............................20
9.6 Notification of Change in Control Event......................20
9.7 Registration Rights..........................................20
9.8 Listing......................................................23
9.9 Issuance of Other Securities.................................23
9.10 Further Assurances...........................................23
9.11 Use of Proceeds..............................................23
9.12 Definitive Operating Agreement...............................24
9.13 Right of Primary Offer.......................................24
9.14 Government License Application Amendment.....................25
Section 10: Termination.....................................................25
10.1 Terminating Events...........................................25
ii
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10.2 Effect on Obligations........................................26
Section 11: Indemnification.................................................26
11.1 Indemnification by NAS.......................................26
11.2 Indemnification by SBC.......................................27
11.3 Losses.......................................................27
11.4 Survival.....................................................27
11.5 Procedures Relating to Third Party Claims....................28
Section 12: Arbitration.....................................................29
12.1 Resolution of Disputes.......................................29
12.2 Arbitrators..................................................30
12.3 Costs and Fees...............................................30
12.4 Burden of Proof..............................................30
12.5 Award........................................................30
12.6 Agreement Controls...........................................30
Section 13: Miscellaneous...................................................31
13.1 Entire Agreement; Amendment..................................31
13.2 Successors and Assigns.......................................31
13.3 Rights and Remedies..........................................31
13.4 Counterparts.................................................31
13.5 Modification and Waiver......................................31
13.6 Expenses.....................................................32
13.7 Notices......................................................32
13.8 Severability.................................................33
13.9 Governing Law................................................33
13.10 Rules of Construction........................................33
13.11 Ownership Limitation.........................................34
iii
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Schedules:
7.2 Consents Exceptions
7.4 NAS Licenses
7.5 Litigation
7.6 Exclusive Dealing Exceptions
7.8 Outstanding Options or Rights
7.9 Financial Statements
7.10 Ordinary Course Exceptions
7.13 Conflicts
7.14 NAS Capital Stock
7.15 Finders' and Brokers' Fees
7.17 Subsidiaries
Exhibits:
A Certificate of Designations
B Form of Shook, Hardy & Bacon Legal Opinion
C Summary of Operating Agreement
iv
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of
February 4, 2000, is by and between SBC Communications Inc., a
Delaware corporation ("SBC"), and Network Access Solutions
Corporation, a Delaware corporation ("NAS").
RECITALS
WHEREAS, SBC wishes to acquire, and NAS wishes to sell to
SBC, shares of preferred stock of NAS;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, SBC and NAS agree as follows:
Section 1: Defined Terms
The following terms shall have the following meanings in
this Agreement:
"AAA" means the American Arbitration Association.
"Affiliate" means, with respect to a Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Assets" means the contracts, NAS Licenses, personal
property, intellectual property and real property, and all other
assets, rights and properties, tangible and intangible, of NAS
and used or held for use in the NAS Business, including (without
limitation) cash, cash equivalents and accounts receivable.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or
transaction that forms or could form the basis for any specified
consequences.
"Beneficial Owner" means, with respect to any security, a
Person that Beneficially Owns such security.
"Beneficially Own" means having the right to vote or dispose
of, or "beneficially own" as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date of this
Agreement, including pursuant to any agreement, arrangement or
understanding.
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"Business Day" means a day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions are authorized
or required by law or executive order to remain closed in the
domicile of SBC or NAS.
"Closing" means the consummation of the transactions
contemplated by this Agreement in accordance with the provisions
of Section 2 and Section 3.
"Closing Date" shall mean the date on which the Closing
occurs.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, or any subsequent legislative
enactment thereof, as in effect from time to time.
"Common Stock" shall mean, collectively, the Common Stock of NAS.
"Communications Act" means the Communications Act of 1934,
47 U.S.C. Section 151 et seq., as amended and in effect from time
to time.
"Company Control Person" shall have the meaning set forth in
Section 11.2.
"Consents" means all of the consents, permits or approvals
of Governmental Authorities and other Persons necessary or
required to consummate the transactions contemplated hereby.
"Control Person" shall have the meaning set forth in Section
11.1.
"Convertible Securities" means any securities convertible
into, exchangeable for or bearing a right to acquire Common
Stock.
"Definitive Operating Agreement" means a mutually agreeable
definitive operating agreement(s) between NAS and SBC Telecom,
Inc. as contemplated by, and containing terms and conditions
substantially as set forth in, the Summary of Operating Agreement
attached as Exhibit C hereto.
"Dispute" shall have the meaning set forth in Section
12.1(a).
"Dispute Notice" shall have the meaning set forth in Section
12.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and in effect from time to time.
"Enforceability Exceptions" shall have the meaning set forth
in Section 6.2(a).
"FCC" means the Federal Communications Commission or any
successor thereto.
"FCC Rules" means Title 47 of the Code of Federal
Regulations, as amended at any time and from time to time, and
FCC decisions issued pursuant to the adoption of such
regulations.
2
<PAGE>
"Final Order" means an order as to which the time for filing
a request for administrative or judicial relief, or for
instituting administrative review sua sponte, shall have expired
without any such filing having been made or notice of review
having been issued; or, in the event of such filing or review sua
sponte, as to which such filing or review shall have been
disposed of favorably to the order and the time for seeking
further relief with respect thereto shall have expired without
any request for such further relief having been filed.
"Fully Diluted" shall mean, with respect to the number of
Shares outstanding on a fully diluted basis, the number of Shares
which would be outstanding at the time of determination assuming
the conversion, exchange or exercise of all Convertible
Securities (irrespective of any legal or contractual restriction
on such exercise, exchange or conversion), and any reference
herein to the number of Shares outstanding shall mean the number
of Shares outstanding assuming no conversion, exchange or
exercise of Convertible Securities.
"GAAP" means generally accepted accounting principles
consistent with the past practices of NAS.
"Governmental Authority" means (i) the United States, any
state, commonwealth, territory, or possession thereof and any
political subdivision or quasi-governmental authority of any of
the same, including but not limited to courts, tribunals,
departments, commissions, boards, bureaus, agencies, counties,
municipalities, provinces, parishes, and other instrumentalities,
and (ii) any foreign (as to the United States) sovereign entity,
including but not limited to nations, states, republics, kingdoms
and principalities, any province, commonwealth, territory or
possession thereof, and any political subdivision, quasi-
governmental authority, or instrumentality of any of the same.
"Holder" means SBC and each transferee of SBC's rights
hereunder that is a Wholly-Owned SBC Subsidiary and any other
transferee of SBC's rights hereunder to which NAS consents, which
consent shall not be unreasonably withheld.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended and in effect from time to time.
"Indemnified Party" shall have the meaning set forth in
Section 11.5.
"IRS" shall mean the Internal Revenue Service and any
governmental body or agency succeeding to the functions thereof.
"Judgment" means any judgment, writ, order, injunction,
award or decree of any court, judge, justice or magistrate,
including any bankruptcy court, or arbiter, and any order of or
by any other Governmental Authority.
"Knowledge" with respect to NAS means the actual knowledge
of NAS and, with respect to SBC, means the actual knowledge of
SBC.
3
<PAGE>
"Legal Requirements" means applicable common law and any
applicable statute, ordinance, code or other law, rule,
regulation, order, technical or other standard, requirement or
procedure enacted, adopted, promulgated or applied by any
Governmental Authority, including any Judgment.
"Lien" means any security agreement, financing statement
filed with any Governmental Authority, conditional sale or other
title retention agreement, any lease, consignment or bailment
given for the purpose of security, any lien, mortgage, indenture,
pledge, option, encumbrance, restriction on transfer, adverse
interest, constructive trust or other trust, claim, attachment,
exception to or defect in title or other ownership interest
(including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, easements, rights-of-
way, restrictive covenants, leases and licenses) of any kind,
which otherwise constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement,
contract or otherwise.
"Litigation" means any claim, action, suit, proceeding,
arbitration, investigation, hearing or other activity or
procedure that could result in a Judgment, and any notice of any
of the foregoing.
"Losses" means any losses, liabilities, damages, Liens,
penalties, costs, fines and expenses, whether in connection with
any Litigation or otherwise, including but not limited to
interest which may be imposed in connection therewith, expenses
of investigation, reasonable fees and disbursements of counsel
and other experts, and the cost to any Person making a claim or
seeking indemnification under this Agreement with respect to
funds expended by such Person by reason of the occurrence of any
event with respect to which indemnification is sought.
"Material Adverse Effect" shall mean, with respect to either
party, a material adverse change in the financial condition or
financial results of operations of such party or the occurrence
of any event or combination of events that is reasonably likely
to result in a material adverse change in the financial condition
or financial results of operations of such party and its
Subsidiaries taken as a whole. When the phrase "material
adverse" is used in this Agreement and is not used as a
capitalized term and in the phrase "Material Adverse Effect,"
such "material adverse" reference shall not be defined or
construed as provided in the immediately preceding sentence or in
the context of such party taken as a whole but instead shall mean
a material adverse effect, change or consequences only as to the
matter with respect to which the phrase "material adverse" is
utilized.
"NAS" shall have the meaning set forth in the preamble
hereto.
"NAS Business" means NAS's business as conducted in the
United States in accordance with NAS's existing operations and
business plans.
"NAS Change in Control Event" shall be deemed to have
occurred if (i) there shall be consummated (x) any consolidation
or merger of NAS in which NAS is not the continuing or surviving
corporation or pursuant to which shares of the Common Stock would
be converted into cash, securities or other property, other than
a merger of NAS in which the holders of the Common
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Stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the Assets of NAS,
or (ii) the stockholders of NAS approved any plan or proposal for
the liquidation or dissolution of NAS, or (iii) any Person other
than Jonathan P. Aust and Spectrum Equity Investors II, L.P shall
become the Beneficial Owner of 20% or more of the outstanding
Common Stock or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
entire NAS Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the
nomination for election by NAS's stockholders, of each new
director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period.
"Nasdaq" means Nasdaq National Market.
"NAS Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
NAS as of September 30, 1999 and as of December 31, 1998 and the
related consolidated statements of income, shareholders' equity
and cash flows (including related notes and schedules, if any)
and (ii) the consolidated balance sheets of NAS (including
related notes and schedules, if any) and related statements of
income, shareholders' equity and cash flows (including related
notes and schedules, if any) with respect to periods ended
subsequent to September 30, 1999.
"NAS Licenses" means all Section 214 authorizations or
microwave and other spectrum licenses issued by the FCC, and all
certificates of public convenience and necessity or comparable
authorizations issued by any state public utilities commission or
comparable regulatory authority, and held by NAS.
"New Securities" shall have the meaning set forth in Section
9.13(d)(i).
"Note" shall mean that certain Promissory Note dated of even
date herewith, in the original principal amount of
$15,000,000.00, payable by NAS to SBC.
"Notice" shall have the meaning set forth in Section
9.13(a).
"Outstanding" with respect to the number of Shares
outstanding on a fully diluted basis, shall have the meaning set
forth in the definition of the term, "Fully Diluted."
"Percentage" shall have the meaning set forth in Section
9.13(d)(ii).
"Permitted Registration Date" means the date that is the
later of (i) two years from the Closing Date, or (ii) the date of
termination of the Definitive Operating Agreement.
"Person" means any natural person, Governmental Authority,
corporation, general or limited partnership, limited liability
company, limited liability partnership, joint venture, trust,
estate, association, organization or unincorporated entity of any
kind.
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"Preferred Shares" means the Convertible Series B Preferred
Stock of NAS, as the terms of such Preferred Shares are set forth
in the Certificate of Designations attached as Exhibit A hereto.
"Prior Holders" shall have the meaning set forth in Section
9.7.
"Purchase Price" means $75,000,000.00.
"Registration Request" shall have the meaning set forth in
Section 9.7(b).
"Registration Statement" shall have the meaning set forth in
Section 9.7(b).
"SBC" shall have the meaning set forth in the preamble
hereto.
"SEC" shall mean the Securities and Exchange Commission and
any governmental body or agency succeeding to the functions
thereof.
"SBC Change in Control Event" shall be deemed to have
occurred if (i) there shall be consummated (x) any consolidation
or merger of SBC in which SBC is not the continuing or surviving
corporation or pursuant to which shares of the Common Stock would
be converted into cash, securities or other property, other than
a merger of SBC in which the holders of the Common Stock
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the Assets of SBC,
or (ii) the stockholders of SBC approved any plan or proposal for
the liquidation or dissolution of SBC, or (iii) any Person shall
become the Beneficial Owner of 20% or more of the outstanding
Common Stock or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
entire SBC Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the
nomination for election by SBC's stockholders, of each new
director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period.
"Securities Act" shall mean the Securities Act of 1933, as
amended and in effect from time to time.
"Selling Shareholder" shall have the meaning set forth in Section
9.7(b).
"Subsidiary" of any corporation shall mean any other
corporation, limited liability company, general or limited
partnership, limited liability partnership, joint venture, trust
or other entity of which the outstanding capital stock possessing
a majority of voting power in the election of directors
(otherwise than as the result of a default) is owned or
controlled by such corporation directly or indirectly through
Subsidiaries.
"Taxes" means all levies and assessments of any kind or
nature imposed on NAS by any Governmental Authority, including
but not limited to all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding,
payroll, employment, excise or
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property taxes, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
"Telmex" shall mean Telefonos de Mexico, S.A. de C.V.
"Third Party Claim" shall have the meaning set forth in
Section 11.5.
"Wholly-Owned SBC Subsidiary" means any corporation, limited
liability company, general or limited partnership, limited
liability partnership, joint venture, trust or other entity of
which the outstanding capital stock is wholly owned directly or
indirectly by SBC and which is formed for business purposes that
are unrelated to the ability of such entity to receive any rights
or interests hereunder or associated herewith.
Section 2: Terms of Purchase and Sale
2.1 Conveyance of Stock
Subject to the terms and conditions of this Agreement, NAS
shall issue to SBC, free and clear of all Liens, the number of
shares of its newly issued Convertible Preferred Stock set forth
in Section 2.3 (the "Preferred Shares").
2.2 Purchase Price for the Preferred Shares
The aggregate purchase price for the Preferred Shares
("Purchase Price") shall be $75,000,000.00.
2.3 Number of Preferred Shares to be Issued at the Closing
The number of shares of Preferred Shares to be acquired by
SBC at the Closing shall be 750,000.
Section 3: Closing
3.1 The Closing
Upon the terms and subject to the conditions contained
herein (each party agreeing to notify the other when all closing
conditions have occurred), the Closing shall take place at the
offices of Arnold & Porter in Washington, D.C., at 2:00 p.m.
local time on the date (the "Closing Date") which is five (5)
Business Days after each of the conditions set forth in Section 4
and 5 hereof have been satisfied or waived, or any other mutually
agreed upon time.
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3.2 Deliveries by SBC
On the Closing Date, SBC shall deliver or cause to be
delivered to NAS the following, in form and substance reasonably
satisfactory to NAS and its counsel:
(a) The Purchase Price, (i) by wire transfer in the form of
immediately available funds to an account designated by
NAS and (ii) to the extent of the amount of unpaid
principal and accrued interest on the Note, by tender
of the Note;
(b) The Note, marked "Paid and Cancelled";
(c) A certificate, dated as of the Closing Date, executed
by a Senior Vice President of SBC, certifying that the
conditions set forth in Section 4 have been fulfilled;
(d) A certificate, dated as of the Closing Date, executed
by SBC's Secretary certifying that the execution of
this Agreement and the consummation of the transaction
contemplated hereby have been authorized and approved
by all necessary corporate action of SBC, which remains
in full force and effect and has not been modified or
amended; and
(e) Such other documents and instruments as shall be
reasonably necessary to effect the intent of this
Agreement and consummate the transactions contemplated
by this Agreement.
3.3 Deliveries by NAS
On the Closing Date, NAS shall deliver to SBC the following,
in form and substance reasonably satisfactory to SBC and its
counsel:
(a) A certificate or certificates for all of the Preferred
Shares;
(b) A certificate, dated as of the Closing Date, executed
by the President of NAS, certifying that all the conditions set
forth in Section 5 have been fulfilled;
(c) A certificate, dated as of the Closing Date, executed
by the Secretary of NAS, certifying that the resolutions, as
attached to such certificate, were duly adopted by the Board of
Directors of NAS authorizing and approving the execution of this
Agreement and the consummation of the transactions contemplated
hereby, and that such resolutions remain in full force and effect
and have not been modified or amended;
(d) SBC shall have been furnished with a favorable opinion,
dated the Closing Date; of outside counsel to NAS (which counsel
shall be reasonably satisfactory to SBC), confirming the matters
set forth in Sections 7.1, 7.2 (as to all transaction documents),
7.5, 7.8, 7.13, 7.14, and exemption of the issuance and sale of
the Series B Preferred Stock from the registration
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requirements of the federal and state securities laws, which opinion shall
be in form and substance reasonably satisfactory to SBC.
(e) Opinions of Shook, Hardy & Bacon, NAS's state
regulatory counsel, dated as of the Closing Date, substantially
in the form of Exhibit B hereto; and
(f) Such other documents and instruments as shall be
reasonably necessary to effect the intent of this Agreement and
consummate the transactions contemplated by this Agreement.
Section 4: Conditions to NAS's Obligations
The obligations of NAS to sell the Preferred Shares and
effect the Closing shall be subject to the satisfaction by SBC,
or waiver thereof by NAS, on or prior to the Closing Date of all
of the following conditions:
4.1 Consents
All Consents shall have been obtained.
4.2 Litigation
No Litigation shall be pending, and no Legal Requirement
shall have been enacted, entered, promulgated or issued, or shall
have become or be deemed applicable, to any of the transactions
contemplated by this Agreement by any Governmental Authority,
that would (i) prohibit SBC's ownership of the Stock or prohibit
NAS's operation of the NAS Business in any material respect as it
is being operated as of the date of this Agreement, (ii) prevent
or make illegal the consummation of the transactions contemplated
by this Agreement.
4.3 SBC Representations; Compliance with Covenants
SBC's representations and warranties contained in Section 6
shall be accurate in all material respects when made and at and
as of the Closing with the same effect as though such
representations and warranties had been made at and as of the
Closing, and SBC shall have in all material respects performed
and complied with all covenants and agreements and conditions
required by this Agreement to be performed or complied with by it
prior to or on the Closing, provided that this condition shall be
satisfied if the inaccuracy of any representation or warranty, or
the nonperformance or noncompliance with any covenant, agreement
or condition, individually or in the aggregate, does not have a
Material Adverse Effect.
4.4 Deliveries
SBC shall have made or stand willing and able to make all of
the deliveries to NAS set forth in Section 3.2.
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4.5 SBC Change in Control Event
No SBC Change in Control Event shall have occurred.
4.6 Telmex Agreement
Telmex shall have executed a stock purchase agreement with
respect to the purchase of 750,000 Preferred Shares in the form
of this Agreement except for appropriate changes to reflect
Telmex as a party thereto.
Section 5: Conditions to SBC's Obligations
The obligations of SBC to purchase the Preferred Shares and
effect the Closing shall be subject to the satisfaction, or
waiver by SBC, on or prior to the Closing Date of all of the
following conditions:
5.1 Consents
All Consents shall have been obtained.
5.2 Litigation
No Litigation shall be pending, and no Legal Requirement
shall have been enacted, entered, promulgated or issued, or shall
have become or be deemed applicable, to any of the transactions
contemplated by this Agreement by any Governmental Authority,
that would (i) prohibit SBC's ownership of the Preferred Shares
or prohibit NAS's operation of the NAS Business in any material
respect as it is being operated as of the date of this Agreement,
or (ii) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
5.3 NAS's Representations; Compliance with Covenants
NAS's representations and warranties contained in Section 7
shall be accurate in all respects when made and at and as of the
Closing with the same effect as though such representations and
warranties had been made at and as of the Closing except:
(i) insofar as any such representation or warranty is made
specifically as of the date of this Agreement or as of any other
specified earlier date (in which event the same shall continue at
and as of the Closing Date to be true and correct as of such
earlier date) and (ii) with respect to changes contemplated by
this Agreement, and NAS shall have in all material respects
performed and complied with all covenants and agreements and
conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date, provided that this
condition shall be satisfied if the inaccuracy of any
representation or warranty, or the nonperformance or
noncompliance with any covenant, agreement or condition,
individually or in the aggregate, does not have a Material
Adverse Effect.
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5.4 NAS Change in Control Event
No NAS Change in Control Event shall have occurred.
5.5 Adverse Developments
Since September 30, 1999, there shall not have occurred any
change, or any development involving a prospective change, in or
affecting the business, operations, properties, Assets or
prospects of NAS which materially impairs the value of the
Preferred Shares.
5.6 Deliveries
NAS shall have made or stand willing and able to make all of
the deliveries to SBC set forth in Section 3.3.
Section 6: Representations and Warranties of SBC
SBC hereby represents and warrants to NAS as follows:
6.1 Organization and Standing
SBC 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 execute and deliver
this Agreement and to perform its obligations hereunder.
6.2 Authorization by SBC
(a) This Agreement has been duly and validly executed and
delivered by SBC and constitutes the legal, valid and binding
obligation of SBC enforceable against SBC in accordance with its
terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally or (ii) general
principles of equity (collectively, the "Enforceability
Exceptions").
(b) Neither the execution, delivery and performance of this
Agreement by SBC nor the consummation by SBC of the transactions
contemplated herein will, with or without the giving of notice or
the lapse of time, or both, (i) violate any Legal Requirements to
which SBC is subject, (ii) conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default
under, the charter or by-laws of SBC or any material agreement or
commitment to which SBC is a party or by which SBC or any of
SBC's assets, may be bound or affected, or (iii) require SBC to
obtain any authorization, consent, approval or waiver from, or to
make any filing with, any Governmental Authority or non-
governmental third party. NAS has informed SBC that the
approvals referred to on Schedule 7.2 are required for
consummation of the transactions contemplated by this Agreement.
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6.3 Litigation
There is no Litigation pending against SBC or, to the best
of SBC's Knowledge, any Basis for Litigation or threatened
Litigation against SBC which seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated
hereby. SBC is not a party to or involved in any Litigation
which has a material adverse effect on SBC's ability to
consummate, or would prevent the consummation of, the
transactions contemplated by this Agreement.
6.4 Finders' and Brokers' Fees
Neither SBC, nor anyone on behalf of SBC, has any
obligations to any broker, finder or agent, or agreed to pay any
brokerage fee, finder's fee or commission in connection with this
Agreement or the transactions contemplated hereby.
6.5 Investment Intent; Qualification
(a) SBC is acquiring the Preferred Shares solely for its
own account, for investment purposes only, and not with a view to
any distribution thereof, in whole or in part, within the meaning
of the Securities Act or any applicable state securities laws.
The Preferred Shares will not be resold by SBC unless registered
pursuant to the Securities Act and any applicable state
securities laws or unless an exemption therefrom is available.
SBC hereby acknowledges that NAS will rely upon the truth of the
representations made in this Section 6.5 in determining that an
exemption from the registration requirements of the securities
laws is available in connection with the sale of the Preferred
Shares pursuant to this Agreement.
(b) SBC has the ability to evaluate the merits and risks
associated with its investment in the Preferred Shares on the
basis of SBC's knowledge and experience in financial and business
matters. SBC is an "accredited investor" as defined in Rule 501
of the General Rules and Regulations under the Securities Act.
SBC has not relied upon any representation or warranty made by
NAS, or by any person on behalf of NAS, other than the
representations and warranties contained in this Agreement.
6.6 Representations Not Misleading
The representations made by SBC in this Agreement do not
contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
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Section 7: Representations and Warranties of NAS
NAS hereby represents and warrants to SBC as follows:
7.1 Organization and Standing of NAS
NAS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with all
requisite power and authority (corporate and other) to own its
properties and conduct its business as now being conducted, and
is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction where the ownership of its
properties or the conduct of its business makes such
qualification necessary, except in those jurisdictions where
failure so to qualify will not permanently impair title to a
material amount of its properties or its rights to enforce in all
material respects contracts against others or expose it to
substantial liabilities in such jurisdictions. Each Subsidiary
of NAS is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation with
all requisite power and authority (corporate and other) to own
its properties and conduct its business as now being conducted,
and is duly qualified to do business as a foreign corporation in
good standing in each jurisdiction where the ownership of its
properties or the conduct of its business makes such
qualification necessary, except in those jurisdictions where
failure so to qualify will not permanently impair title to a
material amount of its properties or its rights to enforce in all
material respects contracts against others or expose it to
substantial liabilities in such jurisdictions.
7.2 Authorization by NAS; Consents
(a) NAS has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement. NAS has taken all corporate action necessary to
authorize this Agreement and the issue, sale and delivery of the
Preferred Shares. This Agreement has been duly authorized,
executed and delivered by NAS and is a legal, valid and binding
obligation of NAS enforceable in accordance with its terms,
except as such enforceability may be limited by the
Enforceability Exceptions.
(b) All material Consents required to be obtained by NAS
are set forth on Schedule 7.2. Except for the Consents set forth
in Schedule 7.2, neither the execution, delivery and performance
of this Agreement by NAS nor the consummation by NAS of the
transactions contemplated herein will, with or without the giving
of notice or the lapse of time, or both, (i) violate any Legal
Requirements to which NAS is subject, (ii) conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, the charter or by-laws of NAS, or any
NAS License, any material contract to which NAS is a party or by
which NAS may be bound or affected, or (iii) require NAS to
obtain any authorization, consent, approval or waiver from, or to
make any filing with, any Governmental Authority or non-
governmental third party.
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7.3 Corporate Documents
True and correct copies of the Amended and Restated
Certificate of Incorporation and the Amended and Restated By-Laws
of NAS, certified by an appropriate officer of NAS, have been
delivered to SBC and such Amended and Restated Certificate of
Incorporation, as amended, and Amended and Restated By-Laws have
not been amended since the respective dates of certification
thereof, nor has the Board of Directors or the shareholders of
NAS taken any action for the purpose of effecting the amendment
or modification of such Amended and Restated Certificate of
Incorporation or Amended and Restated By-Laws.
7.4 Licenses; Qualification
(a) NAS or its Subsidiaries hold all the NAS Licenses
listed in Schedule 7.4 hereto in its corporate name. The NAS
Licenses listed in Schedule 7.4 are all of the material and
necessary Licenses which are required in connection with the
current operation of the NAS Business. Except as set forth on
Schedule 7.4, all NAS Licenses are currently in full force and
effect and there are no pending or, to the Knowledge of NAS,
threatened revocation proceedings which would have a Material
Adverse Effect on the operation of the NAS Business, nor, to the
Knowledge of NAS, is there any Basis for any such proceeding.
NAS has made available to SBC for SBC's review, accurate and
complete copies of all NAS Licenses.
(b) All fees due and payable to Governmental Authorities
pursuant to the NAS Licenses have been paid and, except as set
forth on Schedule 7.4, no event has occurred which, with or
without the giving of notice or the lapse of time or both, would
constitute grounds for revocation of the NAS Licenses. Except as
set forth on Schedule 7.4, NAS is in compliance in all material
respects with the terms of the NAS Licenses, and there is no
condition, event or occurrence existing, nor is there any
proceeding being conducted of which NAS has received notice, nor,
to NAS's Knowledge, is there any proceeding threatened, by any
Governmental Authority, which would cause the termination,
suspension, cancellation or nonrenewal of any of the NAS
Licenses, or the imposition of any material penalty or fine by
any Governmental Authority, nor, to the Knowledge of NAS, is
there any Basis for any such proceeding.
(c) Except as set forth on Schedule 7.4, to NAS's
Knowledge, all applications, reports, fees, filings and other
submissions required by any Governmental Authority have been made
or paid in a timely fashion, the noncompliance with which
reasonably could have a Material Adverse Effect.
7.5 Litigation
There is no Litigation pending against NAS or any of its
Subsidiaries, or, to the Knowledge of NAS, a Basis for Litigation
or threatened Litigation against NAS or any of its Subsidiaries
which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. Except for
those matters disclosed on Schedule 7.5, as of the date hereof
there is no Litigation or, to the Knowledge of NAS, Basis for
Litigation, against NAS or any of its Subsidiaries (including
proceedings concerning labor disputes or grievances, civil
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rights discrimination cases and affirmative action proceedings) nor is
there any governmental investigation pending or, to NAS's Knowledge, Basis for
governmental investigation or threatened governmental investigation relating to
NAS or any of its Subsidiaries or to which NAS or any such Subsidiary is a
party, nor is there any Judgment relating to NAS or any of its Subsidiaries or
to which NAS or any of its Subsidiaries is a party which is unsatisfied or
requires continuing compliance. Neither NAS nor any of its Subsidiaries is a
party to or involved in any Litigation which has a Material Adverse Effect upon
NAS's ability to consummate, or would prevent the consummation of, the
transactions contemplated by this Agreement.
7.6 Exclusive Dealing
Except as set forth on Schedule 7.6, neither NAS nor any of
its Affiliates is a party to any currently effective agreement,
written or oral, involving the sale of any NAS Securities, a
material portion of NAS's Assets, or any of the NAS Business to
any Person other than SBC and Telmex.
7.7 Compliance with Applicable Laws
NAS and each of its Subsidiaries has complied and presently
is in compliance with all applicable Legal Requirements.
7.8 Title to Preferred Shares; Absence of Liens
(a) The Preferred Shares have been duly authorized for
issuance and are validly issued, fully paid and nonassessable.
None of the Preferred Shares has been issued in violation of, or
is subject to, any preemptive or subscription or similar rights.
Except as disclosed on Schedule 7.8 there are no outstanding
options or rights of any kind to acquire or subscribe for any
Preferred Shares nor are there any obligations to issue, sell or
otherwise cause to become outstanding any such options, rights,
capital stock or securities. Except as disclosed on
Schedule 7.8, NAS is not a party to, and does not have any
Knowledge of, any voting trusts, proxies, voting agreements or
other agreements with respect to the voting of the capital stock
of NAS.
(b) SBC will acquire at the Closing good title to the
Preferred Shares, free and clear of all Liens.
(c) NAS owns all of the issued and outstanding capital
stock of each of its Subsidiaries.
7.9 Financial Statements
Attached as Schedule 7.9 are the unaudited NAS Financial
Statements for September 30, 1999 in the form included in NAS's
Form 10-Q for the nine months ended September 30, 1999. The NAS
Financial Statements have been prepared by NAS in accordance with
GAAP and present fairly the financial position of NAS and its
Subsidiaries as of the dates of such
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statements. There are no material contingent liabilities that are not
disclosed on the NAS Financial Statements.
7.10 Conduct of Business in Ordinary Course
Since September 30, 1999, and except as set forth on
Schedule 7.10, NAS has conducted the NAS Business only in the
ordinary course and consistent with past practices and has not:
(i) made any material increase in compensation payable or to
become payable to any senior executives of NAS, or any material
change in personnel policies, insurance benefits or other
compensation arrangements affecting NAS's employees; (ii) made
any sale, assignment, lease or other transfer of any of the
Assets, other than obsolete Assets no longer usable in the
operation of the NAS Business or other Assets sold or disposed of
in the normal course of business with suitable replacements being
obtained therefor; (iii) experienced any physical damages,
destruction or loss exceeding $50,000.00 in the aggregate
affecting the NAS Business that is not covered by insurance or
has not been remedied within 30 days; (iv) incurred any
indebtedness or Liens except in the ordinary course and
consistent with past practices; (v) paid any dividends; or
(vi) waived any material rights of NAS under any contract or NAS
License.
7.11 No Material Adverse Effect
Since September 30, 1999, there has been no Material Adverse
Effect.
7.12 Absence of Defaults
Neither NAS nor any of its Subsidiaries is in material
default under or in material violation of any provision of its
Amended and Restated Certificate of Incorporation or Amended and
Restated By-Laws or contained in any other agreement or
instrument to which it is a party or by which it is bound or to
which any of its properties is subject, and neither NAS nor any
of its Subsidiaries is in material violation of any statute,
order, rule or regulation of any court or governmental agency or
body having jurisdiction over it or any of its properties.
7.13 No Conflict
Except as set forth on Schedule 7.13, neither the execution
and delivery by NAS of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by NAS with
its obligations hereunder:
(i) will conflict with, or result in a breach or
violation of, or constitute a default under, any provision
of the Amended and Restated Certificate of Incorporation or
Amended and Restated By-Laws of NAS or any law, rule,
regulation, order, injunction or decree of any court,
administrative authority or arbitrator applicable to NAS or
any property or Assets of NAS, or will conflict with, or
result in a breach or violation of or constitute a default
in the performance, observance or fulfillment of any
obligation under, or constitute, or, with the giving of
notice or lapse of time or both, would constitute, an event
of default by NAS, or result in the acceleration of any
obligation, or require any
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consent or approval, under, any agreement or instrument to which
NAS is a party or by which it or any of its properties or Assets are
bound;
(ii) will result in the creation or imposition of any
Lien upon any of the Assets of NAS; or
(iii) will require any action, consent or approval of,
or filing with, any Governmental Authority.
7.14 Capital Stock of NAS
The authorized capital stock of NAS as of the date hereof is
as set forth on Schedule 7.14 and no other shares are issued or
outstanding, except as a result of the expiration of employee
options on February 4, 2000. Each issued and outstanding share
of Common Stock is duly and validly authorized and issued and is
fully paid and nonassessable. The Preferred Shares, when issued
and delivered to SBC pursuant to this Agreement will be duly and
validly authorized and issued and fully paid and nonassessable.
There is no existing option, warrant, call or commitment of any
kind relating to the capital stock of NAS or securities
convertible into capital stock of NAS except as set forth on
Schedule 7.14. The Preferred Shares are not and will not at the
time of issuance be subject to any preemptive right of any
shareholder.
7.15 Finders' and Brokers' Fees
Neither NAS, nor anyone on behalf of NAS, has any
obligations to any broker, finder or agent, or agreed to pay any
brokerage fee, finder's fee or commission in connection with this
Agreement and the transactions contemplated hereby except as set
forth on Schedule 7.15.
7.16 Taxes
NAS and each of its Subsidiaries has filed or caused to be
filed all federal, state and local tax returns which are required
to be filed by it, and has paid or caused to be paid all taxes
shown to be due and payable on such returns or on any assessments
received by it, including payroll taxes.
7.17 Subsidiaries
Other than as set forth on Schedule 7.17 hereto, NAS has no
Subsidiaries.
7.18 Representations Not Misleading
The representations made by NAS in this Agreement do not
contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
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Section 8: Covenants of SBC
SBC hereby covenants and agrees with NAS as follows:
8.1 Cooperation
SBC will use commercially reasonable efforts and cooperate
with NAS to secure promptly all necessary Consents.
SBC will not sell or otherwise dispose of any Preferred
Shares except in compliance with the provisions of the Securities
Act, the SEC's regulations thereunder and other applicable
federal and state securities and Blue Sky laws.
8.2 Confidentiality; Press Releases
No press release or public disclosure, either written or
oral, of the existence or terms of this Agreement shall be made
by SBC without the consent of NAS, and SBC shall furnish to NAS
advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby
and the date upon which SBC proposes to make such press release.
This provision shall not, however, be construed to prohibit SBC
from making any disclosures to any Governmental Authority or
other Person which it is required to make under any Legal
Requirement, or to obtain any Consents.
8.3 Definitive Operating Agreement
Promptly following the execution of this Agreement, SBC
shall, and shall cause SBC Telecom, Inc. to, negotiate in good
faith the Definitive Operating Agreement. The Definitive
Operating Agreement shall contain the substance of the terms and
conditions set forth in the Summary of Operating Agreement
attached as Exhibit C and such other terms and conditions as the
parties may mutually agree upon.
8.4 Consent Relating to Registration Rights
Upon receipt by NAS of the consents of the Prior Holders
referred to in Section 9.7, SBC (and any Holder) also will
consent (i) to permit each Prior Holder to participate in any
registration statement in which the Holders may participate and
(ii) to the extent not all shares to be offered by the Holders
and Prior Holders may be sold under any such registration
statement, to reduce the number of shares the Holders, as a
group, may sell under such registration statement on a pro rata
basis with the Prior Holders as a group, with such pro rata
reduction based on the number of shares of Common Stock, or the
shares of Common Stock represented by Convertible Securities,
that each group owns or Beneficially Owns at the time of the
relevant Registration Request.
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8.5 Further Assurances
At any time or from time to time after the Closing Date, SBC
shall execute and deliver any further instruments or documents,
and take all such further action as NAS may reasonably request,
in order to effect this Agreement and issue and deliver the
Preferred Shares to SBC free and clear of all Liens.
Section 9: Covenants of NAS
NAS hereby covenants and agrees with SBC as follows:
9.1 Cooperation
NAS will use commercially reasonable efforts and cooperate
with SBC to secure promptly all necessary Consents.
9.2 Access to NAS Information
During the period prior to Closing, NAS will grant to SBC
and its representatives reasonable access to all the premises,
books, records, inventory, and physical plant relating to NAS.
NAS shall cause its representatives and independent auditors to
furnish to SBC such financial and other data and information with
respect to NAS as SBC and/or its independent accountants and
counsel shall reasonably request, to the extent already in
existence and permitted by law.
9.3 Ordinary Course Operation
Between the date of the Agreement and the Closing, NAS (i)
shall, in all material respects, operate the NAS Business, serve
its customers, and preserve and maintain the Assets of NAS and
relationships with customers, vendors and employees in a
reasonable and prudent manner and (ii) shall, in all material
respects, conduct the NAS Business in the ordinary course.
Through the Closing Date, NAS will use its best efforts to
maintain the current status of the NAS Licenses.
9.4 Board Representation
NAS shall ensure that SBC, as long as SBC owns all of the
Preferred Shares issued upon Closing or all of the Common Stock
issued upon conversion of such Preferred Shares (or owns a
greater number of Preferred Shares or shares of Common Stock than
originally issued upon Closing or conversion), shall have the
right to elect its designated nominee as a member of the Board of
Directors of NAS. Until conversion of Preferred Shares to Common
Stock, such member shall be a nonvoting member; thereafter, the
member shall be a full voting member of the Board of Directors.
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9.5 Confidentiality; Press Releases
No press release or public disclosure, either written or
oral, of the existence or terms of this Agreement shall be made
by NAS without the consent of SBC, and NAS shall furnish to SBC
advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby
and the date upon which NAS proposes to make such press release.
This provision shall not, however, be construed to prohibit NAS
from making any disclosures to any Governmental Authority or
other Person which it is required to make under any Legal
Requirement, or to obtain any Consents.
9.6 Notification of Change in Control Event
NAS shall promptly notify SBC upon the occurrence of any NAS
Change in Control Event.
9.7 Registration Rights
(a) The registration rights in this Section 9.7 as they
apply to the Holders, Telmex and the stockholders of NAS who
have, as of the date of this Agreement, registration rights as to
their stock in NAS (the "Prior Holders") are subject to that
certain letter agreement of even date among SBC, Telmex and the
Prior Holders.
(b) After the Permitted Registration Date, any Holder
holding, in the aggregate, at least 500,000 shares of Common
Stock issued upon the conversion of the Preferred Shares, shall
have the right, on one occasion only, by written request (a
"Registration Request") of one or more Holders (the "Selling
Shareholders") to NAS, to require NAS to prepare a registration
statement (the "Registration Statement") on the appropriate form
under the Securities Act with respect to the Common Stock then
owned by such Selling Shareholders for use in connection with an
underwritten public distribution of all or part of the Subject
Stock.
(c) If at any time after the Permitted Registration Date,
NAS shall propose to prepare on its own behalf or on behalf of
any holders of any of its Common Stock a registration statement
in connection with an underwritten public offering of any such
shares of Common Stock, NAS shall give each Holder written notice
at least twenty or, in case of a registration statement proposed
to be filed pursuant to Rule 415 of the Securities Act, ten
Business Days before the anticipated filing date of such
registration statement. Should any Holder desire to have any
shares of Common Stock included in such registration statement,
such Holder shall so notify NAS in writing (which notice, and the
notice of all other Holders with respect to such registration
statement, shall be deemed to be a Registration Request) no later
than ten or, in the case of a registration statement proposed to
be filed pursuant to Rule 415 of the Securities Act, five
Business Days after NAS's notice is given, setting forth the
number of shares of Common Stock which such Holder requests to be
included in the registration statement and providing any other
information requested by NAS in its original notice relating to
inclusion in the registration statement. Any such registration
statement that includes shares of Common Stock owned by any
Holder is hereinafter included in the term "Registration
Statement" and each Holder who owns
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shares of Common Stock included in a Registration Statement shall be a
Selling Shareholder with respect to such Registration Statement.
(d) NAS may refuse to include in any such Registration
Statement the Common Stock owned by a Holder if in NAS's
reasonable judgment, based on advice of its investment bankers,
inclusion of such shares of Common Stock would have an adverse
effect on the ability of NAS to complete such underwritten public
offering. If in accordance with a Registration Request pursuant
to Section 9.7(b), NAS reduces the number of shares to be
included in any such Registration Statement in accordance with
the foregoing, NAS will include in such registration, to the
extent of the number which NAS is so advised can be sold in such
offering, first, shares of Common Stock requested to be included
in such registration by the Selling Shareholders (subject to the
rights, if any, of Prior Holders) and, second, securities NAS
proposes to sell and other securities of NAS included in such
registration by the holders thereof. If, as a result of this
Section 9.7(d) or as a result of the participation of Prior
Holders in the Registration Statement, the Selling Shareholders
are not able to register all of their shares of Common Stock
requested to be registered pursuant to Section 9.7(b), such
Registration Request will not be deemed to be the single
allowable Registration Request for purposes of Section 9.7(b) and
the Holders' rights to one additional Registration Request will
be restored, and if as a result of such reduction the Selling
Shareholder is left with fewer than 500,000 shares of Common
Stock, then the 500,000 share limit in Section 7(b) shall not
apply.
(e) With respect to any Registration Statement under this
Section 9.7, NAS will:
(i) prepare and file with the SEC the Registration
Statement within 120 days after a Selling Shareholders'
notice requesting registration or inclusion in a proposed
registration, and use its reasonable efforts to cause the
securities covered by such Registration Statement to become
registered and such Registration Statement to be declared
effective as expeditiously as possible under the Securities
Act or other applicable federal law and regulations (and
cause to be prepared and file any amendments or supplements
thereto as may be necessary to comply with applicable
federal law and regulations); provided, however, that NAS
may be allowed to defer filing of the Registration
Statement: (A) if the Vice President - Legal of NAS
reasonably determines in good faith that it is in the best
interests of NAS not to disclose the existence of or facts
surrounding any proposed or pending material developments;
(B) if the underwriters have notified NAS that market
conditions are such as to recommend deferral; (C) pending
the completion of year-end financial statements or quarterly
earnings releases; or (D) if an offering by NAS of any
securities is pending; provided, however, that any deferral
pursuant to clauses (A), (B), (C) or (D) of this paragraph
shall not in the aggregate be for more than 90 days.
(ii) use its reasonable efforts to cause to be
registered or qualified the securities covered by such
Registration Statement under such securities or Blue Sky
laws in such jurisdictions within the United States as any
Selling Shareholder may reasonably request; provided,
however, that NAS reserves the right, in its sole
discretion, not to cause to be registered or qualified such
securities in any jurisdiction where NAS would be
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required in connection therewith to execute a general consent to
service or to qualify as a foreign corporation or to subject itself
to taxation;
(iii) maintain the effectiveness of any Registration
Statement hereunder for 90 days or such longer period as may
be required by the Securities Act to enable any Selling
Shareholder and the underwriters, if any, to complete such
offering;
(iv) promptly notify each Selling Shareholder of the
happening of any event as a result of which any preliminary
prospectus or prospectuses included in any Registration
Statement hereunder includes an untrue statement of a
material fact or omits to state any material fact required
to be stated therein or necessary to make the statements not
misleading in light of the circumstances then existing;
(v) have the right to reasonably approve the choice of
lead underwriter for underwritten offerings initiated by the
Holders under Section 9.7(b);
(vi) furnish, at the request of any Selling
Shareholder, an opinion, dated the date the Registration
Statement became effective, of counsel representing NAS
(which may be in-house counsel) for the purposes of such
registration, addressed to the underwriters, if any, and to
such Selling Shareholder as to such legal matters as such
Selling Shareholder shall reasonably request; and
(vii) furnish, at the request of any Selling
Shareholder, a letter, dated the date the Registration
Statement became effective, of independent certified public
accountants of NAS, addressed to the underwriters, if any,
and to such Selling Shareholder as to such accounting
matters as such Selling Shareholder shall reasonably
request.
(f) The obligations of NAS to cause a Registration
Statement to be prepared pursuant to the provisions of this
Section 9.7 and each Selling Shareholder's right to have shares
of Common Stock included in any Registration Statement pursuant
to the provisions of this Section 9.7 shall be subject to the
following conditions:
(i) Each Selling Shareholder shall furnish to NAS in
writing such information and documents as, in the opinion of
NAS's counsel, may be reasonably required to properly cause
to be prepared such Registration Statement in accordance
with applicable provisions of the Securities Act and the
SEC's regulations thereunder or federal or state securities
or Blue Sky laws and regulations then in effect; and
(ii) If a Selling Shareholder desires to sell and
distribute such shares of Common Stock over a period of
time, or from time to time, pursuant to a Registration
Statement prepared pursuant to the provisions of this
Section 9.7, then such Selling Shareholder shall execute and
deliver to NAS such written undertakings as NAS and its
counsel may reasonably require in order to assure full
compliance with the relevant provisions of the Securities
Act and the SEC's regulations thereunder or other federal or
state securities or Blue Sky laws and regulations as then in
effect.
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(g) The Selling Shareholder will pay or cause to be paid
all fees and expenses (including all Blue Sky, New York Stock
Exchange and National Association of Securities Dealers, Inc.
filing and registration fees, accounting fees and disbursements,
printing costs, attorneys' fees and disbursements) arising out of
the preparation, filing, amending and supplementing of a
Registration Statement pursuant to Section 9.7(b) hereof in which
only the Selling Shareholder participates and the amount of such
fees and expenses that are reasonably allocable to the Selling
Shareholder for a Registration Statement used under
Section 9.7(c) or a Registration Statement based on the number of
shares offered by the Selling Shareholders relative to the number
of other shares offered by NAS or on behalf of any of its other
holders.
(h) In no event shall NAS be required to maintain the
effectiveness of any Registration Statement for more than 90
days.
9.8 Listing
Upon SBC's request, NAS will use its best efforts, and
diligently take all steps necessary, to list for trading on the
Nasdaq or, if at the time of issuance any Common Stock is listed
on any securities exchange, to list on each such exchange, the
Common Stock to be issued to SBC upon conversion of the Preferred
Shares (promptly after such Common Stock is issued).
9.9 Issuance of Other Securities
NAS shall not issue or agree to issue any securities of NAS
to any Person with voting rights that are more favorable in any
material respect than the voting rights of the Preferred Shares.
9.10 Further Assurances
At any time or from time to time after the Closing Date, NAS
shall execute and deliver any further instruments or documents,
and take all such further action as SBC may reasonably request,
in order to effect this Agreement and to issue to SBC the
Preferred Shares free and clear of all Liens except for Liens as
SBC may cause to attach to the Preferred Shares.
9.11 Use of Proceeds
NAS shall use at least 50% of the Purchase Price for the
purpose of more closely aligning its network and business
operations with the future network and business operations of SBC
Telecom, Inc., as outlined in the Summary of Operating Agreement
attached as Exhibit C hereto. The remainder of the Purchase
Price shall be available for general corporate purposes as
determined by NAS.
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9.12 Definitive Operating Agreement
Promptly following the execution of this Agreement, NAS
shall negotiate in good faith the Definitive Operating Agreement.
The Definitive Operating Agreement shall contain the substance of
the terms and conditions set forth in the Summary of Operating
Agreement attached as Exhibit C and such other terms and
conditions as the parties may mutually agree upon.
9.13 Right of Primary Offer
Subject to the terms and conditions specified in this Section
9.13, NAS hereby grants to each Holder, a right of primary offer
with respect to future sales by NAS of its New Securities (as
defined in Section 9.13(d)(i)) after the date hereof.
(a) In the event NAS proposes to issue New Securities, it
shall give each Holder written notice (the "Notice") of its
intention stating: (i) a description of the New Securities it
proposes to issue, (ii) the number of shares of New Securities it
proposes to offer, (iii) the price per share at which, and other
terms on which, it proposes to offer such New Securities, and
(iv) the number of shares that the Holder has the right to
purchase under this Section 9.13, based on the Holder's
Percentage (as defined in Section 9.13(d)(ii)).
(b) Within 10 Business Days after the Notice is given, the
Holder may elect to purchase, at the price specified in the
Notice, up to the number of shares of the New Securities proposed
to be issued equal to the Holder's Percentage. An election to
purchase shall be made in writing and must be given to NAS within
such 10 Business Day period. The closing of the sale of New
Securities by NAS to the participating Holder upon exercise of
its rights under this Section 9.13 shall take place
simultaneously with the closing of the sale of New Securities to
third parties.
(c) NAS shall have 90 days after the last date on which the
Holder's right of first offer lapsed to enter into an agreement
(pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within 45 days from the execution
thereof) to sell the New Securities which the Holder did not
elect to purchase under this Section 9.13, at or above the price
and upon terms not materially more favorable to the purchasers of
such securities than the terms specified in the initial Notice
given in connection with such sale. In the event NAS has not
entered into an agreement to sell the New Securities within such
90 day period (or sold and issued New Securities in accordance
with the foregoing within 45 days from the date of such
agreement), NAS shall not thereafter issue or sell any New
Securities without first offering such New Securities to the
Holder in the manner provided in this Section 9.13.
(d) Definitions:
(i) "New Securities" shall mean any shares of, or
securities convertible into or exercisable for any shares
of, any class of NAS's capital stock; provided that "New
Securities" does not include: (A) securities issued
pursuant to the acquisition of another business entity by
NAS by merger, purchase of substantially all of the assets
of such
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entity, or other reorganization whereby NAS owns not less than a
majority of the voting power of such entity; (B) shares of NAS's
Common Stock, options or warrants to purchase shares of NAS's
Common Stock, and the shares of Common Stock issuable upon
exercise of such options or warrants, issued pursuant to any
arrangement approved by the Board of Directors to employees,
officers and directors of, or consultants, advisors or other
Persons performing services for, NAS; (C) shares of NAS's Common
Stock issued in connection with any stock split, stock dividend
or recapitalization of NAS; or (D) shares of NAS's Common Stock
issued upon exercise of warrants, options or convertible
securities if the issuance of such warrants, options or
convertible securities was a result of the exercise of the right
of first offer granted under this Section 9.13 or was subject to
the right of first offer granted under this Section 9.13.
(ii) The applicable "Percentage" for each Holder shall
be the number of shares of New Securities calculated by
dividing (A) the total number of shares of Common Stock
owned by the Holder (assuming conversion of all outstanding
convertible securities and exercise of all outstanding
options and warrants) by (B) the total number of shares of
Common Stock outstanding at the time the Notice is given
(assuming conversion of all outstanding convertible securities
and exercise of all outstanding options and warrants).
9.14 Government License Application Amendment
NAS shall amend its pending applications for government
licenses to cover the transactions contemplated by this Agreement
and shall use its reasonable best efforts to have those
applications, as amended, approved.
Section 10: Termination
10.1 Terminating Events
This Agreement may be terminated:
(a) By the mutual written consent of NAS and SBC; or
(b) By NAS, by ten (10) Business Days written notice to SBC
(if NAS is not then materially in default or breach of this
Agreement), if SBC shall default in any material respect in the
performance of any of its obligations under this Agreement, and
such default or breach has not been cured by SBC within seven (7)
Business Days following receipt of written notice from NAS of
NAS's intention to terminate this Agreement; or
(c) By SBC, by ten (10) Business Days written notice to NAS
(if SBC is not then materially in default or breach of this
Agreement), if NAS shall default in any material respect in the
performance of any of its obligations under this Agreement, and
such default or breach has
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not been cured by NAS within seven (7)
Business Days following receipt of written notice from SBC of
SBC's intention to terminate this Agreement; or
(d) By either SBC or NAS if the Closing has not occurred on
or before July 31, 2000 (provided that the right to terminate
this Agreement under this Section 10.1(d) shall not be available
to any party whose breach of any obligation under this Agreement
has been the cause of or resulted in the failure of the Closing
to occur on or before such date).
10.2 Effect on Obligations
In the event of any termination of this Agreement pursuant
to Section 10.1(a) or 10.1(d), neither SBC nor NAS shall have any
further liability hereunder, except with respect to the
confidentiality provisions hereof. In the event of a termination
under Section 10.1(b) or 10.1(c), both parties shall retain all
their rights at law or in equity.
Section 11: Indemnification
11.1 Indemnification by NAS
(a) NAS hereby agrees to indemnify SBC and its Affiliates
and their respective officers and directors against and hold them
harmless from any Losses suffered or incurred by any such
Indemnified Party for or on account of or arising from or in
connection with any breach of any representation, warranty or
covenant of NAS contained in this Agreement, provided, however,
that NAS shall not have any liability under this Section 11.1
unless the aggregate of all Losses relating thereto exceed on a
cumulative basis $750,000.00, and then only to the extent of such
excess, and (ii) in excess of the Purchase Price. SBC
acknowledges and agrees that its sole and exclusive remedy with
respect to any and all claims for monetary damages relating to
the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Section 11.
(b) NAS agrees to indemnify and hold harmless each Selling
Shareholder and each Person, if any, who controls (within the
meaning of Section 15 of the Securities Act and Section 20 of the
34 Act) such Selling Shareholder (a "Control Person") against any
Losses to which such Selling Shareholder or any such Control
Person may become subject, insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement
of any material fact contained in any preliminary or final
Registration Statement prepared pursuant to Section 9.7 of this
Agreement or prospectus with respect thereto, or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that NAS will not be
liable in any case to the extent that any such Losses arise out
of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission from any of such
documents in reliance upon and in conformity with written
information furnished by or on behalf of such Selling Shareholder
or any such Control Person specifically for use in the
preparation thereof.
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11.2 Indemnification by SBC
(a) SBC hereby agrees to indemnify NAS and its Affiliates
and their respective officers and directors against and hold them
harmless from any Losses suffered or incurred by any such
Indemnified Party for or on account of or arising from or in
connection with any breach of any representation, warranty or
covenant of SBC contained in this Agreement, provided, however,
that SBC shall not have any liability under this Section 11.2
unless the aggregate of all Losses relating thereto exceed on a
cumulative basis $750,000.00, and then only to the extent of such
excess. NAS acknowledges and agrees that its sole and exclusive
remedy with respect to any and all claims for monetary damages
relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions set forth in this
Section 11.
(b) SBC and any other Selling Shareholder to whom SBC's
rights under this Agreement have been transferred will, severally
and not jointly, indemnify and hold harmless NAS and each of its
directors, officers and each Person, if any, who controls (within
the meaning of Section 15 of the Securities Act and Section 20 of
the 34 Act) NAS (a "Company Control Person") to the same extent
as set forth in the foregoing indemnity from NAS to each Selling
Shareholder set forth in Section 11.1(b), but only with reference
to written information included in any preliminary or final
Registration Statement prepared pursuant to Section 9.7 of this
Agreement or prospectus with respect thereto, or amendment or
supplement thereto, furnished by or on behalf of such Selling
Shareholder specifically for use in the preparation of such
documents.
11.3 Losses
The amount of any Losses for which indemnification is
provided under this Section 11 shall be net of any amounts
recovered or recoverable by the Indemnified Party under insurance
policies with respect to such Losses and shall be increased to
take account of any Tax cost to the Indemnified Party and reduced
to take account of any Tax benefit to the Indemnified Party
arising from the incurrence or payment of any Losses.
11.4 Survival
The representations and warranties made by NAS contained in
Section 7 hereof, and the obligation of NAS to indemnify SBC
pursuant to Section 11.1 hereof, shall survive the execution and
delivery of this Agreement, any examination or due diligence
inquiry by a party and the Closing until the date which is one
year after the Closing Date, except that the representations and
warranties made by NAS in Section 7.8 (Title to Preferred Shares;
Absence of Liens) shall survive for the applicable statute of
limitations. The representations and warranties made by SBC
contained in Section 6 hereof, and the obligation of SBC to
indemnify SBC pursuant to Section 11.2 hereof, survive the
execution and delivery of this Agreement, any examination or due
diligence inquiry by a party and the Closing until the date which
is one year after the Closing Date. All covenants and agreements
of NAS or SBC contained in this Agreement (which terms do not
include representations and warranties) shall survive the Closing
for a period of one year
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unless otherwise expressly provided
herein. The obligations to indemnify and hold harmless a party
hereto, pursuant to Section 11.1 and Section 11.2 hereof, shall
survive only until the expiration of the applicable survival
period for the representation and warranty or covenant under
which the claim for indemnification is being made; provided,
however, that such obligations to indemnify and hold harmless
shall not terminate with respect to any item as to which the
Person to be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the
party to be providing the indemnification.
11.5 Procedures Relating to Third Party Claims
In order for a party (the "Indemnified Party") to be
entitled to any indemnification provided for under this Agreement
in respect of, arising out of or involving a claim or demand made
by any Person against the Indemnified Party (a "Third Party
Claim"), such Indemnified Party must notify the indemnifying
party in writing of the Third Party Claim within 10 Business Days
after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have
been actually prejudiced as a result of such failure (except that
the indemnifying party shall not be liable for any expenses
incurred during the period in which the Indemnified Party failed
to give such notice). Thereafter, the Indemnified Party shall
deliver to the indemnifying party, within five Business Days
after the Indemnified Party's receipt thereof copies of all
notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnified Party,
the indemnifying party will be entitled to participate in the
defense thereof and upon notice to the Indemnified Party to
assume the defense thereof provided that (i) the indemnifying
party's counsel is reasonably satisfactory to the Indemnified
Party and (ii) the indemnifying party shall thereafter consult
with the Indemnified Party upon the Indemnified Party's request
for such consultation from time to time with respect to such
suit, action or proceeding. If the indemnifying party assumes
such defense, the Indemnified Party shall have the right (but not
the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed
by the indemnifying party. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the
Indemnified Party for any period during which the indemnifying
party has not assumed the defense thereof. Should the
indemnifying party so elect to assume the defense of a Third
Party Claim, the indemnifying party will not be liable to the
Indemnified Party for any legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof.
Whether or not the indemnifying party chooses to defend or
prosecute any Third Party Claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying
party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not
the indemnifying party shall have assumed the defense of a Third
Party Claim, the Indemnified Party
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shall not admit any liability
with respect to, or settle, compromise or discharge, such Third
Party Claim without the indemnifying party's prior written
consent.
Any payment pursuant to this Section 11.5 shall be made not
later than 15 days after receipt by the indemnifying party of
written notice from the Indemnified Party stating that any Third
Party Claim has been paid by any Indemnified Party and the amount
thereof and the indemnity payment requested.
Section 12: Arbitration
12.1 Resolution of Disputes
(a) The parties shall attempt in good faith to resolve any
controversy, dispute or claim arising out of or relating to this
Agreement or the breach, termination, enforceability or validity
thereof (collectively, a "Dispute") promptly by negotiation
between officers or employees who have authority to settle the
Dispute. Either party may give the other a written notice (a
"Dispute Notice") setting forth with reasonable specificity the
nature of the Dispute and the identity of such party's
representatives who will attend and participate in the meeting at
which the parties will attempt to settle the Dispute. Following
the receipt of a Dispute Notice, the representatives of both
parties shall meet as soon as is practicable at a mutually
acceptable time and place to negotiate in good faith a settlement
of the Dispute, and shall meet thereafter as they reasonably deem
necessary. All negotiations pursuant to this Section 12.1(a)
shall be confidential and shall be treated as compromise and
settlement negotiations. Nothing said or disclosed, nor any
document produced, in the course of such negotiations which is
not otherwise independently discoverable shall be offered or
received as evidence or used for impeachment or for any other
purpose in any current of future arbitration or litigation.
(b) If the Dispute has not been resolved within 30 days
after the receipt of a Dispute Notice through negotiation as
provided in Section 12.1(a), then the Dispute shall be finally
settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA")
then in effect. However, in all events, the arbitration
provisions in this Section 12 shall govern over any conflicting
rules that may now or hereafter be contained in the AAA rules.
The arbitration shall be held in Washington, D.C., unless the
parties mutually agree to have the arbitration held elsewhere,
and Judgment upon the award made therein may be entered by any
court having jurisdiction in the United States; provided,
however, that nothing contained in this Section 12 shall be
construed to limit or preclude a party from bringing any action
in any court of competent jurisdiction for injunctive or other
provisional relief to compel another party to comply with its
obligations under this Agreement during the pendency of the
arbitration proceedings. Any Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction
over the subject matter hereof. The arbitrator shall have the
authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve any
claim hereunder.
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12.2 Arbitrators
Any such arbitration will be conducted before three (3)
arbitrators, one of which shall be chosen by NAS, one of which
shall be chosen by SBC, and the third chosen by the other two
arbitrators. Each person chosen to serve as an arbitrator shall
be a neutral and impartial attorney who has had training and
experience as an arbitrator. The decision of a majority of the
arbitrators will be the decision of the arbitrators. The
arbitrators shall permit such discovery of information related to
the controversy or claim in arbitration as they shall determine
is appropriate in the circumstances, taking into account the
needs of the parties and the desirability of making discovery
expeditious and cost-effective.
12.3 Costs and Fees
All fees and expenses of the arbitrators, expenses for
hearing facilities and other expenses of the arbitration shall be
borne equally by the parties unless the arbitrators in the award
assess such fees and expenses other than equally against the
parties. Each party shall bear the fees and expenses of its own
attorneys and witnesses except to the extent otherwise provided
in this Agreement or by law; provided, that if the arbitrators
determine that the claim or defense of any party was frivolous or
lacked a reasonable basis in fact or law, the arbitrators may
assess against such party all or part of the fees and expenses of
attorneys and witnesses for the other party.
12.4 Burden of Proof
For any Dispute submitted to arbitration, the burden of
proof will be as it would be if the claim were litigated in a
judicial proceeding.
12.5 Award
Upon the conclusion of any arbitration proceedings
hereunder, the arbitrators will render findings of fact and
conclusions of law and a written opinion setting forth the basis
and reasons for any decision reached and will deliver such
documents to each party to this Agreement along with a signed
copy of the award.
12.6 Agreement Controls
The arbitrators chosen in accordance with these provisions
will not have the power to alter, amend or otherwise affect the
terms of these arbitration provisions or the provisions of this
Agreement.
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Section 13: Miscellaneous
13.1 Entire Agreement; Amendment
This Agreement (including the attached Schedules and
Exhibits) constitutes the sole understanding of the parties with
respect to the subject matter hereof, and supersedes all prior
oral or written agreements, commitments or understandings with
respect to such matters. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be
binding unless the same shall be in writing and duly executed by
the parties hereto.
13.2 Successors and Assigns
This Agreement may not be assigned by either NAS or SBC
without the consent of the other party (which consent shall not
be unreasonably withheld) except that SBC may assign this
Agreement to any Wholly-Owned SBC Subsidiary that agrees to be
bound by all of the terms hereof, and provided that no such
permitted assignment shall relieve the parties hereto of any
liability for a breach of this Agreement by such party or its
assignee. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs
or successors in interest.
13.3 Rights and Remedies
Unless otherwise provided herein, the rights and remedies of
the parties hereunder shall not be mutually exclusive, and the
exercise of one or more provisions of this Agreement shall not
preclude the exercise of any other provisions. Each of the
parties confirms that damages at law may be an inadequate remedy
for a breach or threatened breach of any provision hereof. The
respective rights and obligations hereunder shall be enforceable
by specific performance, injunction or other suitable remedy, it
being the intention of this Section 13.3 to make clear the
agreement of the parties that the respective rights and
obligations of the parties hereunder shall be enforceable in
equity as well as at law or otherwise.
13.4 Counterparts
This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
13.5 Modification and Waiver
At any time on or prior to the Closing Date, the parties by
mutual agreement may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(c) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall only be valid if set forth in
an instrument in writing signed on behalf of such party.
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13.6 Expenses
Except as specifically provided herein, SBC and NAS shall
each pay all costs and expenses incurred by it or on its behalf
in connection with this Agreement and the transactions
contemplated hereby, including, without limiting the generality
of the foregoing, fees and expenses of its own consultants,
accountants and counsel.
13.7 Notices
Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be
in writing and shall be deemed given upon receipt if delivered
personally or by telex or facsimile, the next day if by express
mail or three days after being sent by registered or certified
mail, return receipt requested, postage prepaid to the following
addresses (or at such other address for a party as shall be
specified by like notice provided that such notice shall be
effective only after receipt thereof):
If to SBC: James Kahan
Senior Vice President -
Corporate Development
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-5034
Voice: 210-351-5030
With a copy (which shall Michael A. Meyer
not constitute notice) to: General Attorney
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-3488
Voice 210-351-2165
If to NAS: Jonathan P. Aust
President and Chief Executive
Officer
Network Access Solutions
100 Carpenter Drive
Sterling, VA 20165
Fax: 703-742-7706
Voice: 703-995-1682
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With a copy (which shall Worth D. MacMurray
not constitute notice) to: Vice President, Legal and
Strategic Planning
Network Access Solutions
100 Carpenter Drive
Sterling, VA 20165
Fax: 703-995-2180
Voice: 703-995-2695
13.8 Severability
In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect by a court or other authority of
competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and
this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein and, in
lieu of each such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid
and enforceable, it being the intent of the parties to maintain
the benefit of the bargain for all parties.
13.9 Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such
jurisdiction.
13.10 Rules of Construction
Words used in this Agreement, regardless of the gender and
number specifically used, shall be deemed and construed to
include any other gender and any other number as the context
requires. As used in this Agreement, the word "including" is not
limiting, and the word "or" is not exclusive. Except as
specifically otherwise provided in this Agreement in a particular
instance, a reference to a Section, Schedule or Exhibit is a
reference to a Section of this Agreement or a Schedule or Exhibit
hereto, and the terms "this Agreement," "hereof," "herein," and
other like terms refer to this Agreement as a whole, including
the Schedules to this Agreement, and not solely to any particular
part of this Agreement. The descriptive headings in this
Agreement are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or
interpretation of this Agreement. The parties to this Agreement
do not intend that NAS Employees or any other Person shall obtain
any rights as third party beneficiaries of this Agreement.
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13.11 Ownership Limitation
Notwithstanding anything else to the contrary in this
Agreement, nothing set forth in this Agreement shall be construed
or interpreted to provide SBC with the right to Beneficially Own
any shares of Common Stock or other class of capital stock of NAS
to the extent that it would violate any Legal Requirements of the
FCC or any other Governmental Authority.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement, or have caused this Agreement to be signed in their
respective names by an officer, hereunto duly authorized, on the
date first above written.
NETWORK ACCESS SOLUTIONS
CORPORATION
By: /s/ Jonathan P. Aust
Name: Jon Aust
Title: CEO
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
Name:
Title:
Exhibit III
NETWORK ACCESS SOLUTIONS CORPORATION
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF
_________________________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________________________________
We, the undersigned, being the President and Chief
Executive Officer, and the Secretary, respectively, of Network
Access Solutions Corporation, a Delaware corporation (the
"Corporation"), DO HEREBY CERTIFY, pursuant to Section 151 of the
General Corporation Law of the State of Delaware, that the
following resolution was duly adopted by the Board of Directors
of the Corporation as of February 4, 2000:
"RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Corporation (the "Board of Directors") by the provisions of the
Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors hereby creates and designates
a series of preferred stock of the Corporation to consist of one
million five hundred thousand (1,500,000) shares, each of $0.001
par value, and the Board of Directors hereby fixes the relative
rights and preferences of the shares of such Series as follows:
1. Designation. The shares of such series of
preferred stock shall be designated "Series B Convertible
Preferred Stock" (referred to herein as the "Series B Preferred
Stock") and shall be senior to all other capital stock of the
Corporation as to the distribution of assets on liquidation,
dissolution and winding up of the Corporation and with respect to
dividends.
2. Authorized Number. The number of shares
constituting the Series B Preferred Stock shall be one million
five hundred thousand (1,500,000); provided, however, that the
number of shares constituting the Series B Preferred Stock may be
increased (but not above the total number of authorized shares of
preferred stock of the Corporation) or decreased (but not below
the number of shares of the Series B Preferred Stock then
outstanding) by a certificate of designations executed,
acknowledged and filed with the Secretary of State of the State
of Delaware, in accordance with applicable law, setting forth a
statement that the specified increase or decrease therein has
been authorized and directed by a resolution or resolutions duly
adopted by the Board of Directors. No further approval of any
stockholder or stockholders of the Corporation (including,
without limitation, the holders of any shares of the Series B
Preferred Stock outstanding at such time) shall be required in
connection therewith.
3. Dividends. The holders of record of shares of the
Series B Preferred Stock shall be entitled to receive dividends
at a rate of 7.0% per annum on the stated value of the Series B
Preferred Stock ($100 per share), payable in shares of Series B
Preferred Stock or in cash out of funds legally available
therefor. The choice of the method of payment shall be at the
option of the Corporation. Dividends shall be payable annually
on each anniversary of the Original Issue Date or, if such date
is not a Business Day, the next succeeding Business Day. For
purposes hereof, the term "Business Day" means a day other than
(i) a Saturday or Sunday or (ii) a day on which banking
institutions are authorized or required by law or executive order
to remain closed in the States of Texas or Virginia. Any unpaid
dividends shall accumulate. No dividends shall be paid on the
common stock, par value $0.001 per share, of the Corporation (the
"Common Stock") or any other capital stock of the Corporation
until all accrued and unpaid dividends shall have been paid on
the Series B Preferred Stock and in the event the Board of
Directors declares a dividend to the holders of shares of Common
Stock or other capital stock of the Corporation, the Board of
Directors shall at the same time declare a dividend for the
holders of the Series B Preferred Stock in an amount for each
share of Series B Preferred Stock equal to the dividend payable
on the number of shares of Common Stock into which shares of
Series B Preferred Stock may be converted or other capital stock
of the Corporation.
4. Liquidation Preference. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary (a "Liquidation"), the holders of the shares of
Series B Preferred Stock shall be entitled, before any
distribution or payment is made upon the Common Stock, to be paid
an amount equal to $100.00 per share plus all declared but unpaid
dividends to such date (collectively, the "Liquidation
Preference"). After setting apart for payment or paying in full
the Liquidation Preference, the remaining assets (whether stated
capital or surplus), if any, and all consideration received by
the Corporation in excess of the Liquidation Preference, shall be
distributed to the holders of record of the issued and
outstanding shares of Common Stock. If upon any Liquidation of
the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series B Preferred Stock
shall be insufficient to permit payment in full of the
Liquidation Preference to the holders of Series B Preferred
Stock, then the entire assets of the Corporation shall be
distributed ratably among such holders in proportion to the full
respective distributive amounts to which they are entitled.
Written notice of a Liquidation, stating a payment date, the
estimated amount of the Liquidation Preference, and the place
where said amounts shall be payable shall be given by mail not
less than 20 days prior to the payment date stated therein, to
each holder of record of Series B Preferred Stock at his address
as shown by the records of the Corporation. Notwithstanding the
foregoing, however, the failure of the Corporation to give such
notice, or any defect therein, shall not affect the legality or
validity of any dividend, distribution or other action or event.
Notwithstanding the provisions of Section 6(c) below, a
transaction described in Section 6(c)(i) (excluding a transaction
within the exclusion set forth therein) or Section 6(c)(ii)
shall, at the election of one or more holders of the Series B
Preferred Stock by written notice to the Corporation within 10
days prior to the date that is before the occurrence of such
event, be deemed a Liquidation if the value of the cash, property
or securities per share received by the holders of the shares of
Series B Preferred Stock in such transaction would be less than
the Liquidation Preference. The foregoing election right of the
holders of the Series B Preferred Stock is exercisable y each of
such holders and the exercise by any holder thereof shall not
affect the rights of any other holders of Series B Preferred
Stock.
5. Conversion. The holders of the Series B Preferred
Stock shall have the following conversion rights:
(a) Optional Conversion. Each share of Series B
Preferred Stock shall be convertible at any time, at the option
of the holder of record thereof, into fully paid and
nonassessable shares of Common Stock at the "Conversion Rate" (as
defined in Section 5(c) below) then in effect upon surrender to
the Corporation or its transfer agent of the certificate or
certificates representing the shares of Series B Preferred Stock
to be converted, as provided below, or if the holder notifies the
Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the
execution and delivery of an agreement and security satisfactory
to the Corporation to indemnify the Corporation from any losses
incurred by it in connection therewith. Such conversion shall
occur automatically upon receipt of all applicable regulatory and
other consents and approvals, and the Corporation shall
reasonably cooperate with the holders of the Series B Preferred
Stock to obtain all necessary consents and approvals.
(b) Mandatory Conversion. Beginning on the date
which is 2 years from the date of the initial issuance of the
Series B Preferred Stock (the "Original Issue Date") until the
date which is 5 years after the Original Issue Date, the
Corporation may require, by written notice to one or more of the
holders of the Series B Preferred Stock given at least 30 days
prior to the date of conversion, that all, but not less than all,
of such holder's Series B Preferred Stock shall be automatically
converted into fully paid and nonassessable shares of Common
Stock at the Conversion Rate then in effect. Such conversion
shall occur automatically upon receipt of all applicable
regulatory and other consents and approvals, and the holders of
the Series B Preferred Stock shall reasonably cooperate with the
Corporation to obtain all necessary consents and approvals. In
such event, the outstanding shares of Series B Preferred Stock
shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation shall
have no right to require conversion of the Series B Preferred
Stock if the average of the Closing Prices of the Common Stock
for the 30 trading days preceding the proposed date of conversion
shall be less than the Conversion Price and provided, further,
that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of the
Series B Preferred Stock being converted are delivered to the
Corporation or its transfer agent, as provided below, or the
holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes and
delivers an agreement and security satisfactory to the
Corporation to indemnify the Corporation from any losses incurred
by it in connection therewith. For purposes of this provision
the "Closing Price" means, for any security as of any date, the
closing sale price for such security on the Nasdaq Stock Market
as reported by the consolidated transaction reporting system, or,
if the Nasdaq Stock Market is not the principal trading market
for such security, the last closing bid price of such security on
the principal securities exchange or trading market where such
security is listed or traded as reported by the consolidated
transaction reporting system, or if the foregoing do not apply,
the last closing bid price of such security in the over-the-
counter market on the electronic bulletin board for such security
as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
no closing bid price is reported for such security by Bloomberg,
the last closing trade price of such security that is listed by
Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc.
(c) Basis For Conversion; Converted Shares. The
basis for any conversion under this Section 5 shall be the
"Conversion Rate" in effect at the time of conversion, which for
the purposes hereof shall mean the number of shares of Common
Stock issuable with respect to each share of Series B Preferred
Stock to be converted under this Section 5. Initially, the
Conversion Rate shall be 3.2258:1 (i.e., 3.2258 shares of Common
Stock for each share of Series B Preferred Stock being
converted). Such Conversion Rate shall be subject to adjustment
as provided in Section 6 below. As used herein, the term
"Conversion Price" initially shall be $31.00 per share of Common
Stock, but shall be subject to adjustment as provided herein. If
any fractional interest in a share of Common Stock would be
deliverable upon conversion of Series B Preferred Stock, the
Corporation shall pay in lieu of such fractional share an amount
equal to the Conversion Price of such fractional share (computed
to the nearest ten thousandth of a share) in effect at the close
of business on the date of conversion. Any shares of Series B
Preferred Stock which have been converted shall be canceled and
the certificates representing shares of Series B Preferred Stock
so converted shall represent the right to receive (x) such number
of shares of Common Stock into which such shares of Series B
Preferred Stock are convertible, plus (y) cash payable for any
fractional share plus (z) all accrued but unpaid dividends
relating to such shares. Upon the conversion of shares of Series
B Preferred Stock as provided in this Section 5, the Corporation
shall promptly pay all then declared and accrued but unpaid
dividends to the holder of the Series B Preferred Stock being
converted, if any. The Board of Directors shall at all times
reserve a sufficient number of authorized but unissued shares of
Common Stock to be issued in satisfaction of the conversion
rights and privileges aforesaid.
(d) Mechanics of Conversion. Before any holder
of shares of Series B Preferred Stock shall be entitled to
convert the same into shares of Common Stock, such holder shall
surrender the certificate or certificates therefor, duly
endorsed, or deliver an appropriate indemnity agreement and
security, at the office of the Corporation or its transfer agent
for the Series B Preferred Stock and in the case of a conversion
pursuant to Section 5(a) above, shall give written notice to the
Corporation of the election to convert the same and shall state
therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred
Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. A
certificate or certificates will be issued for the remaining
shares of Series B Preferred Stock in any case in which fewer
than all of the shares of Series B Preferred Stock represented by
a certificate are converted.
6. Adjustment of Conversion Price and Conversion
Rate. The number and kind of securities issuable upon the
conversion of the Series B Preferred Stock, the Conversion Price
and the Conversion Rate shall be subject to adjustment from time
to time in accordance with the following provisions:
(a) Definition of Common Stock. For purposes of
this Section 6, the term "Common Stock" shall be deemed to mean
the Common Stock and the stock of the Corporation of any class,
or series within a class, whether now or hereafter authorized,
which has the right to participate in the distribution of either
earnings or assets of the Corporation without limit as to the
amount.
(b) Reorganization; Share Exchange;
Reclassification. In the event of a reorganization, share
exchange, or reclassification, other than a change in par value,
or from par value to no par value, or from no par value to par
value or a transaction described in subsection (c) or (d) below,
each share of Series B Preferred Stock shall, after such
reorganization, share exchange or reclassification, be
convertible into the kind and number of shares of stock or other
securities or other property of the Corporation which the holder
of Series B Preferred Stock would have been entitled to receive
if the holder had held the Common Stock issuable upon conversion
of such share of Series B Preferred Stock immediately prior to
such reorganization, share exchange, or reclassification.
(c) Merger; Consolidation. If (i) the
Corporation consolidates or merges into or with any other
corporation or corporations or any other entity or entities
(excluding any merger or consolidation in which the Corporation
is the surviving corporation and, after giving effect thereto,
the holders of the Corporation's outstanding capital stock (on a
fully-diluted, as-converted basis) immediately prior to such
merger or consolidation will own more than 50% of the outstanding
capital stock of the Corporation (on a fully-diluted, as-
converted basis) immediately following such merger or
consolidation), or (ii) in a single transaction or a series of
related transactions, the Corporation sells or transfers all or
substantially all its assets, each share of Series B Preferred
Stock shall, after such merger, consolidation or transaction(s),
be convertible into the kind and number of shares of stock and/or
other securities, cash or other property which the holder of such
share of Series B Preferred Stock would have been entitled to
receive if the holder had held the Common Stock issuable upon
conversion of such share of Series B Preferred Stock immediately
prior to such merger, consolidation or transaction(s).
(d) Subdivision or Combination of Shares. In
case outstanding shares of Common Stock shall be subdivided, the
Conversion Price shall be proportionately reduced as of the
effective date of such subdivision. In case outstanding shares
of Common Stock shall be combined, the Conversion Price shall be
proportionately increased as of the effective date of such
combination.
(e) Stock Dividends. In case shares of Common
Stock are issued as a dividend or other distribution on the
Common Stock, then the Conversion Price shall be adjusted, as of
the earliest of the date of such declaration, payment or other
distribution, to that price determined by multiplying the
Conversion Price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to the payment of such dividend or other
distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately
after the payment of such dividend or other distribution. In the
event that the Corporation shall declare or pay any dividend on
the Common Stock payable in any right to acquire Common Stock for
no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock on an amount of shares
equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
(f) Adjustment of Conversion Rate. Upon each
adjustment of the Conversion Price under the provisions of this
Section 6, the Conversion Rate shall be adjusted to an amount
determined by dividing $100 by such adjusted Conversion Price.
(g) Other Provisions Applicable to Adjustment
Under this Section. The following provisions will be applicable
to the adjustments in the Conversion Price and the Conversion
Rate as provided in this Section 6:
(i) Treasury Shares. The number of
shares of Common Stock at any time
outstanding shall not include any shares thereof then directly or indirectly
owned or held by or for the account of the Corporation. For purposes of this
Section 6, the sale or other disposition of any Common Stock of the Corporation
theretofore held in its treasury shall, unless otherwise set forth herein, be
deemed to be an issuance thereof.
(ii) Other Action Affecting Common Stock.
In case the Corporation shall take any action affecting the
outstanding number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(e)
hereof, inclusive, which would have an inequitable or dilutive
effect on the relative percentage ownership interests of the
holders of Series B Preferred Stock that could not have been
cured or avoided by the holders of the Series B Preferred Stock
by their exercise of any available rights of first offer, the
Conversion Price shall be adjusted in such manner and at such
time as the Board of Directors of the Corporation on the advice
of the Corporation's independent public accountants may in good
faith determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of
the Conversion Price shall be made if the amount of any such
adjustment would be an amount less than 1% of the then applicable
Conversion Price, but any such amount shall be carried forward
and an adjustment with respect thereof shall be made at the time
of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried
forward, shall aggregate an increase or decrease of 1% or more of
the then applicable Conversion Price.
(h) Notices of Adjustments. Whenever the
Conversion Rate and Conversion Price is adjusted as herein
provided, an officer of the Corporation shall compute the
adjusted Conversion Rate and Conversion Price in accordance with
the foregoing provisions and shall prepare a written certificate
setting forth such adjusted Conversion Rate and Conversion Price
and showing in detail the facts upon which such adjustment is
based, and such written instrument shall promptly be delivered to
the record holders of the Series B Preferred Stock.
7. Notices of Record Dates and Effective Dates. In
case (i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise than in
shares of Common Stock; (ii) the Corporation shall authorize the
granting to the holders of Common Stock of rights to subscribe
for or purchase any shares of capital stock of any class or any
other rights; (iii) of any reorganization, share exchange or
reclassification of the capital stock of the Corporation, or of
any consolidation or merger to which the Corporation is party or
of the sale, lease or exchange of all or substantially all of the
property of the Corporation; or, (iv) of a Liquidation, then the
Corporation shall cause to be mailed to the record holders of the
Series B Preferred Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice
stating the date on which a record is to be taken for the purpose
of such dividend, distribution or rights, or, if a record is not
to be taken, the date as of which the holders of record of Common
Stock to be entitled to such dividend, distribution or rights are
to be determined or the date on which such dividend, granting of
rights, reclassification, reorganization, share exchange,
consolidation, merger, sale, lease, exchange, or Liquidation is
expected to become effective, and the date as of which it is
expected that holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other
property deliverable upon such dividend, granting of rights,
reclassification, reorganization share exchange, consolidation,
liquidation, merger, sale, lease, exchange, dissolution or
Liquidation.
8. Voting Rights. Holders of Series B Preferred
Stock shall be entitled to notice of any stockholder's meeting.
However, the holders of shares of Series B Preferred Stock shall
not be entitled to vote upon any matters upon which holders of
the Common Stock have the right to vote. Upon conversion of
Series B Preferred Stock to Common Stock, the holders of such
Common Stock shall be entitled to such voting rights with respect
to such Common Stock as the other holders of Common Stock.
9. Redemption. Except as provided below,
at any time after 2 years from the Original Issue Date, any holder of
Series B Preferred Stock shall have the right to require the
Corporation to redeem all or any shares of Series B Preferred
Stock then held by such holder (the "Redemption Right") at a
price equal to the original purchase price paid to the
Corporation by such holder, plus any accrued but unpaid dividends
(the "Series B Redemption Price"). In the event that the average
of the Closing Prices of the Common Stock of NAS for the 30
trading days preceding the second, third, fourth, fifth or sixth
anniversaries of the Original Issue Date shall be less than the
Conversion Price (a "Low Stock Price Condition"), then the
Corporation may, by written notice (the "Extension Notice"),
elect to postpone the holder's Redemption Right until the next
following anniversary of the Original Issue Date. The Extension
Notice shall be effective only if delivered on the first Business
Day following the pertinent anniversary date of the Original
Issue Date or, if such anniversary date is not a Business Day,
then the date for delivery of the Extension Notice shall be the
next Business Day. The Company's right to postpone the holder's
Redemption Right for such one-year periods shall not be available
for the one-year period following any anniversary date in which
the Company was entitled to deliver an Extension Notice and
failed to do so on a timely basis. The Company's right to
postpone the holder's Redemption Right for such one-year periods
shall expire on the sixth anniversary of the Original Issue Date.
The holders shall in any event have the right to require
redemption from and after the seventh anniversary of the Original
Issue Date. Payment of the Series B Redemption Price to the
holders of Series B Preferred Stock shall be made by the
Corporation from any source of funds legally available therefor
within 90 business days (the "Series B Redemption Date"). Any
holder of shares of the Series B Preferred Stock wishing to
exercise such redemption right shall give written notice (the
"Series B Redemption Notice") by mail, postage prepaid, to the
Corporation of such holders' intention to exercise such
redemption right. Such notice shall state the intention of such
holder to exercise its redemption rights and shall set forth the
number of shares of Series B Preferred Stock in respect of which
redemption is demanded. Prior to payment of the Series B
Redemption Price, each holder of shares of Series B Preferred
Stock who shall have requested that such holder's shares of
Series B Preferred Stock be so redeemed shall surrender the
certificate or certificates evidencing such shares to the
Corporation. In the case of any certificate or certificates
which have been lost, stolen or destroyed, the holder of such
certificate or certificates shall make, execute and deliver an
agreement and security satisfactory to the Corporation to
indemnify the Corporation from any losses incurred by it in
connection therewith.
10. Amendment; Waiver. Except as expressly prohibited
by Delaware law, this Certificate of Designation may be amended
and any provision herein may be waived with the approval of the
holders of a majority of the Series B Preferred Stock and the
Board of Directors. Any amendment or waiver so effected shall be
binding upon each holder of Series B Preferred Stock.
[Signature Page Follows]
IN WITNESS WHEREOF, this Certificate has been signed by
the President and Chief Executive Officer and attested to by the
Secretary of Network Access Solutions Corporation this 4th day of
February, 2000.
By: /s/ Jonathan P. Aust
By: /s/ Worth D. MacMurray
Secretary
Exhibit IV
Right of First Offer Agreement
This Right of First Offer Agreement (the "Agreement"), dated as
of February 4, 2000, is by and among Jonathan P. Aust ("Aust"),
SBC Communications Inc., a Delaware corporation ("SBC"),
Telefonos de Mexico, S.A. de C.V. ("Telmex") and Network Access
Solutions Corporation, a Delaware corporation ("NAS").
WHEREAS, SBC and Telmex wish to acquire from Aust, and Aust
wishes to grant to SBC and Telmex, a right of first offer to
acquire shares of capital stock of NAS held by Aust;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
Section 1. RIGHT OF FIRST OFFER
1.1 Right of First Offer
Subject to the terms and conditions specified in this
Agreement, Aust hereby grants to SBC and Telmex, as long as SBC
and Telmex own all of the shares of Series B Preferred Stock
issued to them upon the closing under the Stock Purchase
Agreements of even date herewith between SBC and NAS and between
Telemex and NAS (the "Preferred Shares") or all of the shares of
Common Stock issued upon conversion of such Preferred Shares (or
a greater number of shares of Preferred Stock or shares of Common
Stock than originally issued upon such closing or conversion), a
right of first offer with respect to future sales by Aust of any
shares of Common Stock or other securities of NAS (the "TRANSFER
SHARES") owned of record or beneficially by Aust on or after the
date hereof.
(a) In the event Aust proposes to sell any TRANSFER SHARES,
he shall give SBC, Telmex and any Transferees (as defined in
Section 3.5) written notice (the "Notice") of his intention
stating: (i) a description of the TRANSFER SHARES he proposes to
sell, (ii) the number of TRANSFER SHARES he proposes to sell, and
(iii) the price per share at which, and other terms on which, he
proposes to sell such TRANSFER SHARES.
(b) Within 10 Business Days after the Notice is given, SBC,
Telmex and the Transferees may elect to purchase, at the price
specified in the Notice, up to the number of shares of the
TRANSFER SHARES proposed to be sold. An election to purchase
(the "Election") shall be made in writing and must be given to
Aust within such 10 Business Day period. Unless otherwise agreed
by SBC, Telmex and the Transferees, if more than one of SBC,
Telmex and any Transferee desires to purchase TRANSFER SHARES and
there are insufficient TRANSFER SHARES to accommodate all
proposed purchases, the SBC, Telmex and Transferee purchases
shall be on a pro rata basis based on the number of shares of NAS
Preferred Stock and NAS Common Stock they own at such time. The
closing of the sale of TRANSFER SHARES by Aust to SBC, Telmex
and/or any Transferee shall take place within 30 days after the
Election is made, provided that the 30 day period shall be
extended to the extent necessary to accommodate the receipt of
any necessary regulatory approvals for the sale.
(c) Aust shall have 90 days after the last date on which
SBC's and Telmex's right of first offer lapsed to enter into an
agreement (pursuant to which the sale of TRANSFER SHARES covered
thereby shall be closed, if at all, within 45 days from the
execution thereof) to sell the TRANSFER SHARES which SBC, Telmex
and the Transferees did not elect to purchase under this
Agreement, at or above the price and upon terms not materially
more favorable to the purchasers of such securities than the
terms specified in the initial Notice given in connection with
such sale. In the event Aust has not entered into an agreement
to sell the TRANSFER SHARES within such 90 day period (or sold
and issued the TRANSFER SHARES in accordance with the foregoing
within 45 days from the date of such agreement), Aust shall not
thereafter issue or sell any TRANSFER SHARES without first
offering such TRANSFER SHARES to SBC, Telmex and the Transferees
in the manner provided in this Agreement.
(d) Notwithstanding any other provision hereof, Aust shall
have the right to sell or otherwise transfer any TRANSFER SHARES
without compliance with any other provisions of this Section 1 to
(i) Aust's spouse, children, grandchildren, siblings, aunts,
uncles, cousins, nieces, nephews, parents and/or grandparents, or
(ii) to a trust for the benefit of Aust or any one or more of the
foregoing (each of such persons or entities, a "Permitted
Transferee") who or which agrees to be bound by the provisions
hereof.
Section 2. REPRESENTATIONS, WARRANTIES AND COVENANTS
Mr. Aust represents and warranties to SBC and Telmex as
follows:
Aust has all requisite power and authority to execute,
deliver and perform his obligations under this Agreement. This
Agreement has been duly executed and delivered by Aust and is a
legal, valid and binding obligation of Aust enforceable in
accordance with its terms, and does not require the consent or
approval of any third party
The TRANSFER SHARES are not subject to any contractual right
of first refusal or other right in favor of any person or entity
or any encumbrance, and Aust covenants not to enter into any
agreement that would make the TRANSFER SHARES subject to any such
right or encumbrance or which would be inconsistent with this
Agreement.
Section 3. MISCELLANEOUS
3.1 Rights and Remedies
Unless otherwise provided herein, the rights and remedies of
the parties hereunder shall not be mutually exclusive, and the
exercise of one or more provisions of this Agreement shall not
preclude the exercise of any other provisions. Each of the
parties confirms that damages at law may be an inadequate remedy
for a breach or threatened breach of any provision hereof. The
respective rights and obligations hereunder shall be enforceable
by specific performance, injunction or other suitable remedy, it
being the intention of this Section to make clear the agreement
of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at
law or otherwise.
3.2 Counterparts
This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
3.3 Notices
Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be
in writing (and, in addition to such writing, the text of any
such notice, request, instruction or other document also shall be
sent by electronic mail to the e-mail addresses specified below)
and shall be deemed received (i) upon receipt if delivered either
personally or by telex or facsimile (provided that such telex or
facsimile is confirmed in writing by express mail), (ii) on the
next day if by express mail or (iii) on the date that is three
days after being sent by registered or certified mail, return
receipt requested, postage prepaid to the following addresses (or
at such other address for a party as shall be specified by like
notice provided that such notice shall be effective only after
receipt thereof):
If to SBC: James Kahan
Senior Vice President -
Corporate Development
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-5034
Voice: 210-351-5030
E-mail: [email protected]
With a copy (which shall Michael A. Meyer
not constitute notice) General Attorney
to: SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-3488
Voice: 210-351-2165
E-mail: [email protected]
If to Telmex: Parque Via 198, Oficina 701
Col Cuauhtemoc
Mexico City DF, 06599
Mexico
If to Aust: Jonathan P. Aust
President and Chief Executive
Officer
Network Access Solutions
100 Carpenter Drive
Sterling, VA 20165
Fax: 703-742-7706
Voice: 703-995-1682
E-mail: [email protected]
With a copy (which shall Worth D. MacMurray
not constitute notice) Vice President, Legal and Strategic
to: Planning
Network Access Solutions
100 Carpenter Drive
Sterling, VA 20165
Fax: 703-995-2180
Voice: 703-995-2695
E-mail: [email protected]
3.4 Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such
jurisdiction.
3.5 Assignment
This Agreement (i) may not be assigned by Aust without SBC's
and Telmex's consent (which consent shall not be unreasonably
withheld) except to a Permitted Transferee, that agrees to be
bound by all of the terms hereof and (ii) may not be assigned by
SBC or Telmex without the consent of Aust (which consent shall
not be unreasonably withheld) except to any Wholly-Owned
Subsidiary of SBC or Telmex (as hereafter defined) that agrees to
be bound by all of the terms hereof (any permitted assignee
described in this clause (ii), a "Transferee"), and provided that
no such permitted assignment shall relieve the assigning party of
any liability for a breach of this Agreement by such party or its
assignee. In the event that SBC or Telmex shall assign its right
of first offer pursuant to this Agreement with respect to less
than all of the TRANSFER SHARES, SBC or Telmex shall retain its
right of first offer to the extent not assigned. For purposes
hereof, "Wholly-Owned Subsidiary of SBC or Telmex" means any
corporation, limited liability company, general or limited
partnership, limited liability partnership, joint venture, trust
or other entity of which the outstanding capital stock is wholly
owned directly or indirectly by SBC or Telmex and which is formed
for business purposes that are unrelated to the ability of such
entity to receive any rights or interests hereunder or associated
herewith. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs
or successors in interest.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement, or have caused this Agreement to be signed in their
respective names by an officer, hereunto duly authorized, on the
date first above written.
/s/ Jonathan P. Aust
Jonathan P. Aust
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
Name:_________________________
Title:________________________
TELEFONOS DE MEXICO, S.A. DE C.V.
By: /s/ Adolfo Cerezo
Name: Adolfo Cerezo
Title: C.F.O.
NETWORK ACCESS SOLUTIONS
CORPORATION
By: /s/ Jonathan P. Aust
Name: Jon Aust
Title: CEO
Exhibit V
Right of First Offer Agreement
This Right of First Offer Agreement (the "Agreement"), dated as
of February 4, 2000, is by and among Spectrum Equity Investors
II, L.P., SEA 1998 II, L.P. (each of such entities is referred to
as "Spectrum"), SBC Communications Inc., a Delaware corporation
("SBC"), Telefonos de Mexico, S.A. de C.V. ("Telmex") and Network
Access Solutions Corporation, a Delaware corporation ("NAS").
WHEREAS, SBC and Telmex wish to acquire from Spectrum, and
Spectrum wishes to grant to SBC and Telmex, a right of first
offer to acquire shares of capital stock of NAS held by Spectrum;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
Section 1. RIGHT OF FIRST OFFER
1.1 Right of First Offer
Subject to the terms and conditions specified in this
Agreement, Spectrum hereby grants to SBC and Telmex, as long as
SBC and Telmex own all of the shares of Series B Preferred Stock
issued to them upon the closing under the Stock Purchase
Agreements of even date herewith between SBC and NAS and between
Telmex and NAS (the "Preferred Shares") or all of the shares of
Common Stock issued upon conversion of such Preferred Shares (or
a greater number of shares of Preferred Stock or shares of Common
Stock than originally issued upon such closing or conversion), a
right of first offer with respect to future sales by Spectrum of
any shares of Common Stock or other securities of NAS (the
"TRANSFER SHARES") owned of record or beneficially by Spectrum on
or after the date hereof.
(a) In the event Spectrum proposes to sell any TRANSFER
SHARES, it shall give SBC, Telmex and any Transferees (as defined
in Section 3.5) written notice (the "Notice") of its intention
stating: (i) a description of the TRANSFER SHARES it proposes to
sell, (ii) the number of TRANSFER SHARES it proposes to sell, and
(iii) the price per share at which, and other terms on which, it
proposes to sell such TRANSFER SHARES.
(b) Within 10 Business Days after the Notice is given, SBC,
Telmex and the Transferees may elect to purchase, at the price
specified in the Notice, up to the number of shares of the
TRANSFER SHARES proposed to be sold. An election to purchase
(the "Election") shall be made in writing and must be given to
Spectrum within such 10 Business Day period. Unless otherwise
agreed by SBC, Telmex and the Transferees, if more than one of
SBC, Telmex and any Transferee desires to purchase TRANSFER
SHARES and there are insufficient TRANSFER SHARES to accommodate
all proposed purchases, the SBC, Telmex and Transferee purchases
shall be on a pro rata basis based on the number of shares of NAS
Preferred Stock and NAS Common Stock they own at such time. The
closing of the sale of TRANSFER SHARES by Spectrum to SBC and/or
Telmex and/or any Transferee shall take place within 30 days
after the Election is made, provided that the 30 day period shall
be extended to the extent necessary to accommodate the receipt of
any necessary regulatory approvals for the sale.
(c) Spectrum shall have 90 days after the last date on
which SBC's and Telmex's right of first offer lapsed to enter
into an agreement (pursuant to which the sale of TRANSFER SHARES
covered thereby shall be closed, if at all, within 45 days from
the execution thereof) to sell the TRANSFER SHARES which SBC,
Telmex and the Transferees did not elect to purchase under this
Agreement, at or above the price and upon terms not materially
more favorable to the purchasers of such securities than the
terms specified in the initial Notice given in connection with
such sale. In the event Spectrum has not entered into an
agreement to sell the TRANSFER SHARES within such 90 day period
(or sold and issued the TRANSFER SHARES in accordance with the
foregoing within 45 days from the date of such agreement),
Spectrum shall not thereafter issue or sell any TRANSFER SHARES
without first offering such TRANSFER SHARES to SBC, Telmex and
the Transferees in the manner provided in this Agreement.
(d) Notwithstanding any other provision hereof, Spectrum
shall have the right to sell or otherwise transfer any TRANSFER
SHARES without compliance with any other provisions of this
Section 1 to any person or entity who is a general partner or
limited partner of Spectrum as of the date hereof (each of such
persons or entities, a "Permitted Transferee") who or which
agrees to be bound by the provisions hereof.
Section 2. REPRESENTATIONS, WARRANTIES AND COVENANTS
Spectrum represents and warranties to SBC and Telmex as
follows:
(a) Spectrum has all requisite power and authority to
execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered
by Spectrum and is a legal, valid and binding obligation of
Spectrum enforceable in accordance with its terms, and does not
require the consent or approval of any third party
(b) The TRANSFER SHARES are not subject to any contractual
right of first refusal or other right in favor of any person or
entity or any encumbrance, and Spectrum covenants not to enter
into any agreement that would make the TRANSFER SHARES subject to
any such right or encumbrance or which would be inconsistent with
this Agreement.
Section 3. MISCELLANEOUS
3.1 Rights and Remedies
Unless otherwise provided herein, the rights and remedies of
the parties hereunder shall not be mutually exclusive, and the
exercise of one or more provisions of this Agreement shall not
preclude the exercise of any other provisions. Each of the
parties confirms that damages at law may be an inadequate remedy
for a breach or threatened breach of any provision hereof. The
respective rights and obligations hereunder shall be enforceable
by specific performance, injunction or other suitable remedy, it
being the intention of this Section to make clear the agreement
of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at
law or otherwise.
3.2 Counterparts
This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
3.3 Notices
Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be
in writing (and, in addition to such writing, the text of any
such notice, request, instruction or other document also shall be
sent by electronic mail to the e-mail addresses specified below)
and shall be deemed received (i) upon receipt if delivered either
personally or by telex or facsimile (provided that such telex or
facsimile is confirmed in writing by express mail), (ii) on the
next day if by express mail or (iii) on the date that is three
days after being sent by registered or certified mail, return
receipt requested, postage prepaid to the following addresses (or
at such other address for a party as shall be specified by like
notice provided that such notice shall be effective only after
receipt thereof):
If to SBC: James Kahan
Senior Vice President -
Corporate Development
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-5034
Voice: 210-351-5030
E-mail: [email protected]
With a copy (which shall Michael A. Meyer
Not constitute notice) General Attorney
to: SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Fax: 210-351-3488
Voice: 210-351-2165
E-mail: [email protected]
If to Telmex: Parque Via 198, Oficina 701
Col Cuauhtemoc
Mexico City DF, 06599
Mexico
If to Spectrum: Brion B. Applegate
Managing General Partner
Spectrum Equity Investors
333 Middlefield Road
Suite 200
Menlo Park, CA 94025
With a copy (which shall
not constitute notice)
to:
3.4 Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such
jurisdiction.
3.5 Assignment
This Agreement (i) may not be assigned by Spectrum without
SBC's and Telmex's consent (which consent shall not be
unreasonably withheld) except to a Permitted Transferee that
agrees to be bound by all of the terms hereof and (ii) may not be
assigned by SBC or Telmex without the consent of Spectrum (which
consent shall not be unreasonably withheld) except to any Wholly-
Owned Subsidiary of SBC or Telmex (as hereafter defined) that
agrees to be bound by all of the terms hereof (any permitted
assignee described in this clause (ii), a "Transferee"), and
provided that no such permitted assignment shall relieve the
assigning party of any liability for a breach of this Agreement
by such party or its assignee. In the event that SBC or Telmex
shall assign its right of first offer pursuant to this Agreement
with respect to less than all of the TRANSFER SHARES, SBC or
Telmex shall retain its right of first offer to the extent not
assigned. For purposes hereof, "Wholly-Owned Subsidiary of SBC
or Telmex" means any corporation, limited liability company,
general or limited partnership, limited liability partnership,
joint venture, trust or other entity of which the outstanding
capital stock is wholly owned directly or indirectly by SBC or
Telmex and which is formed for business purposes that are
unrelated to the ability of such entity to receive any rights or
interests hereunder or associated herewith. This Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs or successors in interest.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement, or have caused this Agreement to be signed in their
respective names by an officer, hereunto duly authorized, on the
date first above written.
SPECTRUM EQUITY INVESTORS II, L.P.
By: /s/ Brion B. Applegate
Name: Brion B. Applegate
Title: Managing General Partner
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
Name:__________________________
Title:_________________________
TELEFONOS DE MEXICO, S.A. DE C.V.
By: /s/ Adolfo Cerezo
Name: Adolfo Cerezo
Title: CFO
NETWORK ACCESS SOLUTIONS CORPORATION
By: /s/ Jonathan P. Aust
Name: Jon Aust
Title: CEO
SEA 1998 II, L.P.
By: /s/ Brion B. Applegate
Name: Brion B. Applegate
Title: Managing General Partner
Exhibit VI
February 4, 2000
SBC Communications Inc.
175 East Houston Street
San Antonio, TX 78205
Telefonos de Mexico S.A. de C.V.
Parque Via 198, Oficina 701
Col Cuauhtemoc
Mexico City DF, 06599
Mexico
Re: Network Access Solutions Corporation
Dear Sirs:
This letter will confirm our agreement on certain
registration rights issues.
Reference is made to the Stock Purchase Agreement (the "SBC
Stock Purchase Agreement") dated as of February 4, 2000 between
SBC Communications Inc. ("SBC") and Network Access Solutions
Corporation ("NAS") contemplating the issuance of Series B
Preferred Stock of NAS to SBC and a Stock Purchase Agreement (the
"Telmex Stock Purchase Agreement") dated as of February 4, 2000
between Telefonos de Mexico S.A. de C.V. ("Telmex") and NAS
contemplating the issuance of Series B Preferred Stock of NAS to
Telmex. Capitalized terms in this letter not otherwise defined
shall have the meanings in such Stock Purchase Agreements.
Reference is made to the Investor Rights Agreement (the
"Investor Rights Agreement") dated as of August 6, 1998 between
NAS and the undersigned (other than SBC and Telmex), which grants
to the undersigned registration rights as set forth therein. All
signatories to the Investor Rights Agreement are included as
signatories to this letter. The undersigned (other than SBC and
Telmex) constitute all of the Prior Holders.
Each of the undersigned hereby consents to each Holder under
the SBC Stock Purchase Agreement (a "SBC Holder") and each Holder
under the Telmex Stock Purchase Agreement (a "Telmex Holder")
participating in any registration statement in which the Prior
Holders may participate with respect to securities of NAS and to
the extent not all shares to be offered by the SBC Holders and
Telmex Holders and the Prior Holders may be sold under any such
registration statement, agrees to reduce the number of shares the
SBC Communications Inc.
February 4, 2000
Page 2
Prior Holders, as a group, may sell under such registration
statement on a pro rata basis with the SBC Holders as a group
and the Telmex Holders as a group, with such pro rata reduction
based on the number of shares of Common Stock, or the shares of
Common Stock represented by Convertible Securities, that each
group owns or Beneficially Owns at the time of the relevant
Registration Request.
SBC hereby consents to each Telmex Holder and Prior Holder
participating in any registration statement in which SBC may
participate with respect to securities of NAS and to the extent
not all shares to be offered by the Prior Holders and SBC may be
sold under any such registration statement, agrees to reduce the
number of shares SBC may sell under such registration statement
on a pro rata basis with the Prior Holders as a group and with
the Telmex Holders as a group, with such pro rata reduction based
on the number of shares of Common Stock, or the shares of Common
Stock represented by Convertible Securities, that each group owns
or Beneficially Owns at the time of the relevant Registration
Request.
Telmex hereby consents to each SBC Holder and Prior Holder
participating in any registration statement in which Telmex may
participate with respect to securities of NAS and to the extent
not all shares to be offered by the Prior Holders and Telmex may
be sold under any such registration statement, agrees to reduce
the number of shares Telmex may sell under such registration
statement on a pro rata basis with the Prior Holders as a group
and with the SBC Holders as a group, with such pro rata reduction
based on the number of shares of Common Stock, or the shares of
Common Stock represented by Convertible Securities, that each
group owns or Beneficially Owns at the time of the relevant
Registration Request.
The Investor Rights Agreement and the SBC Stock Purchase
Agreement and the Telmex Stock Purchase Agreement are superseded
in all respects necessary to achieve the arrangements in this
letter.
The obligations of this letter shall be binding upon the
successors and assigns of the parties (and any assignee or
transferee of any of the shares that are the subject of this
letter).
If this letter reflects our understanding, please sign
below.
[Signature Pages Follow]
SBC Communications Inc.
February 4, 2000
Page 3
Spectrum Equity Investors II, L.P.
By: /s/ Brion B. Applegate
SEA 1998 II, L.P.
By: /s/ Brion B. Applegate
FBR Technology Venture
Partners L.P.
By: /s/ Gene Riechers
W2 Venture Partners, LLC
By: /s/ Edward T. Wang
Agreed:
SBC Communications Inc.
By: /s/ James S. Kahan
Telefonos de Mexico, S.A. de C.V.
By: /s/ Adolfo Cerezo
