UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 1, 1999
FIRSTCOM CORPORATION
(Exact name of registrant as specified in its charter)
Texas 0-25194 87-0464860
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
220 Alhambra, Suite 910
Coral Gables, Florida 33134
(Address, including zip code, of principal executive office)
(305) 448-4422
Registrant's telephone number, including area code
(Former name, former address and fiscal year, if changed since last report)
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ITEM 5. OTHER EVENTS.
On June 30, 1999, the Registrant entered into a Securities Purchase
Agreement with GE Capital Structured Finance Group ("SFG"), a wholly owned
subsidiary of GE Capital to issue an aggregate of $10 Million of 15% Series A
Convertible Preferred Stock ("Preferred Stock"). Each share of Preferred Stock
is convertible into one share of the Registrant's common stock, subject to
adjustment for certain events as set forth in the Certificate of Designation.
The holders of Preferred Stock will be granted certain registration rights with
respect to the common stock underlying the Preferred Stock. A copy of the Form
of Certificate of Designation to be filed with the Secretary of State of the
State of Texas relating to the Preferred Stock is attached hereto as Exhibit 4.3
and incorporated herein by referenced.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
4.1 Securities Purchase Agreement, dated as of June 30,
1999, between FirstCom Corporation and SFG-N, Inc.
(GE Capital Structured Finance Group, a wholly owed
subsidiary of GE Capital).
4.2 Investor Rights Agreement, dated as of June 30, 1999,
between FirstCom Corporation and SFG-N, Inc. (GE
Capital Structured Finance Group, a wholly owned
subsidiary of GE Capital).
4.3 Certificate of Designation, dated as of June 30,
1999, between FirstCom Corporation and SFG-N, Inc.
(GE Capital Structured Finance Group, a wholly owned
subsidiary of GE Capital).
20.1 Press Release dated July 1, 1999 in connection with
the issuance of $10 Million Series A Cumulative
Convertible Preferred Stock to GE Capital Structured
Finance Group at $8 per share.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 1, 1999 By: /s/ Douglas G. Geib II
-----------------------
Douglas G. Geib, II
Chief Financial Officer
2
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Securities Purchase Agreement, dated as of June 30,
1999, between FirstCom Corporation and SFG-N, Inc.
(GE Capital Structured Finance Group, a wholly owed
subsidiary of GE Capital).
4.2 Investor Rights Agreement, dated as of June 30, 1999,
between FirstCom Corporation and SFG-N, Inc. (GE
Capital Structured Finance Group, a wholly owned
subsidiary of GE Capital).
4.3 Certificate of Designation, dated as of June 30,
1999, between FirstCom Corporation and SFG-N, Inc.
(GE Capital Structured Finance Group, a wholly owned
subsidiary of GE Capital).
20.1 Press Release dated July 1, 1999 in connection with
the issuance of $10 Million Series A Cumulative
Convertible Preferred Stock to GE Capital Structured
Finance Group at $8 per share.
EXHIBIT 4.1
================================================================================
SECURITIES PURCHASE AGREEMENT
Dated as of June 30, 1999
By and Among
FIRSTCOM CORPORATION
and
SFG-N INC.
================================================================================
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS............................................................................1
ss.1.0 Definitions............................................................................1
ARTICLE II
REPRESENTATIONS OF THE COMPANY.........................................................6
ss.2.0 Representations of the Company.........................................................6
ss.2.1 Existence and Good Standing............................................................6
ss.2.2 Capital Stock..........................................................................7
ss.2.3 Authorization and Validity of the Documents............................................8
ss.2.4 Subsidiaries and Investments...........................................................8
ss.2.5 SEC and Other Documents; Financial Statements..........................................9
ss.2.6 Title to Properties; Encumbrances; Leases; Telecom Licenses............................9
ss.2.7 Intellectual Property.................................................................10
ss.2.8 Material Contracts....................................................................11
ss.2.9 Consents and Approvals; No Violations.................................................11
ss.2.10 Litigation............................................................................11
ss.2.11 Taxes.................................................................................12
ss.2.12 Compliance with Laws..................................................................12
ss.2.13 Employment Relations..................................................................12
ss.2.14 Employee Benefit Plans................................................................12
ss.2.15 Environmental Laws and Regulations....................................................12
ss.2.16 No Misstatements or Omissions; Projections............................................13
ss.2.17 Investment Company Act................................................................13
ss.2.18 Texas Takeover Law....................................................................13
ss.2.19 Year 2000 Reprogramming...............................................................13
ss.2.20 Securities Law Compliance.............................................................14
ss.2.21 Transactions with Affiliates..........................................................14
ss.2.22 Capital Stock Reserved................................................................14
ss.2.23 No Conflict of Rights.................................................................14
ss.2.24 Use of Proceeds.......................................................................14
ss.2.25 Insurance.............................................................................14
ss.2.26 Permits...............................................................................14
ss.2.27 Extortion Payments....................................................................15
ss.2.28 Improper Payments.....................................................................15
ss.2.29 Broker's or Finder's Fees.............................................................15
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ARTICLE III
REPRESENTATIONS OF THE PURCHASER......................................................15
ss.3.0 Representations of the Purchaser......................................................15
ss.3.1 Existence and Good Standing; Power and Authority......................................15
ss.3.2 Restrictive Documents.................................................................15
ss.3.3 Purchase for Investment...............................................................16
ss.3.4 Broker's or Finder's Fees.............................................................16
ARTICLE IV
ISSUANCE OF SECURITIES; PAYMENT OF SUBSCRIPTION PRICE; CLOSINGS.......................16
ss.4.1 Issuance of Preferred Stock...........................................................16
ss.4.2 Purchase Price........................................................................16
ss.4.3 Time and Place of Closings............................................................16
ss.4.4 Closing Deliveries....................................................................17
ARTICLE V
CONDITIONS TO THE PURCHASER'S OBLIGATIONS.............................................17
ss.5.0 Conditions to the Purchaser's Obligations.............................................17
ss.5.1 Opinions of Counsel...................................................................17
ss.5.2 Good Standing and Other Certificates..................................................17
ss.5.3 Truth of Representations and Warranties...............................................17
ss.5.4 Performance of Agreements.............................................................17
ss.5.5 No Litigation Threatened..............................................................18
ss.5.6 Third Party Consents; Governmental Approvals..........................................18
ss.5.7 Proceedings...........................................................................18
ss.5.8 Certificate of Designation............................................................18
ss.5.9 Side Letter...........................................................................18
ss.5.10 Investor Rights Agreement.............................................................18
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS...............................................18
ss.6.0 Conditions to the Company's Obligations...............................................18
ss.6.1 Truth of Representations and Warranties...............................................18
ss.6.2 Third Party Consents; Governmental Approvals..........................................18
ss.6.3 Performance of Agreement..............................................................18
ss.6.4 No Litigation Threatened..............................................................19
ss.6.5 Fair Market Value Opinion.............................................................19
ARTICLE VII
POST-CLOSING AGREEMENTS...............................................................19
ss.7.1 Financial Statements and Other Information............................................19
ss.7.2 Inspection............................................................................20
ss.7.3 Reservation of Common Stock; Valid Issuance...........................................21
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ss.7.4 Prohibited Actions....................................................................21
ss.7.5 Due Diligence.........................................................................21
ss.7.6 Compliance with Statutes, etc.........................................................22
ss.7.7 Improper Payments.....................................................................22
ARTICLE VIII
SURVIVAL..............................................................................22
ss.8.1 Survival..............................................................................22
ARTICLE IX
INDEMNIFICATION.......................................................................22
ss.9.1 Indemnification.......................................................................22
ss.9.2 Contribution..........................................................................23
ss.9.3 Limitation on Indemnification.........................................................23
ARTICLE X
MISCELLANEOUS.........................................................................23
ss.10.1 Knowledge of the Transaction Parties..................................................23
ss.10.2 Expenses..............................................................................23
ss.10.3 Governing Law.........................................................................23
ss.10.4 Captions..............................................................................23
ss.10.5 Publicity.............................................................................23
ss.10.6 Notices...............................................................................24
ss.10.7 Parties in Interest...................................................................25
ss.10.8 Counterparts..........................................................................25
ss.10.9 Entire Agreement......................................................................25
ss.10.10 Amendments............................................................................25
ss.10.11 Severability..........................................................................25
ss.10.12 Third Party Beneficiaries.............................................................25
ss.10.13 Jurisdiction..........................................................................25
SCHEDULES
Schedule 2.1 Existence and Good Standing
Schedule 2.2 Capital Stock
Schedule 2.4 Subsidiaries and Investments
Schedule 2.5(c) Material Adverse Change
Schedule 2.6(a) Material Property
Schedule 2.6(b) Leases and Telecom Licenses
Schedule 2.7 Intellectual Property
Schedule 2.8 Material Contracts
Schedule 2.14 Plans
Schedule 2.15 Environmental Matters
Schedule 2.21 Transactions with Affiliates
Schedule 2.23 Registration Rights
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EXHIBITS
A Form of Certificate of Designation
B Form of Investor Rights Agreement
C Form of Opinion of Baker & McKenzie
D Form of Confidentiality Agreement
E Form of Side Letter
(iv)
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of June 30, 1999 by and
among FIRSTCOM CORPORATION, a Texas corporation (the "Company"), and SFG-N INC.,
a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser desires to subscribe for, and the
Company desires to issue, 1,250,000 shares of Preferred Stock, par value $0.001
per share, of the Company which after giving effect to the transactions
contemplated hereby shall constitute 100% of the issued and outstanding Series A
Cumulative Convertible Preferred Stock of the Company (the "Preferred Stock");
WHEREAS, on or prior to the execution and delivery of this
Agreement, the Company shall have filed with the Secretary of State of the State
of Texas, a certificate of designation, in substantially the form attached
hereto as Exhibit A, setting forth the rights and obligations relating to the
Preferred Stock (the "Certificate of Designation") including without limitation,
provisions relating to the conversion of the Preferred Stock into the Company's
Common Stock, par value $0.001 per share (the "Common Stock"); and
WHEREAS, on or prior to the execution and delivery of this
Agreement, SFG-N Inc., the Company, Patricio E. Northland and Douglas G. Geib II
shall have executed and delivered an investor rights agreement, in substantially
the form attached hereto as Exhibit B, setting forth the rights and obligations
relating to the holders of the Preferred Stock (the "Investor Rights
Agreement").
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
-----------
ss. 1.0 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person; PROVIDED, HOWEVER, that, an Affiliate
shall include any entity that directly or indirectly (including through limited
partner or general partner interests) owns more than 10% of any class of the
equity of any other entity.
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"Agreement" shall mean this Agreement, as the same may be
amended, supplemented or modified in accordance with the terms hereof, from time
to time.
"Applicable Law" shall mean any constitution, statue, law,
rule, regulation, ordinance, judgment, order, decree, Permit, or any published
directive, guideline, requirement or other governmental restriction which has
the force of law, or any determination by, or interpretation of any of the
foregoing by, any judicial authority, binding on a given person whether in
effect as of the date hereof or as of any date thereafter, including all
applicable Environmental Laws, and also including, without limitation, the
following: (i) for Chile: (a) Chilean Telecommunications Law and (b) Chilean
Foreign Investment Statute; (ii) for Peru: (a) General Telecommunications Law,
(b) State Contracts, (c) the General Regulation to the Telecommunications Law,
(d) the Regulation for the Organization for Supervision of Private Investments
in Telecommunications ("OSIPTEL"), and (e) Foreign Investment Promotion Law;
(iii) for Colombia: (a) Decree 1990 issued in 1990, (b) Law 142 enacted in 1994,
and (c) plans adopted by the National Council for Economic and Social Policy of
Colombia and (iv) all other applicable laws, statutes, regulations and decrees
issued by the Chilean, Peruvian or Colombian governmental authorities.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the City
of New York are authorized or obligated by law or executive order to close.
"Certificate of Designation" shall have the meaning set forth
in the recitals of this Agreement.
"Closing" shall have the meaning set forth in Section 4.3 of
this Agreement.
"Closing Date" shall mean June 30, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated and rulings issued thereunder.
"Commission" shall mean, at any time, the Securities and
Exchange Commission or any other Federal agency then administering the
Securities Act and other Federal securities laws.
"Common Stock" shall have the meaning set forth in the
recitals of this Agreement.
"Company" shall have the meaning set forth in the first
paragraph of this Agreement.
"Company Property" shall mean any real property and
improvements owned, leased, used, operated or occupied by any Transaction Party.
"Company Reports" shall have the meaning set forth in Section
2.5 of this Agreement.
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"Copyrights" shall means all material copyrights, whether
registered or unregistered, owned by, assigned to or subject to assignment to
the Transaction Parties anywhere in the world.
"Damages" shall have the meaning set forth in Section 9.1 of
this Agreement.
"Documents" shall mean, collectively, this Agreement, the
Preferred Stock, the Certificate of Designation and the Investor Rights
Agreement.
"Encumbrances" shall have the meaning set forth in Section
2.6 of this Agreement.
"Environmental Claims" shall mean all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued under any such Law
(hereinafter "Claims"), including (a) Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) Claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" shall mean any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of common law in
effect and in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. ss.9601 eT Seq.; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. ss.6901 et seq.; the Federal Water Pollution Control Act, as amended,
33 U.S.C. ss.1351 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss.3601
ET SEq.; the Clean Air Act, 42 U.S.C. ss.7401 ET seq.; the Safe Drinking Water
Act, 42 U.S.C. ss.300F ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. ss.3701
ET SEQ.; and their state and local counterparts and equivalents.
"ERISA" shall have the meaning set forth in Section 2.14 of
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Fully-Diluted Basis" shall mean the total number of shares of
Common Stock outstanding at any time, after giving effect to (a) all Common
Stock outstanding at the time of such determination and (b) all Common Stock
issuable upon the exercise of any outstanding rights, options and/or warrants to
acquire Common Stock and outstanding securities that are, or may be, pursuant to
their terms convertible into or exchangeable for Common Stock or that may be
required to be issued pursuant to any other agreement.
"GAAP" shall have the meaning set forth in Section 2.5(b)
of this Agreement.
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"Governmental Authority" shall mean any national, state,
county, city, town, village, municipal or other local government department,
commission, board, bureau, agency, authority or instrumentality of the United
States or any other national authority or any political subdivision of any
thereof, and any Person exercising executive, legislative, judicial, regulatory
administrative functions of or pertaining to any of the foregoing entities,
having jurisdiction over the Person or matters in question, including, without
limitation, (i) for Chile: (a) Ministry of Transportation and
Telecommunications, (b) Ministry of Economy and (c) Central Bank; (ii) for Peru:
(a) Ministry of Transportation, Communications, Housing and Construction, (b)
Specialized Telecommunications Concession Unit and (c) National Commission on
Foreign Investments; (iii) for Colombia: (a) the Ministry of Communications, (b)
the Superintendency of Public Services, (c) the Commission for the Regulation of
Telecommunications and (d) Central Bank.
"Hazardous Materials" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; and (b)
any chemicals, materials or substances defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, pursuant to any applicable
Environmental Law.
"Improper Payments" shall have the meaning set forth in
Section 2.28 of this Agreement.
"Indebtedness" of any Person shall mean, without duplication,
(i) all indebtedness for borrowed money or for the deferred purchase price of
property or services, (ii) all indebtedness of the type otherwise described in
this definition secured by any lien on any property owned by such Person or any
of its Subsidiaries, (iii) capitalized lease obligations, (iv) all guarantees of
any type of indebtedness otherwise described in this definition, (v) all
obligations of such Person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, I.E., take-or-pay or similar
obligations and (vi) interest rate protection hedging agreements, currency
hedging agreements or commodity hedging agreements.
"Intellectual Property" shall have the meaning set forth in
Section 2.7 of this Agreement.
"Investor Rights Agreement" shall have the meaning set forth
in the recitals of this Agreement.
"LAIF" shall have the meaning set forth in Section 3.3 of
this Agreement.
"Leases" shall have the meaning set forth in Section 2.6 of
this Agreement.
"Marks" shall mean all registrations for material trademarks
and service marks and all pending applications for such registrations owned by,
assigned to or subject to assignment
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to the Transaction Parties anywhere in the world and all material unregistered
trademarks, trade names, service marks, brand names, and business names.
"Material Adverse Effect" shall have the meaning set forth in
Section 2.1 of this Agreement.
"NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automatic Quotation System.
"Patents" shall mean all patents and patent applications owned
by, assigned to or subject to assignment to the Transaction Parties anywhere in
the world.
"Permit" shall mean any Federal, state, local, foreign or
other governmental or other third party permit (including occupancy permit),
certificate, license, consent and authorization held by the Company or its
Subsidiaries.
"Permitted Business" shall mean any business in which any of
the Transaction Parties are engaged in on the Closing Date, and any reasonable
extensions thereof; PROVIDED, HOWEVER, that such businesses are operated in
South America, Central America (including, without limitation, Mexico) or the
Caribbean Islands and PROVIDED FURTHER, that such businesses are not primarily
operated in any country which is the target of any United States boycott laws,
embargo laws, or the substantial equivalent thereof.
"Permitted Encumbrances" shall have the meaning set forth in
Section 2.6 of this Agreement.
"Person" shall mean and include natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pre-Closing Periods" shall have the meaning set forth in
Section 2.11 of this Agreement.
"Preferred Stock" shall have the meaning set forth in the
recitals of this Agreement, and, in any event, shall be issued on the terms and
conditions set forth in the Certificate of Designation.
"Pro Rata Amount" shall mean the quotient obtained by dividing
the number of shares of Common Stock owned by the Purchaser on a Fully-Diluted
Basis by the total number of shares of Common Stock on a Fully-Diluted Basis.
"Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
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"Purchase Price" shall have the meaning set forth in Section
4.2 of this Agreement.
"Returns" shall have the meaning set forth in Section 2.11 of
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
"Securities Laws" shall mean the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder and under any
applicable state securities laws.
"Senior Notes Indenture" shall mean that certain Indenture,
dated as of October 27, 1997 between the Company and State Street Bank & Trust
Company, N.A., as amended or supplemented from time to time.
"Side Letter" shall mean that certain side letter, from the
Company to the Purchaser and LAIF (as defined herein), in substantially the form
attached hereto as Exhibit E.
"Subsidiary" shall have the meaning set forth in Section
2.4(a) of this Agreement.
"Taxes" shall mean all taxes, assessments, charges, duties,
fees, levies or other governmental charges, including, without limitation, all
Federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Telecom License" shall have the meaning set forth in Section
2.6 of this Agreement.
"Transaction Party" shall have the meaning set forth in
Section 2.1 of this Agreement.
"Vendor Financing" shall mean, collectively, the
collateralized vendor financings entered into by certain Transaction Parties on
November 11, 1998 and December 24, 1998.
ARTICLE II
REPRESENTATIONS OF THE COMPANY
------------------------------
ss. 2.0 REPRESENTATIONS OF THE COMPANY. In order to induce the
Purchaser to enter into this Agreement and to purchase the Preferred Stock, the
Company represents and warrants to and agrees with the Purchaser as follows:
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ss. 2.1 EXISTENCE AND GOOD STANDING. The Company and each of
its Subsidiaries (each a "Transaction Party," and collectively, the "Transaction
Parties") is a Person, duly organized, validly existing and in good standing, or
the equivalent thereof, under the laws of the jurisdiction of its organization.
Each Transaction Party has the requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
as proposed to be conducted. Except as set forth in SCHEDULE 2.1, each
Transaction Party is duly qualified or licensed to do business and is in good
standing, or the equivalent thereof, and is authorized to do business, in each
jurisdiction in which the character or location of the properties owned, leased
or operated by such entity or the nature of the business conducted by such
entity makes such qualification or license necessary, except where any such
failure to be duly qualified or licensed or in good standing, or the equivalent
thereof, would not have a material adverse effect on the business, operations,
financial condition or results of operations of the Transaction Parties, taken
as a whole, or on the ability of the Company to perform its obligations under
any of the Documents (a "Material Adverse Effect").
ss. 2.2 CAPITAL STOCK. Immediately prior to giving effect to
the transactions contemplated hereby, the Company had an authorized
capitalization consisting of 50,000,000 shares of Common Stock, par value $0.001
per share ("Common Stock") of which 20,272,644 shares of Common Stock were
outstanding, 15,918,067 shares were being held in reserve for issuance upon the
exercise of outstanding stock options and existing warrants, and 10,000,000
shares of Preferred Stock, par value $0.001 per share of which zero shares were
outstanding, in each case subject to adjustment based on the exercise of
outstanding stock options and existing warrants since June 21, 1999. All
outstanding shares of capital stock of the Company (including, without
limitation, those purchased by the Purchaser hereunder) have been, and, on the
Closing Date, will be duly authorized and validly issued and fully paid and
non-assessable. Except as set forth on SCHEDULE 2.2, and except for the
Preferred Stock, there will be no outstanding subscriptions, options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements or commitments, contingent or otherwise, of any character
providing for the purchase, redemption, acquisition, retirement, issuance or
sale by any Transaction Party of any shares of capital stock of any Transaction
Party or other securities exchangeable or convertible into capital stock of any
Transaction Party, in each case subject to adjustment based on the exercise of
outstanding stock options and existing warrants since June 21, 1999, and there
are no stock appreciation rights or phantom stock plans outstanding. SCHEDULE
2.2 sets forth the aggregate number of shares of Common Stock which, as of June
21, 1999, the Company is obligated to issue in connection with each specific
item set forth on SCHEDULE 2.2 and described in the immediately preceding
sentence, after giving effect to the transactions contemplated thereby. In
addition, except as set forth in SCHEDULE 2.2, there are no rights, agreements,
restrictions or encumbrances (such as preemptive rights, rights of first
refusal, rights of first offer, proxies, voting agreements, voting trusts,
registration rights agreements, shareholders agreements, etc., whether or not
any Transaction Party is a party thereto) nor are there any restrictions on the
transferability or sale of such capital stock pursuant to any provision of law,
contract or otherwise with respect to the purchase, sale or voting of any shares
of capital stock of any Transaction Party (whether outstanding or issuable upon
conversion, exchange or exercise of any other security of any Transaction
Party). Except as set forth in SCHEDULE 2.2 and SCHEDULE 2.23, no Transaction
Party has any outstanding bonds, debentures, notes or other
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obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities the holders of which have the
right to vote). The shares of Common Stock to be issued upon exercise of the
Preferred Stock are duly and validly authorized and when issued upon exercise of
the Preferred Stock, will be duly and validly issued, fully paid and
nonassessable, and free and clear of all Encumbrances (as defined herein) and
preemptive or other similar rights other than Encumbrances, and pre-emptive or
similar rights which may have been granted by the Purchaser.
ss. 2.3 AUTHORIZATION AND VALIDITY OF THE DOCUMENTS. The
Company has the requisite power and authority to execute and deliver the
Documents to which it is a party and to perform its obligations thereunder. The
execution, delivery and performance of the Documents by the Company and the
performance of its obligations hereunder have been duly authorized and approved
by all necessary action (including, without limitation, all action of the Board
of Directors, or the equivalent thereof, and shareholders or other required
Persons of the Company) and no other action on the part of such persons is
necessary to authorize the execution, delivery and performance of the Documents
by the Company. Each of the Documents has been duly executed and delivered by
the Company and, assuming due execution thereof by the other parties thereto, is
a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding brought in equity or at law).
ss. 2.4 SUBSIDIARIES AND INVESTMENTS. (a) Set forth in
SCHEDULE 2.4 attached hereto is a list of each Person in which the Company owns,
directly or indirectly, any equity security (each a "Subsidiary").
(b) Set forth on SCHEDULE 2.4 is a list of jurisdictions in
which each Subsidiary is qualified or licensed to do business.
(c) Each Subsidiary has the equity capitalization (including
minority ownership) set forth in SCHEDULE 2.4. All of the outstanding shares of
capital stock or other equity securities, as the case may be, of each Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable
and are not subject to, nor were they issued in violation of, any preemptive
rights, and, except as set forth in SCHEDULE 2.4, are owned, of record and
beneficially, by the Company or a Subsidiary, free and clear of all
Encumbrances. There are no outstanding options, warrants, rights, subscriptions,
claims of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise relating to the
capital stock or other equity securities, as the case may be, of any Subsidiary,
pursuant to which such Subsidiary, the Company or any other Subsidiary is or may
become obligated to issue or purchase any shares of capital stock or other
equity securities of such Subsidiary or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any capital stock or
other equity securities of such Subsidiary other than such rights granted to the
Company or a subsidiary of the Company.
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(d) There are no restrictions of any kind which prevent or
restrict the payment of dividends by any Subsidiary other than those
restrictions under the Senior Notes Indenture.
ss. 2.5 SEC AND OTHER DOCUMENTS; FINANCIAL STATEMENTS. (a)
Each registration statement, report, including annual and quarterly reports,
proxy statement or information statement, and all exhibits thereto prepared by
the Company or relating to its properties since January 1, 1997, each in the
form (including exhibits and any amendments thereto) filed with the Commission
(collectively, the "Company Reports"), as of their respective dates (i) complied
in all material respects with the applicable requirements of the Securities Laws
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. There is no unresolved violation asserted by any
Governmental Authority with respect to any of the Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presented the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations, shareholders'
equity (deficit) and cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presented
the results of operations, retained earnings or cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein,
in each case in accordance with United States generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except as
may be noted therein and except, in the case of the unaudited statements,
subject to normal recurring year-end adjustments.
(c) Except as set forth on SCHEDULE 2.5(C) attached hereto,
since December 31, 1998, no Transaction Party has experienced any change, event
or circumstance which would have a Material Adverse Effect.
ss. 2.6 TITLE TO PROPERTIES; ENCUMBRANCES; LEASES; TELECOM
LICENSES. (a) Except as set forth on SCHEDULE 2.6(A), the Transaction Parties do
not own, in fee or otherwise, any interest in any real property material to its
business, other than leasehold interests and easements. Except for such
properties and assets which have been sold or otherwise disposed of in the
ordinary course of business, each of the Transaction Parties has good title to
its material properties and assets (whether real, personal, mixed, tangible or
intangible), subject to no encumbrance, lien, charge or other restriction of any
kind or character ("Encumbrances"), except for (i) Encumbrances for current
taxes, assessments or governmental charges or levies on property not yet due and
delinquent, (ii) Encumbrances arising by operation of law, (iii) other
Encumbrances which could not reasonably be expected to have a Material Adverse
Effect and (iv) Encumbrances arising under the Vendor Financing (Encumbrances of
the type described in clauses (i) - (iv) above are hereinafter sometimes
referred to as "Permitted Encumbrances"). Each Transaction Party owns or
otherwise has the right to use all of the property now used and material to the
operation of the business of the Transaction Parties taken as a whole, which
personal property is in good operating condition and repair, ordinary wear and
tear excepted and substantially fit for the purpose for which they are being
utilized and constitutes all of the property necessary to conduct its business
as it is presently being conducted.
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(b) SCHEDULE 2.6(B)(I) attached hereto contains an accurate
and complete list of all material property (whether real, personal, mixed,
tangible or intangible) leased or sub-leased by the Transaction Parties,
including all amendments, extensions and other modifications (the "Leases").
SCHEDULE 2.6(B)(II) attached hereto contains an accurate and complete list of
all material licenses, concessions, easements, rights-of-way, and equivalent or
similar property interests, relating to telecommunications services, to which
any of the Transaction Parties is a party thereto (the "Telecom Licenses").
Except as otherwise set forth in SCHEDULE 2.6(B)(I) and SCHEDULE 2.6(B)(II)
attached hereto, each Lease and Telecom License is in full force and effect; the
Transaction Parties have a good and valid leasehold interest in and to all of
the leased property, subject to no Encumbrances, except Permitted Encumbrances;
all payments, rents and additional rents due to date from any of the Transaction
Parties in respect of each such Lease and Telecom License have been paid; no
Transaction Party has received notice that it is in default under any Lease or
Telecom License; and, to the knowledge of each of the Transaction Parties, there
exists no event, occurrence, condition or act (including the consummation of the
Transaction) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default by any
Transaction Party under any such Lease or Telecom License or which brings into
question the validity or effectiveness of any such Lease or Telecom License.
ss. 2.7 INTELLECTUAL PROPERTY. Except as otherwise indicated
on SCHEDULE 2.6 or SCHEDULE 2.7, to the Company's knowledge the Company owns the
entire right, title and interest in and to the Marks, the Copyrights and the
Patents free and clear of any Encumbrances except for Permitted Encumbrances.
Each item that is indicated as registered on SCHEDULE 2.7 has been duly
registered, filed with or issued by the appropriate authorities in the countries
indicated on SCHEDULE 2.7 and to the knowledge of each of the Transaction
Parties, all such registrations, filings and issuances remain in full force and
effect. Except as otherwise indicated on SCHEDULE 2.7, to the Company's
knowledge none of the Marks, the Copyrights or the Patents are the subject of
any pending, or threatened opposition, interference, cancellation proceeding or
other legal or governmental proceeding before a registration or issuing
authority in any jurisdiction. Except as otherwise disclosed in SCHEDULE 2.7, to
the Company's knowledge the conduct of the Transaction Parties' business as
presently conducted does not infringe, violate, or constitute misappropriation
of any trademark, service mark, copyright (whether registered or unregistered),
patent, trade secret, industrial design, computer program, data base, know-how
or other proprietary right (collectively "Intellectual Property") of any other
Person, nor, since January 1, 1997, has any Transaction Party received notice to
the contrary from any Person. The Company owns or has the right to use through
assignment, lease, license or other agreement all Intellectual Property
necessary for the conduct of the business as presently conducted. Except as set
forth in SCHEDULE 2.7, to the Company's knowledge there are no pending or
threatened material claims by any Person for infringement of any Intellectual
Property or unfair competition by any Transaction Party. Except as set forth in
SCHEDULE 2.7, to the Company's knowledge no Person is infringing upon the
Intellectual Property owned by, assigned to or subject to assignment of, the
Transaction Parties, and the Transaction Parties are aware of no facts that
would support such a claim by the Transaction Parties. The consummation of the
transaction contemplated hereby will not result in the loss or impairment of the
Transaction Parties' right to own or use any of the Intellectual Property
necessary to the conduct of the Transaction Parties' business as presently
conducted
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(including, but not limited to the Marks, the Copyrights and the Patents) nor
will it require the consent of any governmental authority or third party.
ss. 2.8 MATERIAL CONTRACTS. Except as set forth on SCHEDULE
2.8 and SCHEDULE 2.2 attached hereto on the Closing Date, no Transaction Party
is bound by (a) any agreement, contract or commitment providing for annual
payments of more than $250,000, (b) any agreement, indenture or other instrument
which contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock providing for annual payments of
more than $250,000, (c) any agreement, indenture or instrument relating to
Indebtedness providing for annual payments of more than $250,000, (d) any
agreement or contract with any Affiliate providing for annual payments of more
than $250,000, (e) any interconnection agreement providing for annual payments
of more than $250,000, (f) employment agreement, consulting agreement (which
entitles any Person to over $100,000 per year) or any other similar type of
contract or (g) any agreement, contract or commitment limiting the ability of
any Transaction Party to engage in any line of business or to compete with any
Person or to otherwise acquire property or conduct business in any area. Except
as otherwise set forth on SCHEDULE 2.8, each contract or agreement set forth on
SCHEDULE 2.8 (or required to be set forth in SCHEDULE 2.8) is in full force and
effect and there exists no material default or material event of default or to
the knowledge of each of the Transaction Parties, event, occurrence, condition
or act (including the consummation of the sale contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other material
event or condition, would become a default or event of default thereunder.
ss. 2.9 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution
and delivery of this Agreement and the other Documents by the Company to which
it is a party and compliance by the Company with the terms and provisions hereof
and thereof and the issuance of the Preferred Stock by the Company and the
consummation of the transactions contemplated hereby does not and will not (a)
violate or contravene any provision of the articles of incorporation (or
equivalent thereof) or bylaws (or equivalent thereof) of any Transaction Party,
(b) violate or contravene any statute, rule, regulation, licensing requirement,
order or decree of any court, arbitrator or any other public body or authority
by which any Transaction Party is bound or by which any of its properties or
assets are bound, (c) require any filing with, or permit, consent authorization,
qualification or approval of, or exemption from, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or any other Person
(other than required filings under the Exchange Act) or (d) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Encumbrance upon any of the properties or assets of any Transaction Party under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
any other instrument or obligation to which any Transaction Party is bound, or
by which it or any of its properties or assets may be bound.
ss. 2.10 LITIGATION. There is no action, suit, proceeding at
law or in equity, arbitration or administrative or other proceeding by or before
(or, to the knowledge of each of the Transaction Parties, any investigation by)
any governmental or other instrumentality or agency pending, or, to the
knowledge of each of the Transaction Parties, threatened, against or affecting
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any Transaction Party or any such entity's properties or rights which could
reasonably be expected to have a Material Adverse Effect. No Transaction Party
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could reasonably be expected to have a Material Adverse Effect.
ss. 2.11 TAXES.
(a) TAX RETURNS. Each of the Transaction Parties has timely
filed or caused to be timely filed or will timely file or cause to be timely
filed with the appropriate taxing authorities all material returns, statements,
forms and reports for Taxes (each a "Return" and collectively, the "Returns")
that are required to be filed by, or with respect to, the Transaction Parties on
or prior to the Closing Date. The Returns have accurately reflected and will
accurately reflect all material liability for Taxes of the Transaction Parties
for the periods covered thereby.
(b) PAYMENT OF TAXES. All Taxes and Tax liabilities of the
Transaction Parties for all taxable years or periods that end on or before the
Closing Date and, with respect to any taxable year or period beginning before
and ending after the Closing Date, the portion of such taxable year or period
ending on and including such Closing Date ("Pre-Closing Periods") have been
timely paid or accrued and adequately disclosed and fully provided for pursuant
to the financial statements which have been provided to the Purchaser by the
Company and are in accordance with GAAP.
ss. 2.12 COMPLIANCE WITH LAWS. Each of the Transaction Parties
are in compliance in all material respects with all Applicable Laws,
regulations, licensing requirements, orders, judgments and decrees and have
obtained all required governmental approvals and permits in each jurisdiction in
which they currently do business, in each case except where the failure to do so
would not have a Material Adverse Effect on the Company or any Subsidiary.
Without limiting the generality of the foregoing, each of the Transaction
Parties is in compliance in all respects with the United States Foreign Corrupt
Practices Act of 1977, as amended.
ss. 2.13 EMPLOYMENT RELATIONS. The Transaction Parties are in
substantial compliance with all Federal, state or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and have not, and are not, engaged
in any unfair labor practice and there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving any Transaction
Party.
ss. 2.14 EMPLOYEE BENEFIT PLANS. Except as set forth iN
SCHEDULE 2.14 attached hereto, none of the Transaction Parties nor any
organization which, together with any of the Transaction Parties, would be
treated as a "single employer" within the meaning of Section 414(b) or (c) of
the U.S. Internal Revenue Code of 1986, as amended, maintains or contributes to,
or has any obligation to contribute to (or has ever maintained or contributed
to), any domestic or foreign "employee benefit plan" within the meaning of the
U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not covered by ERISA.
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ss. 2.15 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set
forth on SCHEDUle 2.15 attached hereto, and except where the failure of any of
the following to be true and correct would not have a Material Adverse Effect on
the Company or any Subsidiary:
(a) The Company and its Subsidiaries are in compliance with
all Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to any Company Property;
(b) There are no past, pending or threatened material
Environmental Claims against the Company, any of its Subsidiaries or any Company
Property;
(c) There are no facts, circumstances, conditions or
occurrences regarding any Company Property or any property adjoining or in the
vicinity of any Company Property, that could reasonably be anticipated (i) to
form the basis of a material Environmental Claim against the Company, any of its
Subsidiaries or any Company Property or assets or (ii) to cause such Company
Property or assets to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law.
ss. 2.16 NO MISSTATEMENTS OR OMISSIONS; PROJECTIONS. No
representation or warranty by any Transaction Party contained in this Agreement
and no statement contained in any certificate, schedule, exhibit or other
instrument specified or referred to in this Agreement or any other Document
whether heretofore furnished to the Purchaser or hereafter furnished to the
Purchaser pursuant to this Agreement or any other Document contains or will
contain any untrue statement of a material fact or omits or will omit as of the
date of such document any material fact necessary to make the statements
contained therein in light of the circumstances under which such statement was
made, not misleading. The financial projections provided by the Company to the
Purchaser were prepared in good faith using the best information available to
management of the Company and represent management's good faith estimates of the
future performance of the Company for the periods referred to therein. The
Company is not aware of any material facts or circumstances which would render
such financial projections unreasonable or unobtainable; PROVIDED, HOWEVER, it
being recognized by the Purchaser that actual results may differ from the
projections and no representation is made that the projections will in fact be
attained.
ss. 2.17 INVESTMENT COMPANY ACT. No Transaction Party is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
ss. 2.18 TEXAS TAKEOVER LAW. The purchase of the Preferred
Stock by the Purchaser has been approved by the Board of Directors of the
Company and there shall be no restriction on purchase of the Preferred Stock by
the Purchaser or any of its Affiliates pursuant to the laws of the State of
Texas.
ss. 2.19 YEAR 2000 REPROGRAMMING. The costs to the Company and
its Subsidiaries of reprogramming required to permit the proper functioning in
and following the year 2000, of the (i) computer systems and (ii) equipment
containing embedded microchips, in each case, owned or operated by any
Transaction Party and the testing of all such systems and
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equipment and of the reasonably foreseeable consequences of year 2000 with
respect to such systems and equipment (including, without limitation,
reprogramming errors) could, individually or in the aggregate, not reasonably be
expected to have a Material Adverse Effect. Except for the cost of such of the
reprogramming referred to in this Section 2.19 as may be necessary, the computer
and management information systems of the Company and its Subsidiaries are
sufficient to permit the Company and its Subsidiaries to conduct its business
without such conduct resulting in a Material Adverse Effect.
ss. 2.20 SECURITIES LAW COMPLIANCE. Assuming that the
representations set forth in Article III are true and correct, the offering,
issuance, sale and delivery of the Preferred Stock to the Purchaser is exempt
from the registration requirements of the Securities Act. The Company has
complied with, or is exempt from, all registration requirements of all
applicable state securities laws, or foreign securities law, in connection with
the offering, issue, sale and delivery of the Preferred Stock.
ss. 2.21 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.21, none of the Transaction Parties has entered into any transaction
or series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of any Transaction Party, pursuant to which any
Transaction Party maintains any existing obligations and which involves the
payment of more than $60,000 per annum.
ss. 2.22 CAPITAL STOCK RESERVED. Sufficient shares of the
Company's Common Stock have been authorized and duly reserved for issuance upon
conversion of the Preferred Stock.
ss. 2.23 NO CONFLICT OF RIGHTS. Set forth on SCHEDULE 2.23 is
a description of all registration rights held by any Person for which the
Company has not filed a registration statement.
ss. 2.24 USE OF PROCEEDS. All of the proceeds from the sale of
the Preferred Stock shall be used for general corporate purposes, acquisitions
and the repayment of Indebtedness of the Transaction Parties.
ss. 2.25 INSURANCE. The insurance policies of the Transaction
Parties, with respect to their amounts and types of coverage, are adequate to
insure fully against risks to which the Transaction Parties and their respective
property and assets are normally exposed in the operation of their respective
businesses. Since January 1, 1998, there has not been any material adverse
change in the Transaction Parties relationship with its insurers or in the
premiums payable pursuant to such policies.
ss. 2.26 PERMITS. The Company has delivered or made available
to Purchaser for inspection a true and correct copy of each Permit. Each Permit
can be renewed or transferred in the ordinary course of business by the Company
or its Subsidiaries. Any applications for the renewal of any such Permit which
are due prior to the Closing Date or will be timely filed prior to the Closing
Date. No proceeding to modify, suspend, revoke, withdraw, terminate or otherwise
limit any such Permit is pending or threatened and the Company does not know of
any
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valid basis for such proceeding. No administrative or governmental action
has been taken or threatened, in connection with the expiration, continuance or
renewal of any such Permit and the Company does do not know of any valid basis
for any such proceeding.
ss. 2.27 EXTORTION PAYMENTS. No Transaction Party has made any
payment in connection with any Person's scheme or plan to demand money in
exchange for (i) the safety of any person or (ii) the ability of any Person to
conduct otherwise legal business.
ss. 2.28 IMPROPER PAYMENTS. To the Company's knowledge, no
Transaction Party nor any Person acting on any Transaction Party's behalf has
paid or delivered, or promised to pay or deliver, directly or indirectly through
any other Person, of any monies or anything of value to (i) any person or firm
employed by or acting for or on behalf of any customer, supplier, whether
private or governmental, or (ii) any government official or employee or any
political party, for the purpose of illegally or improperly inducing or
rewarding any action by the customer, supplier or official favorable to any
Transaction Party (any such act an "Improper Payment").
ss. 2.29 BROKER'S OR FINDER'S FEES. No agent, broker, person
or firm acting on behalf of the Company is, or will be, entitled to any
commission or broker's or finder's fees from any Transaction Party, or from any
Person controlling, controlled by or under common control with any Transaction
Party, in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
--------------------------------
ss. 3.0 REPRESENTATIONS OF THE PURCHASER. In order to induce
the Company to enter into this Agreement and in order to induce the Company to
issue the Preferred Stock, the Purchaser represents, warrants and agrees as
follows:
ss. 3.1 EXISTENCE AND GOOD STANDING; POWER AND AUTHORITY. The
Purchaser is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its organization. The Purchaser has the requisite
power and authority to execute and deliver the Documents to which it is a party
and perform its obligations thereunder. Each of the Documents to which it is a
party has been duly authorized and approved by the Purchaser, and assuming due
execution by the other parties thereto is a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
to the extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws effecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding brought
in equity or law).
ss. 3.2 RESTRICTIVE DOCUMENTS. The Purchaser is not subject to
any mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character, which
would prevent consummation by the Purchaser of the transactions contemplated
hereby.
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ss. 3.3 PURCHASE FOR INVESTMENT. (a) The Purchaser will
acquire the Preferred Stock for its own account for investment and not with a
view toward any resale or distribution thereof; PROVIDED, HOWEVER, that the
Purchaser may sell some or all of the Preferred Stock to the AIG-GE Capital
Latin American Infrastructure Fund L.P. and/or any of its affiliates ("LAIF");
PROVIDED FURTHER, however, that the disposition of the Purchaser's property
shall at all times remain within the sole control of the Purchaser.
(b) The Purchaser understands that the Preferred Stock have
not been registered under the Securities Act or under any state securities laws
and may not be sold or transferred unless they are subsequently registered under
the Securities Act and any applicable state or other securities laws, or unless
exemptions from registration under such laws are available;
(c) The Purchaser represents that it is experienced in
investment matters, fully understands the transactions contemplated by this
Agreement, has the knowledge and experience in financial matters as to be
capable of evaluating the merits and risks of its investment and has the
financial ability and resources to bear the economic risks of its investment;
(d) The Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
ss. 3.4 BROKER'S OR FINDER'S FEES. No agent, broker, person or
firm acting on behalf of the Purchaser is, or will be, entitled to any
commission or broker's or finder's fees from any Transaction Party, or from any
Person controlling, controlled by or under common control with any Transaction
Party, in connection with the transactions contemplated hereby.
ARTICLE IV
ISSUANCE OF SECURITIES; PAYMENT OF SUBSCRIPTION PRICE; CLOSINGS
---------------------------------------------------------------
ss. 4.1 ISSUANCE OF PREFERRED STOCK. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase the Preferred
Stock. Delivery of the Preferred Stock to be purchased by the Purchaser pursuant
to this Agreement shall be made, pursuant to Section 4.4, on the Closing Date by
the Company to the Purchaser, against payment of the Purchase Price.
ss. 4.2 PURCHASE PRICE. Subject to the terms and conditions
set forth in this Agreement, in full consideration for the sale by the Company
of the Preferred Stock to the Purchaser, the Purchaser shall deliver to the
Company $10,000,000 (the "Purchase Price") on the Closing Date, by wire transfer
of immediately available funds to the accounts specified by the Company.
ss. 4.3 TIME AND PLACE OF CLOSINGS. The deliveries made on the
Closing Date (the "Closing") shall take place at 10:00 a.m. on the Closing Date,
at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, NY
10036, or such other place and time as the Company and the Purchaser shall
mutually agree.
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ss. 4.4 CLOSING DELIVERIES. At the Closing the Company shall
deliver, or cause to be delivered, to the Purchaser the following: (i)
certificates representing the number of shares of Preferred Stock to be issued
and delivered, the Closing, free and clear of all Encumbrances with all
necessary share transfer and other documentary stamps attached at the expense of
the Company, (ii) evidence or copies of any consents, approvals, orders,
qualifications, agreements or waivers required pursuant to Article V, (iii) all
certificates and other instruments and documents required by this Agreement to
be delivered by the Company to the Purchaser at or prior to the Closing and (iv)
such other documents and instruments reasonably requested by the Purchaser, as
may be necessary or appropriate to confirm or carry out the provisions of the
Documents.
ARTICLE V
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
-----------------------------------------
ss. 5.0 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The
obligations of the Purchaser to purchase the Preferred Stock contemplated by
this Agreement is conditioned upon satisfaction, at or prior to the Closing, of
the following conditions:
ss. 5.1 OPINIONS OF COUNSEL. The Company shall have furnished
the Purchaser with the opinion, dated the applicable Closing Date, of Baker &
McKenzie, counsel to the Company to the effect set forth in Exhibit C hereto.
ss. 5.2 GOOD STANDING AND OTHER CERTIFICATES. The Purchaser
shall have received (a) a copy of the articles of incorporation or other
organizational documents of the Company, including all amendments thereto,
certified by the Secretary of State of Texas, (b) a certificate from the
Secretary of State or other appropriate official of the respective State or
country of incorporation or formation to the effect that the Company is in good
standing and listing all charter documents of such entity, (c) a certificate
from the Secretary of State or other appropriate official in each State or
country in which the Company is qualified to do business to the effect that such
entity is in good standing in each such State or country and (d) a copy of the
Bylaws of the Company and the resolutions of the Board of Directors of the
Company authorizing the transactions contemplated hereby, certified by the
Secretary of such Person as being true and correct and in effect on the Closing
Date.
ss. 5.3 TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Company contained in this Agreement and
the other Documents, shall be true and correct in all material respects on and
as of such Closing Date other than such representations and warranties made as
of a specific date, which shall be true and correct in all material respects as
of such date, with the same effect as though such representations and warranties
had been made on and as of such date.
ss. 5.4 PERFORMANCE OF AGREEMENTS. The Company shall be in
compliance with the Documents, shall have performed all of its agreements and
covenants thereunder.
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ss. 5.5 NO LITIGATION THREATENED. No action or proceedings
shall have been instituted or, to the knowledge of each of the Transaction
Parties, threatened before a court or other government body or by any public
authority to restrain or prohibit any of the transactions contemplated by the
Documents.
ss. 5.6 THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals, authorizations, exemptions or waivers required in
connection with the consummation of the transactions contemplated by the
Documents shall have been received.
ss. 5.7 PROCEEDINGS. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Purchaser
and its counsel, and the Purchaser shall have received copies of all such
documents and other evidences as it or its counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ss. 5.8 CERTIFICATE OF DESIGNATION. The Company shall deliver
to the Purchaser evidence that the Certificate of Designation of the Company
shall have been duly filed with the Secretary of State of Texas and shall be in
full force and effect.
ss. 5.9 SIDE LETTER. The Company shall deliver the Side
Letter to the Purchaser.
ss. 5.10 INVESTOR RIGHTS AGREEMENT. The Company, Patricio E.
Northland and Douglas G. Geib II shall deliver the Investor Rights Agreement to
the Purchaser.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
---------------------------------------
ss. 6.0 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The issuance
of the Preferred Stock by the Company is conditioned upon satisfaction, at or
prior to the Closing, of the following conditions:
ss. 6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct on and as of the Closing Date other than such
representatives and warranties made as of a specific date, which shall be true
and correct in all material respects as of such date, with the same effect as
though such representations and warranties had been made on and as of such date.
ss. 6.2 THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals authorizations, exemptions or waivers, if any, required in
connection with the consummation of the transactions contemplated by this
Agreement shall have been received.
ss. 6.3 PERFORMANCE OF AGREEMENT. The Purchaser shall have
performed in all material respects, its obligations under this Agreement.
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<PAGE>
ss. 6.4 NO LITIGATION THREATENED. No action or proceeding
shall be instituted or, to the knowledge of the Purchaser, threatened before a
court or other government body or any public authority to restrain or prohibit
any of the transactions contemplated hereby.
ss. 6.5 FAIR MARKET VALUE OPINION. The Company shall have
received a determination by an investment banking firm of national standing that
the fair market value of the Preferred Stock sold pursuant to this Agreement is
not more than the Purchase Price.
ARTICLE VII
POST-CLOSING AGREEMENTS
-----------------------
ss. 7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company shall deliver to each holder of Preferred Stock:
(i) within 45 days after the end of each of the first three
quarterly accounting periods in each fiscal year, consolidated
statements of earnings, shareholders' equity and cash flows of the
Company for such fiscal quarter, and a consolidated balance sheet of
the Company as of the end of such fiscal quarter, setting forth, in
each case, comparisons to comparable budgeted figures and comparable
figures for the corresponding quarter of the preceding fiscal year, all
prepared in accordance with GAAP, consistently applied, subject to
normal year-end adjustments, and certified by the chief financial
officer or controller of the Company.
(ii) within 90 days after the end of each fiscal year, audited
consolidating and consolidated statements of earnings, shareholders'
equity and cash flows of the Company for such fiscal year, and
consolidated and consolidating balance sheets of the Company as of the
end of such fiscal year, setting forth in each case comparisons to
comparable budgeted figures and comparable figures for the preceding
fiscal year, all prepared in accordance with GAAP, consistently
applied, and certified by, (a) with respect to the consolidated
portions of such statements, an independent accounting firm of national
recognition (such certification to be accompanied by a copy of such
firm's annual management letter to the management of the Company) and
(b) with respect to the consolidating portions of such statements, the
chief financial officer or controller of the Company.
(iii) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs of each of the
Transaction Parties prepared by Company's independent accountants and
provided to any Transaction Party (and not otherwise contained in other
materials provided hereunder);
(iv) as soon as available but in no event later than 15 days
after each fiscal quarter and fiscal year, a quarterly and an annual
budget, as the case may be, of the Transaction Parties for the
following period (such budget to include, without limitation, budgeted
statements of earnings and sources and uses of cash and balance sheets)
and, in
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addition, to the extent delivered to any of the Company's lenders or
prepared for internal use, any other significant budgets prepared by
the Company, and any revisions of such budgets each prepared and in
reasonable detail with appropriate presentation and discussion of the
principle assumptions upon which such budgets are based accompanied by
a certificate of the chief financial officer or controller of the
Company to the effect that, to the best of his or her knowledge, such
budget is a reasonable estimate for the period covered thereby, and
within 30 days after any monthly period in which there is a material
adverse deviation from the annual budget, an officer's certificate
explaining the deviation and what actions the Company has taken and
proposes to take with respect thereto;
(v) promptly (but in any event within three Business Days)
after the discovery or receipt of notice of (a) any default under any
material agreement to which any Transaction Party is a party, or (b)
any other event or circumstance affecting any Transaction Party
(including, without limitation, the filing of any material litigation
against any Transaction Party or the existence of any dispute with any
Person which involves a reasonable likelihood of such material
litigation being commenced) which event or circumstance could
reasonably be expected to have a Material Adverse Effect, an officer's
certificate specifying the nature and period of existence thereof and
what actions the Company has taken and proposes to take with respect
thereto;
(vi) promptly (but in any event within three Business Days)
after transmission thereof, copies of all financial statements, proxy
statements, reports and any other information, documents or
communications which any Transaction Party sends to its equityholders
or which any Transaction Party sends its lenders and copies of all
registration statements and all regular, special or periodic reports
which it files with respect to such Transaction Party, with the
Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by any Transaction Party to the
public concerning material developments in the business of the
Transaction Parties;
(vii) promptly (but in any event within two Business Days) any
document relating to any issuance of securities by the Company; and
(viii) with reasonable promptness, such other information and
financial data concerning any Transaction Party that any person
entitled to receive information under this Section 7.1 may reasonably
request.
ss. 7.2 INSPECTION. The Company covenants and agrees that it
will permit each holder of Preferred Stock and its representatives (including
without limitation, its legal counsel and accountants), upon reasonable notice
during normal business hours to inspect the properties of the Transaction
Parties and to examine and make extracts and copies from the books and records
of the Transaction Parties and discuss with management and the Company's
accountants the business and affairs of the Transaction Parties; PROVIDED,
HOWEVER, that such holder of Preferred Stock and its representatives shall
execute a confidentiality agreement, in substantially the form attached hereto
as Exhibit D.
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ss. 7.3 RESERVATION OF COMMON STOCK; VALID ISSUANCE. (a) The
Company shall at all times reserve for issuance free from preemptive rights and
other rights to preempt or subscribe, (i) a number of shares of Common Stock at
least equal to the number of shares of Common Stock issuable upon conversion or
exercise of the Preferred Stock and (ii) all other securities of the Company
convertible into Common Stock.
(b) The shares of Common Stock issuable upon conversion or
exercise of the Preferred Stock, when issued in accordance with their respective
terms, will be validly issued, fully paid and nonassessable, free of all
preemptive or similar rights, and shall be delivered free and clear of all
Encumbrances.
ss. 7.4 PROHIBITED ACTIONS. Without the prior written approval
of the holders of the Preferred Stock, the Company shall not, and shall not
allow any of its Subsidiaries to:
(i) engage in any business other than a Permitted Business;
(ii) Except in connection with ordinary course compensation
paid to officers of the Company and the issuance of stock options to
officers, directors and employees of the Company, in each case as
authorized by the Board of Directors in good faith, and except as set
forth on SCHEDULE 2.21, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with
any Affiliate of the Company, or any Affiliate of any Subsidiary of the
Company, other than transactions on terms and conditions that are no
less favorable to the Company or such Subsidiary than those as would be
obtainable in a comparable third-party transaction negotiated on an
arm's length basis with a person other than an Affiliate; PROVIDED,
HOWEVER, that the Company will not, nor will the Company allow any of
its Subsidiaries to, enter into any of the following transactions or
series of related transactions with any Affiliate of the Company,
except as otherwise permitted by the Senior Notes Indenture: (i) any
sale or purchase of a material amount of assets made between the
Company or any of its Subsidiaries and any of their Affiliates (by
sale, lease, merger, consolidation or otherwise) or (ii) any issuance
of equity securities of the Company or any of its Subsidiaries to any
of their Affiliates; provided, further, that nothing in this Section
7.4 shall prohibit or otherwise restrict transactions between the
Company and its majority owned Subsidiaries;
(iii) wind up, dissolve or liquidate any Transaction Party;
(iv) commence a voluntary case concerning any Transaction
Party under Title 11 of the United States Code entitled "Bankruptcy",
as now or hereafter in effect, or any successor thereto, or the general
assignment for the benefit of creditors by the Company or any of its
Subsidiaries.
ss. 7.5 DUE DILIGENCE. The Company shall provide LAIF, at
LAIF's request, the opportunity during normal business hours and upon reasonable
notice to inspect the facilities and operations the Transaction Parties, and to
meet with the senior management of the Transaction Parties, within 30 days from
the Closing Date, for the purpose of conducting due diligence with
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respect to LAIF's contemplated purchase of the Preferred Stock, as provided in
Section 3.3 hereof.
ss. 7.6 COMPLIANCE WITH STATUTES, ETC. The Company will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, including, without limitation, the
United States Foreign Corrupt Practices Act of 1977, as amended, in respect of
the conduct of its business and the ownership of its property (including
applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls), except such noncompliances as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or the Company and its Subsidiaries taken as a
whole.
ss. 7.7 IMPROPER PAYMENTS. The Company will not, and will not
permit any Person under its control, to make any Improper Payment.
ARTICLE VIII
SURVIVAL
--------
ss. 8.1 SURVIVAL. Except as expressly provided in this
Agreement, the covenants contained in this Agreement shall survive the Closing
Date indefinitely. The representations and warranties of the Company and the
Purchaser contained in this Agreement and the schedules and certificates
delivered in connection herewith shall survive until two years from the date
hereof, except that the representations and warranties contained in Section 2.11
shall survive until the expiration of the applicable statute of limitations
period (after giving effect to any extensions or waivers thereof) and such
representations and warranties may be relied upon by the Purchaser regardless of
any investigation made at any time by or on behalf of the Purchaser; PROVIDED,
that the Purchaser shall not be entitled to assert claims with respect to any
representation or warranty as to which it had, as of the Closing Date, actual
knowledge that such representation or warranty was false or incorrect.
ARTICLE IX
INDEMNIFICATION
---------------
ss. 9.1 INDEMNIFICATION. The Company agrees to indemnify and
hold the Purchaser and its officers, directors, employees, Affiliates and
agents, and any successors thereto (and any officers, directors, employees,
Affiliates and agents of such successors) harmless from any liability, damage,
deficiency, demand, claim, suit, action, or cause of action, fine, penalty,
loss, cost, expense, including without limitation, reasonable attorney fees
("Damages") incurred or suffered as a result of, in connection with, or arising
out of, the transactions contemplated hereby, including without limitation, any
Damages incurred or suffered as a result of, or in connection with, or arising
out of, the failure of any representation or warranty made by the Company
pursuant to this Agreement, any schedule or exhibit to this Agreement or any
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<PAGE>
certificates delivered pursuant thereto to be true and correct as of the date
hereof and on the Closing Date.
ss. 9.2 CONTRIBUTION. To the extent that the undertaking to
indemnify, pay or hold harmless the Purchaser pursuant to Section 9.1 of this
Agreement may be unenforceable, the Company shall make the maximum contribution
to the payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
ss. 9.3 LIMITATION ON INDEMNIFICATION. The Company shall not
be liable under this Article IX for a breach of a representation or warranty
unless the aggregate amount of Damages exceeds $200,000; PROVIDED, HOWEVER, that
in the event the amount of Damages exceeds $200,000 in the aggregate, the
Company shall be responsible for only the amount of Damages in excess of
$200,000. In no event shall the amount of Company's obligation under this
Article IX for a breach of representations or warranties exceed the Purchase
Price.
ARTICLE X
MISCELLANEOUS
-------------
ss. 10.1 KNOWLEDGE OF THE TRANSACTION PARTIES. Where any
representation or warranty made by the Company contained in this Agreement is
expressly qualified by reference to its knowledge, such knowledge shall be
deemed to exist if the matter should be within the knowledge of any director,
executive officer or other senior member of management (including, without
limitation, the Company's internal counsel) of the Company.
ss. 10.2 EXPENSES. The Company agrees to pay the reasonable
costs and expenses incurred by the Purchaser in connection with the transactions
contemplated hereby and the Purchaser's investment in the Company (including
without limitation, reasonable attorney's fees and expenses); PROVIDED, HOWEVER,
that in no event shall the amount of payments under this sentence exceed
$150,000. The Company agrees to pay the costs and expenses incurred by the
Purchaser (including without limitation, the reasonable attorney's fees and
expenses and the fees and expenses of any experts retained by the Purchaser) in
connection with any successful action to exercise or enforce any of the rights
contained in this Agreement and/or the other Documents.
ss. 10.3 GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of New York applicable to agreements executed and to be performed
solely within such State.
ss. 10.4 CAPTIONS. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
ss. 10.5 PUBLICITY. Except as otherwise required by law, none
of the parties hereto shall issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein or therein, without obtaining the
prior approval of the Purchaser and the Company to the contents and the manner
of presentation and publication thereof. No references to the Purchaser shall be
made in any public statement without the Purchaser's consent.
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<PAGE>
ss. 10.6 NOTICES. Any notice or other communication required
or permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to the Company:
Notice Address:
FirstCom Corporation
220 Alhambra Circle
Suite 910
Coral Gables, Florida 33134
Attention:
Chief Financial Officer
Telephone: (305) 448-4422
Telecopier: (305) 448-2636
With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Suite 1900
Miami, Florida 33131
Attention: Andrew Hulsh, Esq.
Telephone: (305) 789-8985
Telecopier: (305) 789-8953
and if to the Purchaser:
c/o GE Capital Services
Structured Finance Group, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Attention: Portfolio-Operations
Telephone: (203) 357-3735
Telecopier: (203) 961-2017
with a copy to its counsel,
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Telephone: (212) 819-8200
Telecopier: (212) 354-8113
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<PAGE>
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given upon
automatic confirmation of receipt by the receiving machine if sent by
telecopier, upon delivery if delivered in person, and upon mailing if mailed.
ss. 10.7 PARTIES IN INTEREST. The Company may not transfer,
assign or pledge any of its rights in, or otherwise grant any rights to any
Person in, this Agreement. The Purchaser may transfer any of its rights
hereunder and any assignee or transferee of the Preferred Stock (other than
transferees receiving the Preferred Stock pursuant to a registered sale or a
sale pursuant to Rule 144 of the Securities Act), which transferees shall have
all the rights of the Purchaser hereunder.
ss. 10.8 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, all of which taken together shall constitute one
instrument.
ss. 10.9 ENTIRE AGREEMENT. This Agreement, the Certificate of
Designation and the Investor Rights Agreement, including the exhibits,
schedules, and other documents referred to herein and therein which form a part
hereof and thereof, contain the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement, the
Certificate of Designation and the Investor Rights Agreement supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
ss. 10.10 AMENDMENTS. This Agreement may not be changed
orally, but only by an agreement in writing signed by the Purchaser and the
Company.
ss. 10.11 SEVERABILITY. In case any provision in this
Agreement shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof will not in any
way be affected or impaired thereby.
ss. 10.12 THIRD PARTY BENEFICIARIES. Each party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the parties hereto (and, in the case of
the Purchaser, its transferees) and those Persons entitled to indemnification
pursuant to Article IX hereof.
ss. 10.13 JURISDICTION. (a) Each of the parties hereto hereby
irrevocably acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York or in the United
States Southern District Court of New York, as the party bringing such action or
proceeding may elect and each of the parties hereto hereby irrevocably submits
to and accepts with regard to any such action proceeding, for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each party hereby further irrevocably waives any claim that
any such courts lack jurisdiction over such party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or the
transactions contemplated hereby brought in any of the aforesaid courts, that
any such court lacks jurisdiction such party. Each party irrevocably consents to
the service of process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage
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<PAGE>
prepaid, to such party, at its address for notices set forth in Section 10.6,
such service to become effective 10 days after such mailing. Each party hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other documents contemplated hereby that
service of process was in any way invalid or ineffective. The foregoing shall
not limit the rights of any party to serve process in any other manner permitted
by law. The foregoing consents to jurisdiction shall not constitute general
consents to service of process for any purpose except as provided above and
shall not be deemed to confer rights on any Person other than the respective
parties to this Agreement.
(b) To the fullest extent permitted by applicable law, each of
the parties hereto hereby irrevocably waives the objection which it may not or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any of the Courts referred to in Section 10.13(a) and hereby further
irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any
party hereto or its successors or assigns in any action, suit or proceeding
referred to above may, in the discretion of such party (or its successors, or
assigns), be enforced in any jurisdiction, to the extent permitted by applicable
law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF the Purchaser has signed this Securities
Purchase Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, all as of the day and year
first above written.
FIRSTCOM CORPORATION
By:
---------------------------------------
Name:
Title:
THE PURCHASER:
SFG-N INC.
By:
---------------------------------------
Name:
Title:
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EXHIBIT 4.2
INVESTOR RIGHTS AGREEMENT
Dated as of June 30, 1999
By and Among
FIRSTCOM CORPORATION
and
SFG-N INC.
and
PATRICIO E. NORTHLAND
and
DOUGLAS G. GEIB II
<PAGE>
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT dated as of June 30, 1999 by and
among FIRSTCOM CORPORATION, a Texas corporation (the "Company"), SFG-N INC., a
Delaware corporation (the "Investor"), Patricio E. Northland ("Northland") and
Douglas G. Geib II ("Geib").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Securities Purchase
Agreement dated as of the date hereof between the Company and the Investor (the
"Securities Purchase Agreement"), the Investor desires to subscribe for, and the
Company desires to issue, 1,250,000 shares of Series A Convertible Preferred
Stock, par value $ 0.001 per share (the "Preferred Stock"), of the Company which
shall constitute 100% of the issued and outstanding Preferred Stock of the
Company; and
WHEREAS, on or prior to the execution and delivery of this
Agreement and the Securities Purchase Agreement, the Company shall have filed
with the Secretary of State of the State of Texas, a certificate of designation
setting forth the rights and obligations relating to the Preferred Stock (the
"Certificate of Designation") including without limitation, provisions relating
to the conversion of the Preferred Stock into the Common Stock, par value $0.001
per share (the "Common Stock"), of the Company; and
WHEREAS, the Parties hereto believe it to be in their best
interests to set forth their rights and obligations in connection with the
transfer or public offering of the Preferred Stock or any shares of Common Stock
into which the Preferred Stock is converted or any Common Stock issued pursuant
to the terms of this Agreement (the "Converted Common Stock") and certain other
matters relating to the investment by the Investor in the Company.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
-----------
ss. 1.1. DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Additional Shares" has the meaning given to it in Section
5.3.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof, from time to time.
"Board" means the Board of Directors of the Company.
"Board Observer" has the meaning given to it in Section 6.1.
<PAGE>
"Certificate of Designation" has the meaning given to it in
the second recital clause.
"Closing Date" has the meaning given to it in the Securities
Purchase Agreement.
"Commission" means, at any time, the Securities and Exchange
Commission or any other Federal agency then administering the Securities Act and
other Federal securities laws.
"Common Stock" has the meaning given to it in the second
recital clause.
"Common Stock Percentage" means that percentage of the Common
Stock of the Company which is held by the Investor (or would be held by the
Investor if the Preferred Stock was converted into Common Stock) immediately
prior to the issue, sale or exchange of the Offered Securities, all determined
on the basis that all convertible or exchangeable securities (including the
Preferred Stock) shall be deemed to be converted and/or exchanged, all warrants,
options and similar securities shall be deemed to be exercised and all other
obligations of any type to issue Common Stock or securities convertible or
exercisable into Common Stock shall be deemed to have been performed in
accordance with their terms (it being understood that to the extent any such
convertible or exchangeable securities or warrants, options or similar
securities have any type of floating conversion ratio or floating exercise
price, then for purposes of determining the amount of Common Stock which would
be issued upon the conversion, exchange or exercise thereof, the conversion or
exercise price shall be deemed to be the lowest such conversion or exercise
price resulting in the maximum number of securities which may be issued).
"Company" has the meaning given to it in the preamble to this
Agreement.
"Converted Common Stock" has the meaning given to it in the
third recital clause.
"Excluded Securities" has the meaning given to it in Section
3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Final Registration Date" means March 31, 2000, unless (i) a
Strategic Investment is consummated prior to March 31, 2000 and (ii) the
Preferred Shares have not been converted to Converted Common Shares before
December 31, 1999, in which case the Final Registration Date means August 31,
2000.
"Geib" has the meaning given to it in the preamble to this
Agreement.
"Incidental Registration" has the meaning set forth in Section
4.3(a) of this Agreement.
"Investor" has the meaning given to it in the preamble to this
Agreement.
"LAIF" means AIG-GE Capital Latin American Infrastructure Fund
L.P.
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<PAGE>
"NASDAQ" means the National Association of Securities Dealers,
Inc. Automatic Quotation System.
"Northland" has the meaning given to it in the preamble to
this Agreement.
"Notice of Acceptance" has the meaning given to it in Section
2.1(b).
"Offer" has the meaning given to it in Section 2.1(a).
"Offer Period" has the meaning given to it in Section 2.1(a).
"Offered Securities" means (A) shares of Common Stock, (B)
shares of Preferred Stock (C) any other equity security of the Company, (D) any
debt security of the Company which by its terms is convertible into or
exchangeable for any equity security of the Company or has an equity kicker or
other participation rights, (E) any security of the Company that is a
combination of debt and equity or (F) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Company; provided that Offered Securities shall not include
(i) any security that is issued in a public offering that is registered under
the Securities Act, (ii) any Common Stock or options to acquire shares of Common
Stock granted pursuant to incentive plans approved by the Board to employees,
directors or consultants of the Company or any security issued upon exercise of
any such options or (iii) the Teleductos Common Stock.
"Original Issue Date" has the meaning given to it in the
Certificate of Designation.
"Over-Subscribing Tag-Along Stockholders" has the meaning
given to it in Section 5.3.
"Participation Notice" has the meaning given to it in Section
6.4(b).
"Party" means a party to this Agreement and any references to
a Party includes its heirs, executors, administrators, successors and permitted
assigns.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Private Transaction" shall mean the sale, transfer or
exchange of shares in a transaction other than (i) a public offering of shares
or (ii) on a national securities exchange or through NASDAQ, whether pursuant to
Rule 144 of the Securities Act or otherwise.
"Preferred Stock" has the meaning given to it in the first
recital clause.
"Registrable Securities" means (i) the Converted Common Stock
and (ii) any securities issued or issuable with respect to the Converted Common
Stock by way of conversion,
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<PAGE>
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, or (B) such securities shall
have been sold in accordance with Rule 144 (or any successor provision) under
the Securities Act.
"Registration" means the Shelf Registration and each Incidental Registration.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Article IV, inclusive, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depositary Trust Company,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), and fees and disbursements of counsel for the
Company and its independent certified public accountants (including the expenses
of any management review, cold comfort letters or any special audits required by
or incident to such performance and compliance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, fees and expenses of other Persons retained by the Company
and reasonable fees and expenses of one counsel (excluding local counsel) for
holders of Registrable Securities (other than fees and expenses of counsel in
connection with an Incidental Registration), selected by the holders of a
majority of the Registrable Securities to be included in such Registration; but
not including any underwriting fees, discounts or commissions attributable to
the sale of Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Securities Purchase Agreement" has the meaning given to it in
the first recital clause.
"Series A Conversion Price" has the meaning given to it in the
Certificate of Designation.
"Shelf Registration" has the meaning set forth in Section
4.2(a) of this Agreement.
"Strategic Investment" has the meaning given to it in the
Certificate of Designation.
"Strategic Investment Date" has the meaning given to it in
Section 6.4(a).
"Strategic Investment Notice" has the meaning given to it in
Section 6.4(a).
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"Subsidiaries" has the meaning given to it in the Securities
Purchase Agreement.
"Tag-Along Allotment" has the meaning given to it in Section
5.1.
"Tag-Along Notice" has the meaning given to it in Section 5.3.
"Tag-Along Rights" has the meaning given to it in Section 5.2.
"Tag-Along Sale" has the meaning given to it in Section 5.1.
"Tag-Along Sale Date" has the meaning given to it in Section
5.2.
"Tag-Along Sale Notice" has the meaning given to it in Section
5.2.
"Tag-Along Stockholders" has the meaning given to it in
Section 5.1.
"Teleductos Common Stock" means the Common Stock issuable upon
the conversion of the indebtedness evidenced by promissory notes issued to the
stockholders of Teleductos Occidente, Ltda. in connection with the acquisition
of such company.
"25% Holder" has the meaning given to it in the Certificate of
Designation.
ARTICLE II
PURCHASE RIGHTS
---------------
ss. 2.1. PURCHASE RIGHTS. (a) Subject to Section 2.2, the
Company shall not issue, sell or exchange, or agree to issue, sell or exchange,
any Offered Securities unless the Company shall have first offered to sell to
the Investor such amount of Offered Securities required to enable the Investor
to maintain the Investor's Common Stock Percentage, at a price and on such other
terms as shall have been specified by the Company in writing delivered to the
Investor (the "Offer"), which Offer by its terms shall remain open for a period
of 45 business days from the date it is delivered by the Company (the "Offer
Period").
(b) Notice of the Investor's intention to accept, in whole or
in part, an Offer shall be evidenced by a writing signed by the Investor and
delivered to the Company prior to the end of the Offer Period, setting forth
such portion of the Offered Securities as such Investor elects to purchase (the
"Notice of Acceptance"). Within 30 days after receipt by the Company of such
Notice of Acceptance, the Company shall sell and the Investor shall purchase the
Offered Securities in respect of which such Investor's Notice of Acceptance was
delivered, upon the terms and conditions of the Offer; provided, however, that
the Investor shall not be required to purchase any Offered Securities prior to
the consummation of the issue, sale or exchange of the Offered Securities giving
rise to the rights in Section 2.1(a).
(c) In the event the Company materially amends the terms of
the Offer at any time, the Offer Period shall be extended for a period of not
less than 10 business days.
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(d) In the event that a Notice of Acceptance is not given by
the Investor in respect of all the Offered Securities, the Company shall have 90
days from the expiration of the Offer Period to sell all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given to any
other Person(s), but only upon terms and conditions which are no more favorable
to such other Person(s) or less favorable, in the aggregate, to the Company than
those set forth in the Offer.
(e) In each case, any Offered Securities not purchased by the
Investor in accordance with this Section 2.1 or by other Persons in accordance
with Section 2.1(d) may not be sold or otherwise disposed of until they are
again offered to the Investor under the procedures specified in this Section
2.1.
ss. 2.2. DURATION OF PURCHASE RIGHTS. The rights of the
Investor set forth in Section 2.1 shall not apply to any Strategic Investment
consummated within nine months of the Closing Date. The rights of the Investor
set forth in Section 2.1 shall expire upon the fifth anniversary of the Closing
Date; provided, however, that nothing in this Section 2.2 shall prejudice the
right of the Investor to deliver a Notice of Acceptance with respect to, and
purchase any Offered Securities in connection with, an Offer delivered prior to
such date.
ARTICLE III
ANTI-DILUTION RIGHTS
--------------------
ss. 3.1. ANTI-DILUTION RIGHTS. (a) Subject to Section 3.2, if
the Company issues shares of Common Stock for a consideration per share less
than the Series A Conversion Price as determined prior to such issuance,
regardless of whether Preferred Stock is outstanding or not, the Company shall
issue additional shares of Common Stock to the holders of Converted Common Stock
in an amount equal to the Adjustment Amount for each share of Common Stock held
by the Investor in accordance with the following formula:
A = T - 1
-----
O + P
-
M
where:
A = the Adjustment Amount.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares of Common Stock.
P = the aggregate consideration received for the issuance
of such additional shares of Common Stock.
M = the Series A Conversion Price.
T = the number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares of Common Stock.
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The Adjustment Amount shall be determined and shares of Common
Stock shall be issued successively whenever any such issuance is made, and shall
become effective immediately after such issuance.
This Section 3.1(a) does not apply to any of the following
issuances: (i) the issuance of Common Stock upon the conversion, exercise or
exchange of any security convertible into or exercisable or exchangeable for
shares of Common Stock and any right, option or warrant to purchase shares of
Common Stock, outstanding on the date hereof or for which an issuance of shares
of Common Stock has been made pursuant to this Agreement; or (ii) the issuance
of such shares of Common Stock to employees, managers or directors of, or
consultants to, the Company pursuant to a plan adopted by the Board in good
faith including options and shares of Common Stock issued upon the exercise of
options or warrants hereafter issued to such Persons pursuant to any such plan;
or (iii) the issuance of Common Stock to a Strategic Investor in connection with
a Strategic Investment within nine months after the Original Issue Date;
provided that the average daily closing or last sale price per share of Common
Stock for the ninety (90) days immediately following such Strategic Investment,
as reported on a national securities exchange or NASDAQ, is greater than or
equal to $9.00 (the securities referred to in clauses (i), (ii) and (iii) being
referred to collectively as "Excluded Securities").
(b) Subject to Section 3.2, if the Company issues any options,
warrants or other securities convertible into or exchangeable or exercisable for
Common Stock for a consideration per share of Common Stock initially deliverable
upon conversion, exchange or exercise of such securities less than the Series A
Conversion Price as determined on the date of and immediately prior to such
issuance, regardless of whether Preferred Stock is outstanding or not, on the
date of issuance of such securities, the Company shall issue additional shares
of Common Stock to the holders of Converted Common Stock in an amount equal to
the Adjustment Amount for each share of Common Stock held by the Investor shall
be determined in accordance with the following formula:
A = O + D - 1
-------
O + P
-
M
where:
A = the Adjustment Amount.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
P = the sum of the aggregate consideration received for
the issuance of such securities and the aggregate
minimum consideration receivable by the Company for
issuance of Common Stock upon conversion or in
exchange for, or upon exercise of, such securities.
M = the Series A Conversion Price
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D = the maximum number of shares of Common Stock
deliverable upon conversion or in exchange for or
upon exercise of such securities at the initial
conversion, exchange or exercise rate.
The Adjustment Amount shall be determined and shares of Common
Stock shall be issued successively whenever any such issuance is made, and shall
become effective immediately after such issuance.
This Section 3.1(b) does not apply to the Excluded Securities.
ss. 3.2. LIMITS ON ANTI-DILUTION RIGHTS. Notwithstanding
anything to the contrary, the provisions of Section 3.1 shall not apply on or
after the fifth anniversary of the Original Issue Date.
ss. 3.3. CONSIDERATION RECEIVED. For purposes of any
computation respecting consideration received pursuant to this Article 3 the
manner of determination set forth in Subsection 5(d)(ii) of the Certificate of
Designation shall be followed.
ss. 3.4. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional shares of Common Stock in connection with any
Adjustment Amount. All shares of Common Stock held of record by the holders of
Converted Common Stock shall be taken into account in determining the number of
full shares of Common Stock which shall be issuable to the holders of Converted
Common Stock in connection with the Adjustment Amount. If any fraction of a
share of Common Stock would, except for the provisions of this Section 3.4, be
issuable to the holders of Converted Common Stock, the Company shall pay an
amount in cash equal to the fair market value of a share of Common Stock (as
determined in good faith by the Board), multiplied by such fraction, or issue a
full share of Common Stock in lieu thereof.
ARTICLE IV
PUBLIC OFFERING; PUBLIC OFFERING
PIGGYBACK RIGHTS; REGISTRATION RIGHTS
-------------------------------------
ss. 4.1. NO PUBLIC SALE. (a) The Investor shall not sell any
Preferred Stock or Converted Common Stock on any national securities exchange or
through NASDAQ other than in compliance with Section 4.2 or 4.3 for a period of
one year from the Closing Date.
(b) Until the later of the first anniversary of the Closing
Date and the date that the Shelf Registration becomes effective, neither
Northland nor Geib will, either directly or indirectly, sell an amount of Common
Stock exceeding in the aggregate the number of shares of Common Stock that such
individuals would be able to sell assuming, for such purpose, that (i) the
shares of Common Stock owned by either Northland and Geib were "restricted"
securities within the meaning of Rule 144(a)(3) of the Securities Act and (ii)
each of Northland and Geib were subject to the volume limitations governing the
sale by "affiliates" within the meaning of Rule 144(e) of the Securities Act;
PROVIDED, HOWEVER, that until the later of the first anniversary of the Closing
Date and the date that the Shelf Registration becomes effective each of
Northland and Geib shall continue to hold 30% or more of their respective Common
Stock holdings as of
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the Closing Date (assuming, for purposes of calculating such percentage, that
all warrants, options and similar securities held by either Northland or Geib
shall be deemed to be exercised).
ss. 4.2. SHELF REGISTRATION. (a) OBLIGATION TO FILE AND
MAINTAIN. On or prior to the Final Registration Date, the Company shall file a
registration statement covering all of the Registrable Securities and which
shall include a number of shares of Common Stock issuable upon the conversion of
all of the shares of Preferred Stock issued on a continuous or delayed basis in
the future (the "Shelf Registration"). The Shelf Registration shall be amended
from time to time to include a number of shares of Common Stock sufficient to
include all shares of Common Stock issuable upon exercise or conversion of all
Preferred Stock. The Shelf Registration shall be on an appropriate form and such
Registration and any form of prospectus included therein or prospectus
supplement relating thereto shall reflect such plan of distribution or method of
sale as the holders of Registrable Securities may from time to time notify the
Company, including (I) the sale of some or all of the Registrable Securities in
a public offering or, (II) if requested by any holder of Registrable Securities,
subject to receipt by the Company of such information (including information
relating to purchasers) as the Company reasonably may require, (i) a transaction
constituting an offering outside the United States which is exempt from the
registration requirements of the Securities Act in which any holder of
Registrable Securities undertakes to effect registration after the completion of
such offering in order to permit such shares to be freely tradable in the United
States, (ii) a transaction constituting a private placement under Section 4(2)
of the Securities Act in connection with which any holder of Registrable
Securities undertakes to effect a registration after the conclusion of such
placement to permit such shares to be freely tradable by the purchasers thereof,
or (iii) a transaction under Rule 144A of the Securities Act in connection with
which any holder of Registrable Securities undertakes to effect a registration
after the conclusion of such transaction to permit such shares to be freely
tradable by the purchasers thereof.
(b) TIME FOR FILING AND EFFECTIVENESS. The Company shall use
its best efforts to cause the Shelf Registration referred to in Section 4.2(a)
to become effective as promptly as practicable after filing thereon. The Company
shall keep the Shelf Registration filed pursuant to this Section 4.2
continuously effective until all Registrable Securities have been sold or until,
at the request of the Company, counsel to the Company advises that all
Registrable Securities may be freely resold by the holders thereof without
registration. During the period during which the Shelf Registration is
effective, the Company shall supplement or make amendments to the Shelf
Registration, if required by the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, or if requested by
the holder of Registrable Securities or an underwriter of Registrable
Securities, including to reflect any specific plan of distribution or method of
sale, and shall use its best efforts to have such supplements and amendments
declared effective, if required, as soon as practicable after filing.
(c) BLACK-OUT PERIODS OF THE HOLDERS OF REGISTRABLE
SECURITIES. Notwithstanding anything herein to the contrary, (i) the Company
shall have the right from time to time to require any holder of Registrable
Securities not to sell Registrable Securities pursuant to any Shelf Registration
or to suspend the effectiveness thereof during the period starting with the date
30 days prior to the Company's good faith estimate, as certified in writing by
an executive officer of the Company to the holders of Registrable Securities, of
the proposed date of filing of a
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<PAGE>
registration statement or a preliminary prospectus supplement relating to an
underwritten public offering of equity securities of the Company for the account
of the Company, and ending on the date 120 days following the delivery of such
estimate and (ii) the Company shall be entitled to require the holders of
Registrable Securities not to sell Registrable Securities pursuant to any Shelf
Registration or to suspend the effectiveness thereof (but not for a period
exceeding 90 days) if the Company determines, based on the opinion of legal
counsel, that such offering or continued effectiveness would interfere with any
material financing, acquisition, disposition, corporate reorganization or other
material transaction involving the Company or any of its subsidiaries because
public disclosure thereof would be required prior to the time such disclosure
might otherwise be required. In any event, the Company shall not be entitled to
exercise the rights granted to the Company pursuant to this Section 4.2(c) more
than once in any one year period.
(d) BLACK-OUT PERIODS OF THE COMPANY. Subject to the
conditions of this Section 4.2(d), each holder of Registrable Securities shall
have the right to require the Company not to sell, and to use its best efforts
to cause any employee, director, agent or representative, who is also a holder
of common equity securities or securities convertible into common equity
securities of the Company not to sell, any equity securities of the Company or
any securities convertible into equity securities of the Company under any
registration statement or prospectus supplement, or to suspend the effectiveness
thereof, during the period starting with the date 30 days prior to such holders'
good faith estimate, as certified in writing by an executive officer of such
holder to the Company, of the proposed date of filing of a preliminary
prospectus supplement relating to a Shelf Registration filed pursuant to Section
4.2(a), pertaining to an underwritten offering of Registrable Securities, and
ending on the date 90 days following the date of filing of the final prospectus
supplement, but in no event on a date later than 90 days following the date of
filing of the preliminary prospectus supplement.
(e) PRIORITY ON SHELF REGISTRATIONS. If the managing
underwriter for any underwritten offering contemplated by this Section 4.2 shall
advise the Company in writing that, in such underwriter's opinion, the amount of
securities requested to be included in such Shelf Registration would adversely
affect the offering and sale (including pricing) of such securities then the
Company will include in such Shelf Registration, the number of securities that
the Company is so advised can be sold in such offering, in the following
priority:
(i) first, all Registrable Securities requested to be sold
pursuant to this Section 4.2;
(ii) second, securities proposed to be sold by the Company for
its own account; and
(iii) third, any other securities requested to be included in
such Registration in such manner as the Company may determine.
(f) NOTICE. The Company shall give each holder of Registrable
Securities prompt notice in the event that the Company has suspended sales of
Registrable Securities under Section 4.2(c).
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<PAGE>
(g) SELECTION OF UNDERWRITERS. Any and all underwriters or
other agents involved in any sale of Registrable Securities pursuant to a Shelf
Registration shall include one or more underwriting firms of nationally
recognized standing selected by the Company which underwriting firms must be
reasonably satisfactory to the Investor in its sole discretion.
(h) EXPENSES. All Registration Expenses incurred in connection
with any Shelf Registration shall be borne by the Company.
ss. 4.3. INCIDENTAL REGISTRATIONS. (a) NOTIFICATION AND
INCLUSION. If the Company proposes to register for its own account or the
account of any other securityholder, any equity securities of the Company or any
securities convertible into equity securities of the Company under the
Securities Act (other than pursuant to a registration on Form S-4 or Form S-8 or
any similar form or in connection with a proposal to register the Teleductos
Common Stock within 60 days of the Closing Date), the Company shall, at each
such time after the date hereof, promptly give notice to each holder of
Registrable Securities (the "Company Notice") of such registration and of such
holder's rights under this Section 4.3(a). Upon the written request of any
holder of Registrable Securities given within 10 business days after receipt of
a Company Notice by such holder of Registrable Securities, the Company shall
include in such proposed registration such Registrable Securities as such
holders shall request and shall use its best efforts to cause a registration
statement covering all of the Registrable Securities that such holders have
requested to be registered to become effective under the Securities Act (an
"Incidental Registration").
(b) PRIORITY ON INCIDENTAL REGISTRATION. If an Incidental
Registration pursuant to this Section 4.3 involves an underwritten offering and
the managing underwriter of such underwritten offering shall advise the Company
in writing that, in such underwriter's opinion, the amount of securities
requested to be included in such Incidental Registration, would adversely affect
the offering and sale (including price) of such securities, then the Company
will include in such Incidental Registration, the number of securities that the
Company is so advised can be sold in such offering, in the following priority:
(A) Prior to the consummation of a Strategic Investment:
(i) first, all the securities of the Company which
the Company proposes to sell for its own account;
(ii) second, all Registrable Securities requested to
be sold pursuant to this Section 4.3; and
(iii) third, any other securities requested to be
included in such Registration, in such manner as the Company
may determine.
(B) Following the consummation of a Strategic Investment:
(i) first, all the securities of the Company which
the Company proposes to sell for its own account;
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<PAGE>
(ii) second, all Registrable Securities requested to
be sold pursuant to this Section 4.3 and any Securities
requested to be sold by Northland or Geib, determined on a PRO
RATA basis; and
(iii) third, any other securities requested to be
included in such Registration, in such manner as the Company
may determine.
(c) EXPENSES. All Registration Expenses incurred in connection
with any Incidental Registration shall be borne by the Company.
ss. 4.4. REGISTRATION PROCEDURES. In connection with the
filing of any registration statement as provided in Section 4.2 or 4.3 of this
Agreement, the Company shall use its best efforts to effect the Registration and
sale of Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto, the Company will as expeditiously as
possible:
(a) prepare and file with the Commission the requisite
registration statement (including a prospectus therein) to effect such
Registration and use its best efforts to cause such registration
statement to become effective, provided that before filing such
registration statement or any amendments or supplements thereto, the
Company will furnish to the counsel selected by the holders of
Registrable Securities copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel
before any such filing is made, and the Company will comply with any
reasonable request made by such counsel to make changes in any
information contained in such documents relating to such holders, and
upon filing such documents, the Company shall promptly notify in
writing such counsel of the receipt by the Company of any comments by
the Commission with respect to such registration statement or
prospectus or any amendment or supplement thereto or any request by the
Commission for the amending or supplementing thereof or for additional
information with respect thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such Registration and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until, in the case of
Section 4.2, the termination of the period during which the Shelf
Registration is required to be kept effective, or, in the case of
Section 4.3, the earlier of such time as all of such securities have
been disposed of and the date which is 180 days after the date of
initial effectiveness of such registration statement;
(c) furnish to each holder of Registrable Securities included
in a Registration hereunder and the underwriter or underwriters, if
any, without charge, at least one signed copy of the registration
statement and any post-effective amendments thereto, and upon request,
such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of
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<PAGE>
copies of the prospectus contained in such registration statements
(including each preliminary prospectus, complete prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, including documents
incorporated by reference, as such holders and the underwriters may
request (it being understood that the Company consents to the use of
the prospectus and any amendment or supplement thereto by each holder
of Registrable Securities covered by such registration statement and
the underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any amendment
or supplement thereto);
(d) register or qualify all Registrable Securities under such
other securities or blue sky laws of such jurisdictions as the holders
of Registrable Securities shall request, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and take any other action which may be necessary or
advisable to enable such holders to consummate the disposition in such
jurisdictions of the securities owned by such holders, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this paragraph be obligated to be
so qualified, or to consent to general service of process in any such
jurisdiction, or to subject the Company to any material tax in any such
jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
government authority as may be necessary to enable such holder to
consummate the disposition of such Registrable Securities;
(f) furnish to each holder of Registrable Securities included
in a Registration hereunder a signed counterpart, addressed to such
holders (and the underwriters, if any), of (i) an opinion of counsel
for the Company, dated the effective date of such registration
statement (and, if such Registration includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to the
holders of Registrable Securities, and (ii) a "cold comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of
such financial statements, all as are customarily covered in opinions
of issuer's counsel and in accountants' "cold comfort" letters
delivered to the underwriters in underwritten public offerings of
securities;
(g) immediately notify each holder of Registrable Securities
included in a registration statement hereunder at any time when the
Company becomes aware that a prospectus relating thereto is required to
be delivered under the Securities Act, upon discovery that, or upon the
discovery of the happening of any event as a result of which
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<PAGE>
the prospectus included in such registration statement, as then in
effect, 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 therein not misleading in the light of the
circumstances under which they were made, and at the request of such
holders promptly prepare and furnish to such holders a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
(h) comply or continue to comply in all material respects with
the Securities Act and the Exchange Act and with all applicable
policies, rules and regulations of the Commission, as announced from
time to time, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act, and not file any amendment or
supplement to such registration statement or prospectus to which the
Investor shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act, having been furnished with a
copy thereof at least five business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) list all Registrable Securities covered by such
registration statement on any securities exchange on which any shares
of Common Stock are then listed;
(k) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under such Registration,
and enable such securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or
such holders may request;
(l) enter into such agreements (including underwriting
agreements in customary form) and take such other actions as the
Investor shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities; and
(m) cause its employees and personnel to use their best
efforts to support the marketing of the Registrable Securities
(including, without limitation, the participation in "road shows," at
the request of the underwriters or the holders of Registrable
Securities).
ss. 4.5. REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any Registration, the Company will enter into a customary
underwriting agreement with such
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underwriters for such offering, which shall contain such representations and
warranties by the Company and such other terms as are customarily contained in
agreements of this type, including indemnities to the effect and to the extent
provided in Section 4.7 hereof. Each holder of Registrable Securities may be a
party to such underwriting agreement and may, at its option, require that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
holders. The Company will use its best efforts to ensure that the holders of
Registrable Securities included in an underwritten registration hereunder shall
not be required to (i) make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder and such holder's intended method of
distribution and (ii) undertake any indemnification or contribution obligations
to the Company or the underwriters with respect thereto, except such
indemnification or contribution obligations otherwise provided in Section 4.7
hereof.
ss. 4.6. PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of any registration statement under the
Securities Act, the Company will give one representative of the holders of
Registrable Securities, its underwriters, if any, and their respective counsel,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of the holders of Registrable Securities, such underwriters and
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
ss. 4.7. INDEMNIFICATIon. (a) INDEMNIFICATION BY THE COMPANY.
In the event of any registration of any Registrable Securities of the Company
under the Securities Act, the Company will, and hereby does, indemnify and hold
harmless the holders of such securities, their officers, directors, members,
employees, agents, representatives, stockholders and general and limited
partners and each Person who controls such holder (within the meaning of the
Securities Act and Exchange Act) against any losses, claims, damages,
liabilities, costs and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof), joint or several, insofar as such losses,
claims, damages, liabilities, costs and expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of, are based
upon or are incurred in connection with, any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company will reimburse such
indemnified persons for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceedings; provided, however, that the Company shall not be liable
to a holder of Registrable Securities in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof), costs or expense arises out of, is based upon or are
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incurred in connection with, an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such holder of Registrable Securities specifically stating
that it is for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
each holder of Registrable Securities and shall survive the transfer of such
securities by such holders.
(b) INDEMNIFICATION BY THE HOLDER OF REGISTRABLE SECURITIES.
The Company may require, as a condition to including any Registrable Securities
in any registration statement pursuant to Section 4.2 or Section 4.3, that the
Company shall have received an undertaking satisfactory to it from each holder
of Registrable Securities to indemnify and hold harmless (in the same manner and
to the same extent as set forth in paragraph (a) of this Section 4.7) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act with respect to any untrue statement or alleged untrue statement
of a material fact in or omission or alleged omission to state a material fact
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holders specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by the holders of Registrable
Securities; provided, however, that the obligation to indemnify will be
individual, not joint and several, for each holder and will be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 4.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 4.7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
receive such notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation and the
indemnifying party shall not, without the consent of the indemnified party,
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consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, a release from all liability in
respect of such claim or litigation provided by the claimant or plaintiff to
such indemnified party.
(d) CONTRIBUTION. If, for any reason, the foregoing indemnity
is unavailable, or is insufficient to hold harmless an indemnified party, then
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such expenses, losses, damages, liabilities or
expenses, (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other (determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
the proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other, but also the relative fault of the indemnifying party on the one hand
and the indemnified party on the other, as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no holder of Registrable
Securities shall be required to contribute any amount in excess of the amount
such holder would have been required to pay to an indemnified party if the
indemnity under Section 4.7(b) was available. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any indemnifying party
who was not guilty of such fraudulent misrepresentation. The obligation of any
Person to contribute pursuant to this Section 4.7 shall be several and not
joint.
ss. 4.8. RULE 144. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Registrable Securities to the public without
registration, the Company shall:
(a) use its best efforts to facilitate the sale of the
Registrable Securities to the public, without registration under the
Securities Act, pursuant to Rule 144;
(b) make and keep public information available, as those terms
are understood and defined in Rule 144 at all times;
(c) use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied
with such requirements of this section, to the holders of Registrable Securities
upon any such holder's request.
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ARTICLE V
TAG-ALONG RIGHTS
----------------
ss. 5.1. RIGHT TO PARTICIPATE IN SALE. (a) Subject to Section
5.5, if (i) prior to the consummation of a Strategic Investment, either
Northland or Geib; (ii) following the consummation of a Strategic Investment,
any of the Investor, Northland or Geib; or (iii) following the consummation of a
Strategic Investment, the Strategic Investor, propose to enter into an agreement
to sell or otherwise dispose of for value (such sale or other disposition for
value being referred to as a "Tag Along Sale") any shares of Common Stock in a
Private Transaction then (x) in the case of clause (i), Northland or Geib shall
afford the Investor; (y) in the case of clause (ii), the Investor, Northland or
Geib shall afford to each other; and (z) in the case of clause (iii), the
Strategic Investor shall afford the Investor the opportunity to participate
proportionately in such Tag-Along Sale (the Person(s) being afforded the
opportunity to participate proportionately in such Tag-Along Sale being referred
to as the "Tag-Along Stockholders") in accordance with this Article 5.
(b) The number of shares of Common Stock that each Tag-Along
Stockholder will be entitled to include in such Tag-Along Sale (the "Tag-Along
Allotment") shall be determined by multiplying (i) the number of shares of
Common Stock held by such Tag-Along Stockholder immediately prior to the
consummation of the Tag-Along Sale Date (including shares of Common Stock
issuable upon the conversion of the Preferred Stock) by (ii) a fraction, the
numerator of which shall equal the number of shares of Common Stock of the
Company proposed to be sold or otherwise disposed of pursuant to the Tag-Along
Sale and the denominator of which shall equal the total number of shares of
Common Stock that are beneficially owned by (a) the Party proposing the
Tag-Along Sale and (b) any other holder of shares of Common Stock that had the
right to "tag-along" in the Tag-Along Sale (including shares of Common Stock
issuable upon the conversion of the Preferred Stock) on the day immediately
prior to the consummation of the Tag-Along Sale Date; provided, however, that in
negotiating a Tag-Along Sale, the Party proposing the Tag-Along Sale shall
provide (i) that the only representations, warranties or covenants which any
Tag-Along Stockholder shall be required to make in connection with any Tag-Along
Sale are representations and warranties with respect to its own ownership of the
Common Stock to be sold by it and its ability to convey title thereto free and
clear of liens, encumbrances or adverse claims, its due organization, its due
authorization, execution and delivery of the definitive purchase agreement (if
applicable), enforceability of such purchase agreement against it and no
conflicts of it with such purchase agreement, and (ii) that the liability of the
Tag-Along Stockholder with respect to any representation and warranty made in
connection with any Tag-Along Sale is the several liability of such Tag-Along
Stockholder (and not joint with any other person) and that such liability is
limited to the amount of proceeds actually received by such Tag-Along
Stockholder; provided, however, that the foregoing shall not limit the
obligations of such Tag-Along Stockholder, and such Tag-Along Stockholder hereby
expressly agrees to be bound by and be subject to, any escrow or other holdback
arrangement (on a PRO RATA basis based on the number of shares of Common Stock
sold by such Tag-Along Stockholder in proportion to all shares of Common Stock
sold in such Tag-Along Sale) provided for in the agreement relating to the
Tag-Along Sale.
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ss. 5.2. SALE NOTICE. The Party proposing the Tag-Along Sale
shall provide each Tag-Along Stockholder and the Company with written notice
(the "Tag-Along Sale Notice") not less than 30 days prior to the proposed date
of the Tag-Along Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice
shall be accompanied by a copy of any agreement relating to the Tag-Along Sale
(if available) and shall set forth: (i) the name and address of each proposed
purchaser of shares of Common Stock in the Tag-Along Sale; (ii) the number of
shares of Common Stock proposed to be sold; (iii) the proposed amount and form
of consideration to be paid for such shares of Common Stock and the terms and
conditions of payment offered by each proposed purchaser; (iv) the aggregate
number of shares of Common Stock held of record by the Party proposing the
Tag-Along Sale as of the close of business on the day immediately preceding the
date of the Tag-Along Notice (the "Tag-Along Notice Date"); (v) the Tag-Along
Stockholder's Tag-Along Allotment assuming the Stockholder elected to sell the
maximum number of shares of Common Stock possible; (vi) confirmation that the
proposed purchaser has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase shares of Common Stock from any Tag-Along
Stockholder in accordance with the terms hereof; and (vi) the Tag-Along Sale
Date.
ss. 5.3. TAG-ALONG NOTICE. Any Tag-Along Stockholder wishing
to participate in the Tag-Along Sale shall provide written notice (the
"Tag-Along Notice") to the Party proposing the Tag-Along Sale no less than 15
days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the
number of shares of Common Stock that such Tag-Along Stockholder elects to
include in the Tag-Along Sale, which shall not exceed such Tag-Along
Stockholder's Tag-Along Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Common Stock held by such Tag-Along
Stockholder as of the day immediately preceding the Tag-Along Notice Date, if
any, that such Tag-Along Stockholder desires to include in the Tag-Along Sale
("Additional Shares") in the event that there is any under subscription for
Tag-Along Allotments by the Tag-Along Stockholders. If such is the case, the
unsubscribed Tag-Along Allotments shall be allocated to the Tag-Along
Stockholders specifying Additional Shares, respectively (the "Over-Subscribing
Tag-Along Stockholders"), which allocation shall be on a PRO RATA basis among
all such Over-Subscribing Tag-Along Stockholders in accordance with the number
of Additional Shares specified by such Over-Subscribing Tag-Along Stockholders
in their Tag-Along Notice. The Tag-Along Notice given by any Tag-Along
Stockholder shall constitute such Tag-Along Stockholder's binding agreement to
sell the shares of Common Stock specified in the Tag-Along Notice on the terms
and conditions applicable to the Tag-Along Sale; provided, however, that in the
event that there is any material change in the material terms and conditions of
such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not
limited to, any decrease in the purchase price that occurs other than pursuant
to an adjustment mechanism set forth in the agreement relating to the Tag-Along
Sale) after such Tag-Along Stockholder gives it Tag-Along Notice, then,
notwithstanding anything herein to the contrary, the Tag-Along Stockholder shall
have the right to withdraw from participation in the Tag-Along Sale with respect
to all of its shares of Common Stock affected thereby. If the proposed purchases
does not consummate the purchase of all of the shares of Common Stock requested
to be included in the Tag-Along Sale by any Tag-Along Stockholder on the same
terms and conditions applicable to the Party proposing the Tag-Along Sale
(except as otherwise provided herein), then the Party proposing the Tag-Along
Sale shall not
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consummate the Tag-Along Sale of any of its shares of Common Stock to such
purchaser, unless the shares of the Party proposing the Tag-Along Sale and the
Tag-Along Stockholders are reduced or limited PRO RATA in proportion to the
respective number of shares of Common Stock actually sold in any such Tag-Along
Sale and all other times and conditions of the Tag-Along Sale are the same for
the Party proposing the Tag-Along Sale and the Tag-Along Stockholders, subject
to the provisions set forth in Section 5.1.
If a Tag-Along Notice from any Tag-Along Stockholder is not
received by the Party proposing the Tag-Along Sale prior to the 15 day period
specified above, the Party proposing the Tag-Along Sale shall have the right to
consummate the Tag-Along Sale without the participation of such Tag-Along
Stockholder, but only on terms and conditions which are no more favorable in any
material respect to the Party proposing the Tag-Along Sale (and in any event, at
no greater a purchase price) than as stated in the Tag-Along Sale Notice and
only if such Tag-Along Sale occurs on a date within 90 days of the Tag-Along
Sale Date. If such Tag-Along Sale does not occur within such 90 day period, the
shares of Common Stock that were to be subject to such Tag-Along Sale thereafter
shall continue to be subject to all of the restrictions contained in this
Agreement.
ss. 5.4. DELIVERY OF CERTIFICATES. On the Tag-Along Sale Date,
each Tag-Along Stockholder shall deliver a certificate or certificates for the
shares of Common Stock to be sold in connection with the Tag-Along Sale, duly
endorsed for transfer with signatures guaranteed, to the purchaser in the manner
and at the address indicated in the Tag-Along Notice against delivery of
immediately available funds in the amount of the purchase price for such shares
of Common Stock.
ss. 5.5. EXEMPT TRANSFERS. The provisions of this Article 5
shall not apply:
(i) to any sale or other disposition to any corporation
or business entity a majority of the capital stock or other ownership interests
of which are owned by the Person proposing the sale or other disposition;
(ii) to any sale or other disposition contemplated by
Section 6.4;
(iii) to any sale or transfer by an individual as a
gift or gifts during such individual's lifetime to such individual's spouse,
children, grandchildren or a trust or other legal entity for the benefit of any
such individual or any of the foregoing; provided, however that such individual
retains voting control of the Common Stock so transferred;
(iv) to any sale or other disposition (a) pursuant to
and in accordance with the terms of any merger, consolidation, reclassification
of shares or capital reorganization of the Person effecting the sale or other
disposition, or (b) pursuant to a sale of all or substantially all of the stock
or assets of such Person; and
(v) to any sale or other disposition to LAIF made by
the Investor.
A sale or other disposition for value shall be exempt from the
provisions of this Section 5 if any one of the above listed exemptions in
applicable.
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ss. 5.6. NO WAIVER. Any election in any instance by a
Stockholder not to exercise its rights to participate in a Tag-Along Sale under
this Article 5 shall not constitute a waiver of such rights with respect to any
other proposed sale of shares of Common Stock which would trigger such rights.
ARTICLE VI
OTHER AGREEMENTS
----------------
ss. 6.1. BOARD OBSERVER. (a) For so long as the Preferred
Stock and Converted Common Stock represent more than 2.0% of the outstanding
Common Stock of the Company determined on the basis that all convertible or
exchangeable securities (including the Preferred Stock) shall be deemed to be
converted and/or exchanged, the Investor shall have the right to designate an
individual who will be an observer (who will be a representative of either the
Investor or LAIF), and shall be entitled to be present, at each meeting of the
Board and each committee of the Board (the "Board Observer").
(b) The Board Observer will have the right to attend each
meeting of the Board and to attend each meeting of each committee of the Board.
Any such attendance may be by teleconference. No meeting of the Board or any
committee thereof may be conducted by teleconference if all participants therein
cannot hear all other participants. The Company shall provide the Board Observer
with (i) copies of all actions taken by written consent of the Board and/or any
committee thereof promptly after the execution thereof and copies of all minutes
of meetings of the Board and/or any committee thereof or the stockholders
promptly after they are prepared, (ii) simultaneously with any distribution to
directors of the Company or any members of any committee of the Board, copies of
all materials that are distributed to such directors or members (including
requests for actions by written consent) and (iii) to the extent possible using
its best efforts, written notice at least one week prior to any meeting of the
Board or any committee of the Board that such Board Observer is entitled to
attend, provided, HOWEVER, that, in any case, the Board Observer shall receive
notice of any meeting of the Board or any committee of the Board that such Board
Observer is entitled to attend no later than any director of the Company. The
Investor shall, and shall use its reasonable best efforts to cause the Board
Observer and LAIF to, hold in confidence (unless compelled to disclose by
judicial or administrative process or by other requirements of law) all
confidential documents and information concerning the Company received by the
Board Observer in his or her capacity as such and reported to the Investor and
LAIF. The Investor shall, and shall use its reasonable best efforts to cause the
Board Observer and LAIF to, refrain from using any information concerning the
Company received by the Board Observer in his or her capacity as such and
reported to the Investor and LAIF for any purpose other than the evaluation of
any investment in the Company.
(c) The Company shall reimburse the Board Observer for all
out-of-pocket expenses incurred in connection with or relating to any meeting of
the Board or any committee thereof.
ss. 6.2. ACCESS AND DISCLOSURE. In connection with the
possible purchase by AIG-GE Capital Latin American Infrastructure Fund L.P.
("LAIF") of up to 50.0% of the Preferred Stock from the Investor, the Company
agrees that for a period of 30 days after the Closing Date it
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shall cause its Subsidiaries to, upon reasonable notice and during normal
business hours, afford LAIF and its employees, accountants, agents and
representatives reasonable access to their books and records and those of their
respective Subsidiaries in order that LAIF may have the opportunity to make such
investigations as it shall desire of the affairs of such Subsidiaries.
ss. 6.3. STRATEGIC INVESTOR BOUND. The Company agrees that it
shall be a condition of any Strategic Investment that the Strategic Investor
agree to be bound by the provisions of this Agreement applicable to the
Strategic Investor
ss. 6.4. PARTICIPATION IN STRATEGIC INVESTMENT. (a)
NOTIFICATION AND INCLUSION. Other than in connection with a Strategic Investment
the consummation of which occurs within nine months of the Closing Date, the
Company shall provide the Investor with written notice (the "Strategic
Investment Notice") not less than 30 days prior to the proposed date of the
consummation of the Strategic Investment (the "Strategic Investment Date"). The
Strategic Investment Notice shall be accompanied by a copy of any purchase
agreement relating to the Strategic Investment (if available) and shall set
forth: (i) the name and address of the proposed Strategic Investor; (ii) the
number of shares of Common Stock proposed to be issued; (iii) the proposed
amount and form of consideration to be paid for such shares of Common Stock and
the terms and conditions of payment offered; (iv) confirmation that the proposed
Strategic Investor has been informed of the rights provided for herein and has
agreed to purchase shares of Common Stock from the Investor in accordance with
the terms hereof in priority to any Common Shares to be issued by the Company;
and (v) the Strategic Investment Date. The Company agrees that in negotiating
the Strategic Investment it shall ensure that the documentation relating to the
Strategic Investment shall provide (i) that the only representations, warranties
or covenants which the Investor shall be required to make in connection with a
sale contemplated herein are representations and warranties with respect to its
own ownership of the Common Stock to be sold by it and its ability to convey
title thereto free and clear of liens, encumbrances or adverse claims, its due
organization, its due authorization, execution and delivery of the definitive
purchase agreement (if applicable), enforceability of such purchase agreement
against it and no conflicts of it with such purchase agreement, and (ii) that
the liability of the Investor with respect to any representation and warranty
made in connection with any sale contemplated herein is limited to the amount of
proceeds actually received by the Investor.
(b) NOTICE OF PARTICIPATION. The Investor shall provide
written notice (the "Participation Notice") to the Company of its desire to sell
Common Stock to the Strategic Investor no less than 15 days prior to the
Strategic Investment Date. The Participation Notice shall set forth the number
of shares of Common Stock that the Investor elects to include in the sale to the
Strategic Investor. The Participation Notice shall constitute the Investor's
binding agreement to sell the shares of Common Stock specified in the
Participation Notice on the terms and conditions applicable to the Strategic
Investment; provided, however, that in the event that there is any material
change in the material terms and conditions of such Strategic Investment
applicable to the Investor (including, but not limited to, any decrease in the
purchase price that occurs other than pursuant to an adjustment mechanism set
forth in the agreement relating to the Strategic Investment) after the Investor
gives its Participation Notice, then, notwithstanding anything herein to the
contrary, the Investor shall have the right to withdraw from participation in
the Strategic Investment with respect to all of its shares of Common Stock
affected thereby.
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(c) FAILURE TO DELIVER PARTICIPATION NOTICE. If a
Participation Notice is not received by the Company prior to the 15 day period
specified above, the Company shall have the right to consummate the Strategic
Investment without the participation of the Investor, but only on terms and
conditions which are no more favorable in any material respect to the Investor
(and in any event, at no greater a purchase price) than as stated in the
Strategic Investment Notice and only if such Strategic Investment is consummated
on a date within 90 days of the Strategic Investment Date.
(d) DELIVERY OF CERTIFICATES. On the Strategic Investment
Date, the Investor shall deliver a certificate or certificates for the shares of
Common Stock to be sold in connection with the Strategic Investment, duly
endorsed for transfer with signatures guaranteed, to the Strategic Investor in
the manner and at the address indicated in the Strategic Investment Notice
against delivery of immediately available funds in the amount of the purchase
price for such shares of Common Stock.
ARTICLE VII
MISCELLANEOUS
-------------
ss.7.1 GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of New York applicable to agreements executed and to be performed
solely within such State.
ss.7.2 CAPTIONS. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.7.3 NOTICES. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to the Company:
FirstCom Corporation
220 Alhambra Circle
Suite 910
Coral Gables, Florida 33134
Attention: Douglas G. Geib II
Chief Financial Officer
Telephone: (305) 448-4422
Telecopier: (305) 448-2636
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With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Suite 1900
Miami, Florida 33131
Attention: Andrew Hulsh, Esq.
Telephone: (305) 789-8985
Telecopier: (305) 789-8953
and if to the Investor:
c/o GE Capital Services
Structured Finance Group, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Attention: Portfolio - Operations
Telephone: (203) 357-3735
Telecopier: (203) 961-2017
with a copy to its counsel,
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Telephone: (212) 819-8200
Telecopier: (212) 354-8113
and if to Northland and/or to Geib, to such individual "care
of" the Company at the address set forth above for the
Company.
or such other address or number as shall be furnished in writing by any such
Party, and such notice or communication shall be deemed to have been given upon
automatic confirmation of receipt by the receiving machine if sent by
telecopier, upon delivery if delivered in person, and upon mailing if mailed.
ss.7.4 PARTIES IN INTEREST. The Company may not transfer,
assign or pledge any of its rights in, or otherwise grant any rights to any
Person in, this Agreement. Each of Northland and Geib may transfer any of his
rights hereunder in whole or in part pursuant to a Private Transaction. The
Investor may transfer any of its rights hereunder in whole or in part pursuant
to a Private Transaction except for the rights set out in Section 6.1 which may
not be transferred and the rights set out in Article II and Article III which
may only be transferred to a 25% Holder. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
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ss.7.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
ss.7.6 ENTIRE AGREEMENT. This Agreement, the Certificate of
Designation and the Securities Purchase Agreement, including the exhibits,
schedules, and other documents referred to herein and therein which form a part
hereof and thereof, and the Side Letter dated June 30, 1999 between the Company,
the Investor and LAIF contain the entire understanding of the parties hereto
with respect to the subject matter contained herein and therein. This Agreement,
the Certificate of Designation and the Securities Purchase Agreement supersede
all prior agreements and understandings between the Parties with respect to such
subject matter.
ss.7.7 AMENDMENTS. This Agreement may not be changed orally,
but only by an agreement in writing signed by the Parties hereto.
ss.7.8 SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.7.9 THIRD PARTY BENEFICIARIES. Each Party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the Parties hereto (and, in the case of
the Investor, its transferees) and those Persons entitled to indemnification
pursuant to Article IV hereof.
ss.7.10 JURISDICTION. (a) Each of the Parties hereto hereby
irrevocably acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York or in the United
States Southern District Court of New York, as the Party bringing such action or
proceeding may elect and each of the Parties hereto hereby irrevocably submits
to and accepts with regard to any such action or proceeding, for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Party hereby further irrevocably waives any claim that
any such courts lack jurisdiction over such Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or the
transactions contemplated hereby brought in any of the aforesaid courts, that
any such court lacks jurisdiction over such Party. Each Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Party, at its address for notices set forth in Section 7.3, such service to
become effective 10 days after such mailing. Each Party hereby irrevocably
waives any objection to such service of process and further irrevocably waives
and agrees not to plead or claim in any action or proceeding commenced hereunder
or under any other documents contemplated hereby that service of process was in
any way invalid or ineffective. The foregoing shall not limit the rights of any
Party to serve process in any other manner permitted by law. The foregoing
consents to jurisdiction shall not constitute general consents to service of
process for any purpose except as provided above and shall not be deemed to
confer rights on any Person other than the respective Parties to this Agreement.
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<PAGE>
(b) To the fullest extent permitted by applicable law, each of
the Parties hereto hereby irrevocably waives the objection which it may not or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any of the Courts referred to in Section 7.10(a) and hereby further
irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
(c) The Parties hereto agree that any judgment obtained by any
Party hereto or its successors or assigns in any action, suit or proceeding
referred to above may, in the discretion of such Party (or its successors, or
assigns), be enforced in any jurisdiction, to the extent permitted by applicable
law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF the Investor has signed this Investor
Rights Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, and each of Northland and
Geib have signed this Agreement in their individual capacities all as of the day
and year first above written.
FIRSTCOM CORPORATION
By:
----------------------------------------
Name:
Title:
SFG-N INC.
By:
----------------------------------------
Name:
Title:
------------------------------------------
PATRICIO E. NORTHLAND
------------------------------------------
DOUGLAS G. GEIB II
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EXHIBIT 4.3
FIRSTCOM CORPORATION
---------------------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 2.13 of the Texas
Business Corporations Act
--------------------------------------------
Series A Convertible Preferred Stock
-------------------------------------------
The undersigned, Douglas G. Geib II, Secretary of FirstCom Corporation,
a Texas corporation (the "Corporation"), does hereby certify that the following
resolution has been duly adopted by the Board of Directors of the Corporation
(the "Board of Directors") on June 29, 1999:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by the provisions of the Articles of
Incorporation of the Corporation (the "Articles of Incorporation"), there hereby
is created, out of the shares of Preferred Stock of the Corporation authorized
in Article IV of the Articles of Incorporation (the "Preferred Stock"), a series
of the Preferred Stock consisting of 1,666,667 shares, par value $0.001 per
share, which series shall have the following powers, designations, preferences
and relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions (in addition to the powers,
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions, set forth in the
Articles of Incorporation which are applicable to the Preferred Stock
generally):
1. Designation and Amount. This series of Preferred Stock
shall be designated as the Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), and the authorized number of shares constituting such series
shall be 1,666,667, par value $0.001 per share.
2. Dividends.
(a) The holders of Series A Preferred Stock shall have the
right to receive, in preference to the holders of Junior Stock,
dividends, payable when and as declared by the Board of Directors of
the Corporation out of assets legally available therefor, as provided
in this Section 2(a). Dividends shall accrue on each share of Series A
Preferred Stock at an annual rate of fifteen percent (15%) on the sum
of (i) $8.00 (the "Series A Purchase
<PAGE>
Price") and (ii) all accumulated and unpaid dividends accrued thereon
pursuant to this Section 2(a) from the date of issuance thereof (the
"Series A Dividends" and, the sum of the Series A Purchase Price and
Series A Dividends is referred to herein as the "Series A Preference
Amount"). Such dividends will be calculated and, to the extent such
dividends remain unpaid, compounded quarterly in arrears on the first
day of each January, April, July and October of each year (excluding
the first day of July, 1999) prorated on a daily basis for partial
periods. Such dividends shall commence to accrue on each share of
Series A Preferred Stock from the date of issuance of such share of
Series A Preferred Stock whether or not they have been declared and
whether or not there are profits, surplus or other funds legally
available for the payment of dividends and shall continue to accrue
until paid out of assets legally available therefor; PROVIDED HOWEVER,
that for the period from the Original Issue Date until (and including)
the first day of July 2001 (the "PIK Period"), the Corporation shall
pay dividends on each dividend payment date in additional shares of
Series A Preferred Stock (such dividends paid in kind being herein
referred to as "PIK Dividend"); and PROVIDED FURTHER that the amount
payable as a PIK Dividend on the final dividend payment date during the
PIK Period shall be adjusted so that the total number of shares of
Series A Preferred Stock paid as PIK Dividends is equal to 416,667 and
any amount of unpaid dividend resulting from such adjustment shall
accrue as otherwise provided in this Section 2; and PROVIDED FURTHER
that in the event that the Corporation shall exercise its right to
redeem the Series A Preferred Stock after the closing of a Strategic
Investment as provided in Section 7, then the payment of all PIK
Dividends for the PIK Period shall be accelerated and any PIK Dividends
not previously paid shall be immediately paid to the holders of the
Series A Preferred Stock as described in the next paragraph
(notwithstanding any subsequent conversion pursuant to Section 5 or 6
or redemption pursuant to Section 8). In addition, the holders of
Series A Preferred Stock shall have the right to receive dividends or
other distributions (as defined below), ratably and equally with the
holders of Common Stock, when and as declared by the Board of Directors
of the Corporation out of assets legally available therefor; provided,
however, that each holder of Series A Preferred Stock shall be entitled
to receive dividends or other distributions on the outstanding shares
of Series A Preferred Stock held by such holder in an amount equal to
the product of (i) the per share amount, if any, of the dividend or
other distribution to be declared, paid or set aside for the Common
Stock, multiplied by (ii) the number of whole shares of Common Stock
into which such shares of Series A Preferred Stock are then
convertible.
(b) PIK Dividends shall be paid by delivering to the record
holders of Series A Preferred Stock a number of shares of Series A
Preferred Stock determined by dividing the amount of the payment which
otherwise would be payable on the dividend payment date to each
respective holder in cash by the Series A Purchase Price per share. The
issuance of any such PIK Dividend in such amount shall constitute full
payment of such dividend. Fractional shares of Series A Preferred Stock
payable as PIK Dividends may be paid in cash by the Corporation. Any
additional shares of Series A Preferred Stock issued pursuant to this
section shall be subject in all respects, except as to issue date and
the date from which dividends accrue and cumulate as set forth above,
to the same terms as the shares of Series A Preferred Stock originally
issued hereunder.
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<PAGE>
(c) For purposes of this Section 2, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or
property without consideration, whether by way of dividend or
otherwise, or the purchase or redemption of shares of the Corporation
for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation.
3. Liquidation, Dissolution or Winding Up; Certain Mergers,
Consolidations and Asset Sales.
Upon a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, (each, a "Liquidation"),
each holder of Series A Preferred Stock shall be entitled, after
provision for the payment of the Corporation's debts and other
liabilities, to be paid in cash in full, before any distribution is
made on any Junior Stock, an amount in cash equal to the Series A
Preference Amount of all Series A Preferred Shares held by such holder.
If, upon a Liquidation, the net assets of the Corporation distributable
among the holders of all outstanding Series A Preferred Stock shall be
insufficient to permit the payment of the Series A Preference Amount in
full, then the entire net assets of the Corporation remaining after the
provision for the payment of the Corporation's debts and other
liabilities shall be distributed among the holders of the Series A
Preferred Stock ratably in proportion to the full preferential amounts
to which they would otherwise be respectively entitled on account of
their Series A Preferred Stock. A merger or consolidation of the
Corporation (except one in which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation continue
to hold more than 50% by voting power of the equity interests of the
surviving entity), a single transaction or a series of transactions
pursuant to which holders of capital stock of the Corporation
immediately prior to such transaction or series of transactions do not
continue to hold more than 50% by voting power of the capital stock
after such transaction or series of transactions, or the sale of all or
substantially all the assets of the Corporation, shall be deemed to be
a Liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or
consolidation), or all consideration payable to the Corporation,
together with all other available assets of the Corporation (in the
case of an asset sale), shall be distributed to the holders of capital
stock of the Corporation in accordance with the foregoing provisions of
this Section 3.
4. Voting.
(a) Each holder of outstanding shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which the shares of Series A
Preferred Stock held by such holder are then convertible (as adjusted
from time to time pursuant to Section 5 hereof), at each meeting of
stockholders of the Corporation (and written actions of stockholders in
lieu of meetings) with respect to any and all matters presented to the
stockholders of the Corporation for their action or consideration.
Except as provided by law, by the provisions of Subsection 4(b) below
or elsewhere in the Corporation's Articles of Incorporation, as
amended,
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<PAGE>
holders of Series A Preferred Stock shall vote together with
the holders of Common Stock and Preferred Stock as a single class.
(b) Except as provided by law, the Corporation shall not,
without first obtaining the affirmative vote or written consent of the
holders of at least 75% of the then outstanding shares of Series A
Preferred Stock, voting together as a single class of Preferred Stock:
(i) Amend, repeal, alter or waive any provision of,
or add any provision to, the Corporation's Articles of
Incorporation or Bylaws, if such action could have a material
adverse effect on the rights, preferences or privileges of the
Series A Preferred Stock;
(ii) Authorize or issue any new or existing class or
classes or series of capital stock having any preference or
priority as to dividends, liquidation preference, assets or
voting superior to or on parity with any such preference or
priority of the Series A Preferred Stock or authorize or issue
shares of stock of any class or any bonds, debentures, notes
or other obligations convertible into or exchangeable for, or
having rights to purchase, any shares of stock of the
Corporation having any preference or priority as to dividends,
liquidation preference, assets or voting superior to or on
parity with any such preference or priority of the Series A
Preferred Stock;
(iii) Redeem, purchase or otherwise acquire, directly
or indirectly, any Junior Stock; or
(iv) Authorize or effect the declaration or payment
of dividends or other distributions upon any Junior Stock;
5. Optional Conversion. The holders of the Series A Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $6.00
by the Series A Conversion Price in effect at the time of conversion.
The "Series A Conversion Price" shall initially be $6.00. The rate at
which shares of Series A Preferred Stock may be converted into shares
of Common Stock shall be subject to adjustment as provided below.
In the event of a Liquidation of the Corporation, the
Conversion Rights shall terminate at the close of business on the first full day
preceding the date fixed for the payment of any amounts distributable on
Liquidation to the holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock. In
lieu of any fractional shares to which
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<PAGE>
the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then
effective Series A Conversion Price.
(c) Mechanics of Conversion.
(i) In order for a holder of Series A Preferred Stock
to convert such shares into shares of Common Stock, such
holder shall surrender the certificate or certificates for
such shares of Series A Preferred Stock at the office of the
transfer agent for the Series A Preferred Stock (or at the
principal office of the Corporation if the Corporation serves
as its own transfer agent), together with written notice (a
"Conversion Demand") that such holder elects to convert all or
any number of the shares of the Series A Preferred Stock
represented by such certificate or certificates. Such
Conversion Demand shall state such holder's name or the names
of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If
required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of
receipt of such certificates and Conversion Demand notice by
the transfer agent (or by the Corporation if the Corporation
serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at
such office to such holder of Series A Preferred Stock, or to
his or its nominees, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be
entitled, together with cash in lieu of any fraction of a
share.
(ii) The Corporation shall at all times when the
Series A Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued stock, for
the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Series A Preferred
Stock. Before taking any action which would cause an
adjustment reducing the Series A Conversion Price below the
then par value of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, the Corporation
will take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares
of Common Stock at such adjusted Series A Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Series A Conversion Price shall be made for any declared but
unpaid dividends on the Series A Preferred Stock surrendered
for conversion or on the Common Stock delivered upon
conversion.
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<PAGE>
(iv) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding and all rights
with respect to such shares, including the rights, if any, to
receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the
holders thereof to receive shares of Common Stock in exchange
therefor and payment of any dividends declared but unpaid
thereon. Any shares of Series A Preferred Stock so converted
shall be retired and canceled and shall not be reissued, and
the Corporation (without the need for stockholder action) may
from time to time take such appropriate action as may be
necessary to reduce the authorized Series A Preferred Stock
accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock upon conversion of shares
of Series A Preferred Stock pursuant to this Section 5. The
Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the
amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(vi) Notwithstanding any other provision hereof, if a
conversion of Series A Preferred Stock is to be made in
connection with a public offering of Common Stock, the
conversion of any shares of Series A Preferred Stock may, at
the election of the holder of such shares, be conditioned upon
the consummation of such public offering in which case such
conversion shall not be deemed to be effective until the
consummation of such public offering.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of Subsections
5(d)-5(g), the following definitions shall apply:
(A) "Option" shall mean rights, options or
warrants to subscribe for, purchase or otherwise
acquire Common Stock or Convertible Securities,
excluding options described in subsection
5(d)(i)(C)(IV) below.
(B) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
directly or indirectly convertible into or
exchangeable for Common Stock.
(C) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or,
pursuant to Subsection 5(d)(iii) below, deemed to be
issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock (or, in the
case of clause IV
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<PAGE>
below, options or warrants to purchase shares of
Common Stock) issued or issuable:
(I) upon conversion of any
Convertible Securities outstanding on the
Original Issue Date, or upon exercise of any
Options outstanding on the Original Issue
Date;
(II) as a dividend or distribution
on Series A Preferred Stock;
(III) by reason of a dividend, stock
split, split up or other distribution on
shares of Common Stock that is covered by
Subsection 5(e) or 5(f) below;
(IV) to employees, directors,
officers or managers of, or consultants to,
the Corporation or any of its subsidiaries
pursuant to a plan adopted by the Board of
Directors of the Corporation in good faith;
or
(V) to a Strategic Investor in
connection with a Strategic Investment
within nine months after the Original Issue
Date; PROVIDED that the average daily
closing or last sale price per share of
Common Stock for the ninety (90) days
immediately following such Strategic
Investment, as reported on a national
securities exchange or NASDAQ, is greater
than or equal to $9.00.
(ii) No Adjustment of Conversion Price. No adjustment
in the number of shares of Common Stock into which the Series
A Preferred Stock is convertible shall be made, by adjustment
in the Series A Conversion Price, as applicable, unless the
consideration per share (determined pursuant to Subsection
5(d)(v)) for an Additional Share of Common Stock issued or
deemed to be issued by the Corporation is less than the Series
A Conversion Price in effect on the date of, and immediately
prior to, the issue of such Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional
Shares of Common Stock.
If the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then
the maximum number of shares of Common Stock (as set forth in
the instrument relating thereto without regard to any
provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible
-7-
<PAGE>
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business
on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Subsection
5(d)(v) hereof) of such Additional Shares of Common Stock
would be less than the Series A Conversion Price, as
applicable, in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Series A
Conversion Price shall be made upon the subsequent
issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage
of time or otherwise, for any increase in the
consideration payable to the Corporation, upon the
exercise, conversion or exchange thereof, the Series
A Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase
insofar as it affects such Options or the rights of
conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of
any unexercised Option or any unexercised rights of
conversion or exchange under any Convertible
Security, the Series A Conversion Price shall be
readjusted to eliminate the Additional Shares of
Common Stock deemed issued as the result of the
original issue of such Option or such Convertible
Security;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise,
conversion or exchange of any Option or Convertible
Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof,
the Series A Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as
would have been obtained had the adjustment which was
made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such
change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B),
(C) or (D) above shall have the effect of increasing
the Series A Conversion Price to an amount which
exceeds the lower of (i) the Series A Conversion
Price on the original adjustment date, or (ii) the
Series A Conversion Price that
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<PAGE>
would have resulted from any issuances of Additional
Shares of Common Stock between the original
adjustment date and such readjustment date.
In the event the Corporation, after the
Original Issue Date, amends the terms of any Options
or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the
Original Issue Date or were issued after the Original
Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have
been issued after the Original Issue Date and the
provisions of this Subsection 5(d)(iii) shall apply.
It is expressly acknowledged that options
issued to persons described in Subsection 5(d)(i)(C)(IV) are
excluded from the definition of "Option" as provided in
Subsection 5(d)(i)(A).
(iv) Adjustment of Series A Conversion Price Upon
Issuance of Additional Shares of Common Stock.
In the event the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common
Stock without consideration or for a consideration per share
less than the applicable Series A Conversion Price in effect
on the date of and immediately prior to such issue, then and
in such event, such Series A Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated
to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, (A) the numerator of which
shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares
of Common Stock which the aggregate consideration received or
to be received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at
such Series A Conversion Price; and (B) the denominator of
which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Subsection 5(d)(iv), all
shares of Common Stock issuable upon exercise or conversion of
Options or Convertible Securities outstanding immediately
prior to such issue shall be deemed to be outstanding, and
(ii) the number of shares of Common Stock deemed issuable upon
exercise or conversion of such outstanding Options and
Convertible Securities shall not give effect to any
adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance
of Additional Shares of Common Stock that is the subject of
this calculation.
(v) Determination of Consideration. For purposes of
this Subsection 5(d), the consideration received by the
Corporation for the issue of any Additional Shares of Common
Stock shall be computed as follows:
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<PAGE>
(A) Cash and Property: Such consideration
shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash
received by the Corporation, excluding
amounts paid or payable for accrued
interest;
(II) insofar as it consists of
property other than cash, be computed at the
fair market value thereof at the time of
such issue, as determined in good faith by
the Board of Directors; and
(III) in the event Additional Shares
of Common Stock are issued together with
other shares or securities or other assets
of the Corporation for consideration which
covers both, be the proportion of such
consideration so received, computed as
provided in clauses (I) and (II) above, as
determined in good faith by the Board of
Directors.
(B) Options and Convertible Securities. The
consideration per share received by the Corporation
for Additional Shares of Common Stock deemed to have
been issued pursuant to Subsection 5(d)(iii),
relating to Options and Convertible Securities, shall
be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities, by
(y) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the
Corporation shall issue on more than one date Additional
Shares of Common Stock, and such issuance dates occur within a
period of no more than 30 days, then the Series A Conversion
Price shall each be adjusted only once on account of such
issuances, with such
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<PAGE>
adjustment to occur upon the final such issuance and to give
effect to all such issuances as if they occurred on the date
of the final such issuance.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original
Issue Date effect a subdivision of the outstanding Common Stock, the
Series A Conversion Price then in effect immediately before that
subdivision shall each be proportionately decreased. For example, if
there are two outstanding shares of Common Stock which are subdivided
into a total of four shares of Common Stock and the Series A Conversion
Price in effect immediately prior to such subdivision is $6.00, then
the Series A Conversion Price after giving effect to such subdivision
shall be $3.00. If the Corporation shall at any time or from time to
time after the Original Issue Date effect a subdivision of the Series A
Preferred Stock, the Series A Conversion Price then in effect
immediately before that subdivision shall be proportionately increased.
If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Series A Conversion Price then in effect immediately before the
combination shall each be proportionately increased. For example, if
there are two outstanding shares of Common Stock which are combined
into a total of one share of Common Stock and the Series A Conversion
Price in effect immediately prior to such combination is $6.00, then
the Series A Conversion Price after giving effect to such combination
shall be $12.00. If the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of
Series A Preferred Stock, the Series A Conversion Price then in effect
immediately before the combination shall be proportionately decreased.
Any adjustment under this paragraph shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(f) Adjustment for Certain Dividends and Distributions. In the
event the Corporation at any time, or from time to time after the
Original Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in Additional Shares of Common
Stock, then and in each such event the Series A Conversion Price then
in effect shall each be decreased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close
of business on such record date, by multiplying the Series A Conversion
Price then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on
the date fixed therefor, the Series A
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<PAGE>
Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series A Conversion
Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided
further, however, that no such adjustment shall be made if the holders
of Series A Preferred Stock simultaneously receive a dividend or other
distribution of shares of Common Stock in a number equal to the number
of shares of Common Stock as they would have received if all
outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event.
(g) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Corporation
other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series A Preferred
Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation that they would have received had the
Series A Preferred Stock been converted into Common Stock on the date
of such event and had they thereafter, during the period from the date
of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of the Series A
Preferred Stock; and provided further, however, that no such adjustment
shall be made if the holders of Series A Preferred Stock simultaneously
receive a dividend or other distribution of such securities in an
amount equal to the amount of such securities as they would have
received if all outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event.
(h) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the
Series A Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the holder of each
such share of Series A Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares
of Common Stock into which such shares of Series A Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as
provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of
any consolidation or merger of the Corporation with or into another
corporation or the sale of all or substantially all of the assets of
the Corporation to another corporation (other than a consolidation,
merger or sale which is covered by Subsection 2(b)), each share of
Series A Preferred Stock shall thereafter be convertible (or shall be
converted into a security
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which shall be convertible) into the kind and amount of shares of stock
or other securities or property to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion
of such Series A Preferred Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 5
set forth with respect to the rights and interest thereafter of the
holders of the Series A Preferred Stock to the end that the provisions
set forth in this Section 5 (including provisions with respect to
changes in and other adjustments of the Series A Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good
faith assist in the carrying out of all the provisions of this Section
5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
the Series A Preferred Stock.
(k) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this Section 5, the Corporation at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder
of Series A Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Series A Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of
other property which then would be received upon the conversion of
Series A Preferred Stock.
(l) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or merger
of the Corporation into or with another corporation, or of the
sale of all or substantially all of the assets of the
Corporation; or
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(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or
at the office of the transfer agent of the Series A Preferred Stock and
shall cause to be mailed to the holders of the Series A Preferred Stock
at their last addresses as shown on the records of the Corporation or
such transfer agent, at least ten days prior to the date specified in
(A) below or twenty days before the date specified in (B) below, a
notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be
taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution,
subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or
winding up.
(m) Notwithstanding anything to the contrary, the provisions
of Section 5(d) shall not apply (i) to any share of Series A Preferred
Stock held by a holder other than a 25% Holder or (ii) on or after the
fifth anniversary of the Original Issue Date.
6. Mandatory Conversion.
(a) On the first Business Day following a Mandatory Conversion
Period (the "Mandatory Conversion Date"), all outstanding shares of
Series A Preferred Stock shall automatically be converted into shares
of Common Stock at the then effective conversion rate.
(b) All holders of record of shares of Series A Preferred
Stock will be given written notice of the Mandatory Conversion Date and
the place designated for mandatory conversion of all shares of Series A
Preferred Stock pursuant to this Section 6. Such notice shall be sent
by first class or registered mail, postage prepaid, to each record
holder of Series A Preferred Stock at such holder's address last shown
on the records of the transfer agent for the Series A Preferred Stock,
as the case may be (or the records of the Corporation, if it serves as
its own transfer agent). Upon receipt of such notice, each holder of
shares of Series A Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at
the place designated in such notice, and shall thereafter receive
certificates for the number of shares of Common Stock to which such
holder is entitled pursuant to this Section 6. On the Mandatory
Conversion Date, all rights with respect to the Series A Preferred
Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders
thereof, upon surrender of their certificate or certificates therefor,
to receive
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<PAGE>
certificates for the number of shares of Common Stock into
which such Series A Preferred Stock has been converted, and payment of
any declared but unpaid dividends thereon. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed
or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered
holder or by his or its attorney duly authorized in writing. As soon as
practicable after the Mandatory Conversion Date and the surrender of
the certificate or certificates for Series A Preferred Stock, the
Corporation shall cause to be issued and delivered to such holder, or
on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in
Subsection 5(b) in respect of any fraction of a share of Common Stock
otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance
with the provisions hereof shall, from and after the Mandatory
Conversion Date, be deemed to have been retired and canceled and the
shares of Series A Preferred Stock represented thereby converted into
Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to
such date. The Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce
the authorized Series A Preferred Stock accordingly.
(d) Any Series A Preferred Stock converted pursuant to this
Section 6 will be cancelled and will not under any circumstances be
reissued, sold or transferred and the Corporation may from time to time
take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
7. Redemption at Corporation's Option.
(a) The Corporation shall have the right (the "Redemption
Right"), in its sole discretion, to redeem all but not less than all of the
outstanding shares of Series A Preferred Stock in accordance with the further
provisions of this Section 7. The Redemption Right shall be exercisable (i) at
any time after the third anniversary of the Original Issue Date or (ii) at any
time not less than ninety (90) and not more than one hundred and eighty (180)
days after the closing of a Strategic Investment provided that the closing of
such Strategic Investment occurs within nine (9) months after the Original Issue
Date. The redemption price (the "Corporation Redemption Price") of each share of
Series A Preferred Stock redeemed pursuant to the Redemption Right shall be
equal to the Anniversary Redemption Price as of the Corporation Redemption Date,
in the case of clause (i) in the immediately preceding sentence, or the
Strategic Redemption Price in the case of clause (ii) in the immediately
preceding sentence.
(b) The Corporation may elect to exercise its Redemption Right
pursuant to Section 7(a) by mailing written notice (a "Corporation Notice of
Redemption") to each registered holder specifying the time and place of such
redemption and the number of shares of Series A Preferred Stock held by such
holder to be redeemed. Such Corporation Notice of Redemption shall be mailed by
certified mail, return receipt requested, at least 30, and not more than 60 days
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<PAGE>
prior to the date specified for redemption (the "Corporation Redemption Date"),
to each registered holder of the shares of Series A Preferred Stock at such
holder's last address as it appears on the Corporation's books. At the closing,
the Corporation shall pay to each of the holders of the Series A Preferred Stock
called for redemption, against the Corporation's receipt from such holder of the
certificate or certificates representing the shares of such Series A Preferred
Stock then held by such holder, an amount equal to the aggregate payment due
pursuant to this Section 7 for all such shares, by wire transfer of immediately
available funds, or if such holder shall not have specified wire transfer
instructions to the Corporation prior to the closing, by certified or official
bank check made payable to the order of such holder.
(c) Notwithstanding anything to the contrary contained in this
Section 7, the outstanding shares of Series A Preferred Stock shall remain
subject to (i) conversion pursuant to Section 5 and Section 6 and (ii)
redemption pursuant to Section 8, in each case, at all times on or prior to the
Corporation Redemption Date.
(d) In the case of any redemption pursuant to this Section 7,
unless the Corporation defaults in the payment in full of the Corporation
Redemption Price, dividends on the shares called for redemption shall cease to
accumulate on the applicable Corporation Redemption Date, and all rights of the
holders of the shares of Series A Preferred Stock subject to such redemption by
reason of their ownership of such shares shall cease on such Corporation
Redemption Date, except the right to receive the Corporation Redemption Price on
surrender to the Corporation of the certificates representing such shares. After
the applicable Corporation Redemption Date, the shares shall not be deemed to be
outstanding and shall not be transferable on the books of the Corporation,
except to the Corporation.
(e) Any shares of Series A Preferred Stock redeemed by the
Corporation pursuant to this Section 7 shall be canceled and shall have the
status of authorized and unissued preferred stock, without designation as to
series.
8. Redemption at Holder's Option.
(a) Each holder of Series A Preferred Stock shall have the
right (the "Put Right"), in its sole discretion, to require the Corporation to
redeem all or any portion of its outstanding shares of Series A Preferred Stock
at a redemption price (the "Holder Redemption Price") equal to the Series A
Preference Amount as of the Holder Redemption Date in accordance with the
further provisions of this Section 8. The Put Right shall be exercisable for a
period of 70 days after (i) the ninety-first day after the Senior Note Maturity
Date, (ii) any Major Liquidity Event or (iii) a Change of Control.
(b) A holder of Series A Preferred Stock may elect to exercise
its Put Right pursuant to Section 8(a) by mailing written notice (a "Holder
Redemption Notice") to the Corporation by certified mail, return receipt
requested. The Holder Redemption Notice shall specify:
(i) the name of the holder of shares of Series A Preferred
Stock delivering such Holder Redemption Notice;
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<PAGE>
(ii) that such holder is exercising its option, pursuant to
Section 8, to require the Corporation to redeem shares of Series A
Preferred Stock held by such holder; and
(iii) the number of, and a description of, the shares of
Series A Preferred Stock to be subject to such redemption.
(c) The Corporation shall, within thirty (30) days of receipt
of such Holder Redemption Notice, deliver to the holder exercising its rights to
require redemption of shares pursuant to Section 8(b), a notice (the
"Corporation Notice") specifying the date set for such redemption, which date
shall be no more than thirty (30) days after the Corporation Notice (the "Holder
Redemption Date").
(d) Notwithstanding anything contained in this Section 8 to
the contrary, the Corporation shall not be obligated to redeem shares of Series
A Preferred Stock which are the subject of a Holder Redemption Notice if such
redemption would result in a breach of, or would cause a default or event of
default under, the Notes Indenture.
PROVIDED, HOWEVER, if such breach, event of default or default would not result
from the purchase of any number of shares of Series A Preferred Stock which is
less than the total number of shares the Corporation is obligated to redeem on
the Holder Redemption Date, the Corporation shall purchase on the Holder
Redemption Date the maximum number of shares of Series A Preferred Stock it may
so purchase, allocated among the holders which have elected to have their shares
so repurchased ratably according to the number of shares so tendered; PROVIDED,
FURTHER, however, the Corporation shall use its reasonable best efforts to cure
such default or violation in a timely manner and remove any associated
restrictions or limitations which are applicable to the rights of the holders of
Series A Preferred Stock contained in this Section 8.
(e) In the case of any redemption pursuant to this Section 8,
unless the Corporation defaults in the payment in full of the Holder Redemption
Price, dividends on the shares called for redemption shall cease to accumulate
on the applicable Holder Redemption Date, and all rights of the holders of the
shares of Series A Preferred Stock subject to such redemption by reason of their
ownership of such shares shall cease on such redemption date, except the right
to receive the Holder Redemption Price on surrender to the Corporation of the
certificates representing such shares. After the applicable Holder Redemption
Date, the shares shall not be deemed to be outstanding and shall not be
transferable on the books of the Corporation, except to the Corporation.
(f) Any shares of Series A Preferred Stock redeemed by the
Corporation pursuant to this Section 8 shall be canceled and shall have the
status of authorized and unissued preferred stock, without designation as to
series.
9. Definitions.
As used in this Certificate of Designation, and unless the context
requires a different meaning, the following terms have the meanings indicated:
(i) "Anniversary Redemption Price" shall mean an amount per
share equal to
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(a) the Series A Purchase Price PLUS (b) an amount then necessary to provide a
holder of Series A Preferred Stock with a 25.0% internal rate of return on such
holder's investment in a share of Series A Preferred Stock as if such holder
held such share of Series A Preferred Stock from the Original Issue Date. Such
internal rate of return shall be determined in accordance with the following
formula:
IRR = (P/I) 1/N - 1
where:
IRR = Internal Rate of Return.
P = Anniversary Redemption Price.
I = Series A Purchase Price.
N = Number of years from the Original Issue Date
to the Corporation Redemption Date, calculated
on the basis of a 365-day year.
(ii) "Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in the City of New York are authorized or obligated by law
or executive order to close.
(iii) "Change of Control" shall mean a Change of Control as
defined in the Notes Indenture.
(iv) "Common Stock" shall mean the Common Stock of the
Corporation, par value $.001 per share.
(v) "Junior Stock" shall mean any of the Corporation's Common
Stock, and all other equity securities of the Corporation other than
the Series A Preferred Stock.
(vi) "Major Liquidity Event" shall mean (a) a Public Offering
or (b) a Strategic Investment.
(vii) "Mandatory Conversion Period" shall mean, at any time
after the second anniversary of the Original Issue Date, a period of
thirty (30) consecutive trading days during which the daily closing or
last sale price per share of Common Stock, as reported on a national
securities exchange or NASDAQ, is greater than $15.00 per share.
(viii) "NASDAQ" means the National Association of Securities
Dealers, Inc., Automated Quotation System.
(ix) "Notes Indenture" shall mean that certain Indenture,
dated as of October 27, 1997, between the Corporation and State Street
Bank and Trust Company, N.A., as Trustee), as in effect on June 30,
1999.
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(x) "Original Issue Date" shall mean the date on which a share
of Series A Preferred Stock was first issued.
(xi) "Public Offering" shall mean the closing of an
underwritten public offering of shares of Common Stock pursuant to an
effective registration statement filed with the Securities and Exchange
Commission for a public offering and sale of securities of the
Corporation (other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a similar limited
purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
(xii) "Senior Note Maturity Date" shall mean the date that the
Senior Notes issued pursuant to the Notes Indenture are paid in full.
(xiii) "Strategic Investment" shall mean the purchase by a
Strategic Investor of thirty-five percent (35%) or more (on an as
converted basis) of the capital stock of the Corporation.
(xiv) "Strategic Investor" shall mean (i) a telecommunications
operator with assets in excess of $2 billion or (ii) an entity with
controlling equity investments in excess of $1 billion in companies
operating in the telecommunications industry; provided that such entity
is not a private equity investment firm or other like entity.
(xv) "Strategic Redemption Price" shall mean $9.00.
(xvi) "25% Holder" shall mean SFG-N Inc., the AIG-GE Capital
Latin American Infrastructure Fund L.P. and/or any of its affiliates
and any holder of not less than twenty-five percent (25%) of the shares
of Common Stock issued or issuable upon conversion of the Series A
Preferred Stock.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be affixed hereto and this Certificate of Designation to be signed by
its Chairman and attested by its Secretary this __th day of June, 1999.
FIRSTCOM CORPORATION
By:
------------------------------
Chairman
ATTEST:
- --------------------------------
Secretary
[Corporate Seal]
EXHIBIT 20.1
PRESS RELEASE
FOR IMMEDIATE DISTRIBUTION
GE CAPITAL INVESTS $10 MILLION OF PRIVATE EQUITY
IN FIRSTCOM TO EXPAND INTERNET/DATA SERVICES
o FIRSTCOM CORPORATION ISSUES $10 MILLION OF CONVERTIBLE PREFERRED STOCK
TO GE CAPITAL STRUCTURED FINANCE GROUP AT $8 PER SHARE
CORAL GABLES, FLORIDA, JUNE 30, 1999 - FirstCom Corporation (NASDAQ: FCLX)
("FirstCom") today announced that GE Capital made a $10 million private equity
investment in the form of FirstCom convertible preferred stock. The investment
was made by GE Capital Structured Finance Group (SFG), a wholly owned subsidiary
of GE Capital. It provides for an annual dividend and is convertible into 1.25
million shares of FirstCom common stock as of June 30, 1999.
Commenting on the investment, Patricio E. Northland, Chairman of the
Board, CEO and President of FirstCom said, "We are very pleased that GE Capital
has become the first major private equity investor in FirstCom. The Company's
decision to select GE Capital over competing investors was based on its
excellent reputation in the financial markets, its ability to provide additional
financing in the future, its tremendous network of worldwide relationships, its
focus on e-commerce and the Internet, as well as its belief in the Latin
American region."
Douglas G. Geib II, FirstCom's Chief Financial Officer and Executive
Vice President added the following, "It is our plan to use the proceeds to
accelerate the expansion of Internet/data services in our existing markets of
Colombia, Peru and Chile. This investment is part of an ongoing process to
improve the overall capital structure of the Company and to better position
FirstCom to continue to grow within the region."
Robert L. Lewis, President of SFG, commented, "We are delighted to make
this investment in FirstCom. Its strong senior management team and growth
strategy provides us with an excellent strategic partner within the rapidly
growing telecommunications market in Latin America." Camille Chee-Awai, SFG's
Director for Latin America Telecom, said that, "A key factor in SFG's investment
decision was FirstCom's ability to deliver high speed Internet access and other
broadband services to Latin American business customers through state-of-the-art
fiber optic networks."
FirstCom Corporation is rapidly emerging as a premium provider of
broadband integrated Internet/data, voice and video telecommunication services
to business customers in Peru, Chile and Colombia. FirstCom owns and operates
state-of-the-art fiber-optic networks in each of these countries to provide
high-speed Internet/data connectivity that facilitates the delivery of content
to the business
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Page 2 - FirstCom Investment
community. FirstCom also operates a competitive long-distance carrier in Chile
and intends to begin providing similar services in Peru during the third quarter
of this year.
The Structured Finance Group of GE Capital provides specialized
financial products and services to, and acts as an equity investor with, clients
in the global Communications, Commercial & Industrial, Energy, and
Transportation sectors. GE Capital, with assets of over US$300 billion, is a
global, financial services company with 28 specialized businesses. It is a
wholly owned subsidiary of General Electric Company, a diversified
manufacturing, technology, and services company with operations worldwide.
###
For more information, contact:
Douglas G. Geib II Richard Cooper/Rob Schatz
Chief Financial Officer Investor Relations
FirstCom Corporation FirstCom Corporation
305.448.4422 516.829.7111
Ken Koprowski
GE Capital Structured Finance Group
203.961.5743
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE FOREGOING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES
THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS OR OUTCOMES TO BE MATERIALLY
DIFFERENT FROM THOSE ANTICIPATED AND DISCUSSED HEREIN. EXCEPT FOR HISTORICAL
INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS PRESS RELEASE
CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES,
INCLUDING BUT NOT LIMITED TO ECONOMIC, COMPETITIVE, GOVERNMENTAL AND
TECHNOLOGICAL FACTORS DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION WHICH READERS ARE URGED TO READ CAREFULLY IN ASSESSING THE
FORWARD LOOKING STATEMENTS CONTAINED HEREIN.
