<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
USTEL, INC.
- ------------------------------------------------------------------------------
(Name of Issuer)
Common Stock (par value $0.01 per share)
- ------------------------------------------------------------------------------
(Title of Class of Securities)
917325 10 2
- ------------------------------------------------------------------------------
(CUSIP Number)
Barbara Sherman, Esq.
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
(212) 902-1000
- ------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 25, 1998
- ------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule
13d-1(g), check the following box / /.
(Continued on following pages)
(Page 1 of 65 Pages)
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 2 of 65 Pages
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
GOLDMAN, SACHS & CO.
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / / (b) / /
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO [SEE ITEM 3.]
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e): /X/
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES BENEFICIALLY 0
OWNED BY REPORTING
PERSON WITH
---------------------------------------------------
8 SHARED VOTING POWER
9,565,953
---------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
9,565,953
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,565,953
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
/ /
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
45.3%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
BD - PN - IA
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 3 of 65 Pages
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
THE GOLDMAN SACHS GROUP, L.P.
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / / (b) / /
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO [SEE ITEM 3.]
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e): / /
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES BENEFICIALLY 0
OWNED BY REPORTING
PERSON WITH
---------------------------------------------------
8 SHARED VOTING POWER
9,565,953
---------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
9,565,953
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,565,953
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
/ /
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
45.3%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
HC - PN
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 4 of 65 Pages
- ------------------------------------------------------------------------------
SCHEDULE 13D
RELATING TO THE COMMON STOCK OF
USTEL, INC.
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D relates to the common stock, par value
$0.01 per share (the "Common Stock"), of UStel, Inc., a Minnesota corporation
(the "Company").
The principal executive offices of the Company are located at 2033
Sixth Avenue, Suite 401, Seattle, Washington 98121-2516.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by Goldman, Sachs & Co. ("GS&Co.") and
The Goldman Sachs Group, L.P. ("GS Group"), together with GS&Co., the "Filing
Persons".(1)
GS&Co., a New York limited partnership, is an investment banking firm
and a member of the New York Stock Exchange, Inc. and other national exchanges.
GS Group, one of the general partners of GS&Co., owns a 99% interest in GS&Co.
GS Group is a Delaware limited partnership and holding partnership that
(directly and indirectly through subsidiaries or affiliated companies or both)
is a leading investment banking organization. The other general partner of
GS&Co. is The Goldman Sachs & Co. L.L.C., a Delaware limited liability company
("GS L.L.C."), which is a wholly-owned subsidiary of GS Group and The Goldman
Sachs Corporation, a Delaware corporation ("GS Corp."). GS Corp. is the sole
general partner of GS Group. The principal business address of each of GS&Co.,
GS Group, GS L.L.C. and GS Corp. is 85 Broad Street, New York, New York 10004.
The name, business address, present principal occupation or employment
and citizenship of each director of GS Corp. and GS L.L.C. and of each member of
the executive committees of GS Corp., GS L.L.C., GS&Co. and GS Group are set
forth in Schedule I hereto and are incorporated herein by reference.
During the last five years, none of the Filing Persons, or, to the
knowledge of each of the Filing Persons, any of the persons listed on Schedule I
hereto, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) except as set forth in Schedule II
to this Schedule 13D, has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject
- -----------------------
(1) Neither the present filing nor anything contained herein shall be
construed as an admission that any Filing Person constitutes a "person" for
any purposes other than Section 13(d) of the Securities Exchange Act of 1934
or that the Filing Persons constitute a "group" for any purpose.
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 5 of 65 Pages
- ------------------------------------------------------------------------------
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Effective November 25, 1998, the Company issued to GS&Co. an Amended
and Restated Warrant (the "Warrant") giving GS&Co. the right to acquire up to
9,565,953 shares (subject to antidilutive and other adjustments) of the Common
Stock of the Company (the "Warrant Shares") at any time on or before November
25, 2003. The Warrant is exercisable for 7,891,106 Warrant Shares at an
exercise price of $0.21 per share and 1,674,847 Warrant Shares at an exercise
price of $0.01 per share (subject in each case to certain antidilutive and other
adjustments). The Warrant amended and restated a warrant (the "Old Warrant")
that the Company issued to GS&Co. as of June 25, 1998 relating to 12,400,309
shares of Common Stock.
The Company issued the Warrant in connection with the execution of
Amendment Number One to Loan and Security Agreement ("Amendment No. 1"),
dated as of November 25, 1998, by and among the Company, its subsidiary
Arcada Communications, Inc. ("Arcada"), Coast Business Credit, a division of
Southern Pacific Bank ("Coast"), and Goldman Sachs Credit Partners, L.P.
("GSCP").(2) Amendment No. 1 amended a Loan and Security Agreement (the "Loan
Agreement"), dated as of June 25, 1998, by and among the Company, Arcada,
Coast and GSCP.
Pursuant to the Loan Agreement, GSCP and Coast (the "Lenders") agreed
to, among other things, lend the Company up to $35,000,000, to be divided among
a $12,500,000 revolving accounts receivable line of credit bearing interest at
prime plus 2%, a $15,000,000 term loan (repayable commencing February 28, 1999)
bearing interest at 12.75% and a $7,500,000 capital expenditure line of credit
bearing interest at 12.75%. The Company's obligations under the Loan Agreement
are secured by substantially all of the Company's assets.
In connection with entering into the Loan Agreement in June 1998, the
Company issued to GS&Co. the Old Warrant as of June 25, 1998, which gave GS&Co.
the right to acquire up to 12,400,309 shares (subject to antidilutive and other
adjustments) of the Common Stock of the Company on the following terms:
(i) 7,891,106 shares at an exercise price of $1.00 per share, (ii) 901,841
shares at an exercise price of $1.50 per share, (iii) 1,803,681 shares at an
exercise price of $3.00 per share, and (iv) and 1,803,681 shares at an exercise
price of $5.00 per share (such exercise prices in each case subject to certain
antidilutive and other adjustments). The Old
- ----------------------------
(2) GSCP, a Bermuda limited partnership, was formed for the purpose of
providing bank debt financing and trading and investing in bank loans, trade
claims and other loans and loan instruments. Goldman Sachs Global Holdings
L.L.C. ("GSGH"), a Delaware limited liability company, is the sole general
partner of GSCP. The managing member of GSGH is GS Group.
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 6 of 65 Pages
- ------------------------------------------------------------------------------
Warrant was exercisable beginning on the earliest to occur of (a) March 25,
1999, (b) the date upon which an Event of Default under the Loan Agreement
(as defined in Article 8 of the Loan Agreement) occurred and (c) thirty days
prior to the consummation of a merger, sale or similar transaction involving
the Company. The Old Warrant provided for an original term of five years,
terminating on June 25, 2003.
As a result of adverse changes in the Company's financial condition
and various other factors, certain Events of Default occurred under the Loan
Agreement. In response to these events, in November 1998 the Lenders and the
Company agreed to a restructuring of their obligations and relationship under
the Loan Agreement, whereby the Company and the Lenders would enter into
Amendment No. 1 and revise the terms of the Old Warrant. In addition, the
Lenders agreed to waive the Company's Events of Default under the Loan Agreement
as to which the Lenders had actual knowledge as of the date of Amendment No. 1.
In connection with the restructuring, effective November 25, 1998 the Company
issued the Warrant to GS&Co., which amended and restated the Old Warrant.
Amendment No. 1 also provided for, among other things, the following:
(a) revised interest rate of prime plus 4% on the revolving line of credit and
14.75% on each of the term loan and capital expenditure line of credit; (b)
institution of a cap on the maximum indebtedness under the revolving line of
credit of $5.6 million and a cap on the maximum aggregate indebtedness under the
Loan Agreement (including guarantees by the Lenders) of $22.3 million; (c)
issuance of guarantees by the Lenders of up to $4.0 million in favor of the
Company's principal vendor; (d) payment by the Company of a guarantee fee of
$150,000 and an amendment fee of $200,000 to the Lenders; and (e) the budgeting
of all future advances by the Lenders to the Company and the revision of
financial covenants under the Loan Agreement.
None of the persons listed on Schedule I hereto has contributed any
funds or other consideration towards the purchase of the securities of the
Company, except insofar as they may be general or limited partners of the
limited partnerships of GS&Co., GS Group or GSCP and have made capital
contributions to such limited partnerships, as the case may be.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Warrant was issued to GS&Co. in exchange for the Old Warrant, in
connection with the execution of Amendment No. 1 by the Company and the
restructuring of the Lenders' relationship with the Company, all as described
above in Item 3.
Each Filing Person expects to evaluate on an ongoing basis the
Company's financial condition, business operations and prospects, the market
price of the Common Stock, conditions in the securities markets generally,
general economic and industry conditions and other factors. Accordingly, each
Filing Person reserves the right to change its plans and intentions at any time,
as it deems appropriate. In particular, each Filing Person may, subject to any
restrictions discussed in Item 6 below and the restrictions contained in the
Securities Act of 1933 (the "Securities Act"), at any time and from time to time
acquire additional shares of
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 7 of 65 Pages
- ------------------------------------------------------------------------------
Common Stock or securities convertible, exchangeable or exercisable for
Common Stock in public or private transactions; dispose of shares of Common
Stock or other securities in public or private transactions; and/or enter
into privately negotiated derivative transactions with institutional
counterparties to hedge the market risk of some or all of its positions in
the Common Stock or other securities. Any such transactions may be effected
at any time and from time to time. To the knowledge of each Filing Person,
each of the persons listed on Schedule I hereto may make the same evaluation
and may reserve the same rights.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of November 25, 1998, the aggregate number of shares
beneficially owned and shares for which there is a right to acquire by GS&Co.
and GS Group is 9,565,953 shares of Common Stock, representing approximately
45.3% of the shares of Common Stock reported to be outstanding as of November
12, 1998 in the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
None of the Filing Persons beneficially own any shares of Common Stock
other than as set forth herein.
(b) Each Filing Person shares with the other Filing Persons the power
to vote or direct the vote and to dispose or direct the disposition of shares of
Common Stock beneficially owned by such Filing Person as indicated in paragraph
(a) above.
(c) Except as set forth in Item 3, no transactions in the Common Stock
were effected by any of the Filing Persons or, to their knowledge, any of the
persons listed on Schedule I hereto, during the past 60 days.
(d) No other person is known by any Filing Person to have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any shares of Common Stock beneficially owned by any Filing
Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described in this Schedule 13D, none of the Filing Persons
or, to the knowledge of the Filing Persons, any of the persons listed on
Schedule I hereto is a party to any contract, arrangement, understanding or
relationship with respect to any securities of the Company.
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 8 of 65 Pages
- ------------------------------------------------------------------------------
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Amended and Restated Warrant, dated as of November 25, 1998, to
purchase 9,565,953 shares of the Company's Common Stock in favor of
GS&Co, filed herewith as Exhibit 99A.
B. Warrant, dated as of June 25, 1998, to purchase 12,400,309 shares of
the Company's Common Stock in favor of Goldman Sachs & Co.,
incorporated herein by reference from Exhibit 10.70 to the Current
Report on Form 8-K of the Company dated June 25, 1998.
C. Amendment No. 1 to Loan and Security Agreement, dated as of November
25, 1998, by and among the Company, Arcada, Coast and GSCP, filed
herewith as Exhibit 99C.
D. Loan and Security Agreement, dated as of June 25, 1998, by and among
the Company, Arcada, Coast and GSCP, incorporated herein by reference
from Exhibit 10.69 to the Current Report on Form 8-K of the Company
dated June 25, 1998.
E. Powers of Attorney, filed herewith as Exhibit 99E.
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 9 of 65 Pages
- ------------------------------------------------------------------------------
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
DATED: December 4, 1998
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Hans-Linhard Reich
--------------------------------------
Name: Hans-Linhard Reich
Title: Attorney-in-fact*
GOLDMAN, SACHS & CO.
By: /s/ Hans-Linhard Reich
---------------------------------------
Name: Hans-Linhard Reich
Title: Attorney-in-fact*
* Powers of attorney are filed as Exhibit 99E herewith.
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 10 of 65 Pages
- ------------------------------------------------------------------------------
SCHEDULE I
The name of each director and of each member of the executive committee of
The Goldman Sachs Corporation and The Goldman, Sachs & Co. L.L.C. and of each
member of the executive committee of The Goldman Sachs Group, L.P. and Goldman,
Sachs & Co. is set forth below.
The business address of each person listed below except John L. Thornton is
85 Broad Street, New York, NY 10004. The business address of John L. Thornton
is 133 Fleet Street, London EC4A 2BB, England. Each person is a citizen of the
United States of America. The present principal occupation or employment of
each of the listed persons is as a managing director of Goldman, Sachs & Co. or
another Goldman Sachs operating entity and as a member of the executive
committee.
Jon Z. Corzine
Henry M. Paulson, Jr.
Robert J. Hurst
John A. Thain
John L. Thornton
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 917325 10 2 Page 11 of 65 Pages
- ------------------------------------------------------------------------------
SCHEDULE II
In Securities and Exchange Commission Administrative Proceeding File No.
3-8282 In the Matter of Goldman, Sachs & Co., Goldman, Sachs & Co. (the
"Firm"), without admitting or denying any of the SEC's allegations, settled
administrative proceedings involving alleged books and records and
supervisory violations relating to eleven trades of U.S. Treasury securities
in the secondary markets in 1985 and 1986. The SEC alleged that the Firm had
failed to maintain certain records required pursuant to Section 17(a) of the
Exchange Act and had also failed to supervise activities relating to the
aforementioned trades in violation of Section 15(b)(4)(E) of the Exchange Act.
The Firm was ordered to cease and desist from committing or causing any
violation of the aforementioned sections of the Exchange Act, pay a civil money
penalty to the SEC in the amount of $250,000 and establish policies and
procedures reasonably designed to assure compliance with Section 17(a) of the
Exchange Act and Rules 17a-3 and 17a-4 thereunder.
<PAGE>
AMENDED AND RESTATED WARRANT
(Goldman Sachs)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
THERE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS THERE IS (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED,
(iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES
WERE ISSUED DIRECTLY OR INDIRECTLY.
USTEL, INC.
WARRANT TO PURCHASE 9,565,953 SHARES
OF COMMON STOCK (this "WARRANT")
UStel, Inc., a Minnesota corporation (the "COMPANY"), hereby certifies
that, for value received, Goldman, Sachs & Co., a New York limited partnership
("HOLDER"), or its registered assigns, is the registered holder of warrants (the
"WARRANTS") to subscribe for and purchase an aggregate of Nine Million Five
Hundred Sixty-Five Thousand Nine Hundred Fifty-Three (9,565,953) shares of the
fully paid and nonassessable Common Stock (as adjusted pursuant to SECTION 4
hereof, the "WARRANT SHARES") of the Company, at a purchase price per share as
follows: (a) Seven Million Eight Hundred Ninety-One Thousand One Hundred Six
(7,891,106) shares at a per share purchase price equal to Twenty-One Cents
($.21) and (b) One Million Six Hundred Seventy-Four Thousand Eight Hundred
Forty-Seven (1,674,847) shares at a per share purchase price equal to One Cent
($.01) (both of such prices, as adjusted pursuant to SECTION 4 hereof, the
"WARRANT PRICE"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "COMMON STOCK" shall mean
the Company's presently authorized Common Stock, par value $.001 per share, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, (b) the term "DATE OF GRANT" shall mean November 25, 1998, and
(c) the term "OTHER WARRANTS" shall mean any warrant issued upon transfer or
partial exercise of this Warrant. The term "WARRANT" as used herein shall be
deemed to include Other Warrants unless the context hereof or thereof clearly
requires otherwise.
These Warrants are amended and restated from, and are being issued in
exchange for, those certain Warrants of the Company originally issued to Holder
on June 25, 1998 (the "OLD WARRANTS"). The Old Warrants were originally issued
pursuant to that certain Loan and Security Agreement dated as of June 25, 1998
(the "LOAN AGREEMENT"), by and among the Company,
<PAGE>
Arcada Communications, Inc., a Washington corporation ("ARCADA"), Coast Business
Credit, a Division of Southern Pacific Bank and Goldman Sachs Credit Partners,
L.P., a Bermuda limited partnership.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through and including the close of business (i.e., 5:00 p.m. New
York time) on November 25, 2003 (the "EXPIRATION DATE"); PROVIDED, HOWEVER, that
in the event that any portion of this Warrant is unexercised as of the
Expiration Date, the terms of SECTION 2(b), below, shall apply.
2. EXERCISE.
a. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to SECTION 1 hereof, the purchase right represented by this Warrant may
be exercised by the holder hereof, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as EXHIBIT A duly executed) at the principal office of the Company and by the
payment to the Company of an amount equal to the lowest then applicable Warrant
Prices multiplied by the number of Warrant Shares then being purchased. The
person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to 5:00 p.m. (New York time) on
the date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the shares
of Common Stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised (including without limitation,
exercise pursuant to SECTION 2(b) below), a new Warrant representing the portion
of the Warrant Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such thirty (30)-day period.
b. AUTOMATIC EXERCISE. In the event that any portion of this
Warrant is unexercised as of the Expiration Date, such portion of this Warrant
shall be deemed to have been exercised automatically immediately prior to 5:00
p.m. (New York time) on the Expiration Date (or, in the event that the
Expiration Date is not a business day, the immediately preceding business day),
or, if the Expiration Date is due to a Sale, immediately prior to the
consummation of such Sale (the "AUTOMATIC EXERCISE DATE") and the person
entitled to receive the shares of Common Stock issuable upon such exercise shall
be treated for all purposes as the holder of record of such Warrant Shares as of
5:00 p.m. (New York time), or, in the event of a Sale, as of immediately prior
to the consummation of the Sale, on such Automatic Exercise Date. This Warrant
shall be deemed to be surrendered to the Company on the Automatic Exercise Date,
by virtue of this SECTION 2(b) and without any action by the holder of this
Warrant or any other person, and payment to the Company of the then applicable
Warrant Prices multiplied by the number of Warrant Shares then being purchased
shall be deemed to be made pursuant to the terms of SECTION 10.2 below (without
payment by the holder of any exercise price or any cash or other consideration).
As promptly as practicable on or after the Automatic Exercise Date and in any
event within thirty (30) days thereafter, the Company at its expense shall issue
and deliver to the person or persons entitled to
2.
<PAGE>
receive the same a certificate or certificates for the number of Warrant Shares
issuable upon such exercise.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Warrant Shares that
may be issued upon the exercise of the rights represented by this Warrant will,
upon issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges, and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price(s) shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
a. ADJUSTMENT FOR INITIAL ERRORS. The Company hereby
acknowledges that the Nine Million Five Hundred Sixty-Five Thousand Nine Hundred
Fifty-Three (9,565,953) Warrant Shares constituting the initial number of
securities purchasable upon the exercise of the Warrants was based upon the
Company's representations as to the amount of outstanding Common Stock (on a
fully diluted basis) on the Date of Grant, as set forth on Schedule 5.8 to the
Loan Agreement ("SCHEDULE 5.8"). If for any reason it shall hereafter be
determined by the holder of any outstanding Warrant that the actual amount of
Common Stock outstanding as of the Date of Grant (on a fully diluted basis)
differs from that set forth on Schedule 5.8, then the holder may notify the
Company of such determination and the Company shall forthwith reissue all of the
Warrants with an appropriate proportional adjustment in said number to be
effective from the Date of Grant, PROVIDED that such adjustment shall be made
only if it results in an increase to the number of Warrant Shares hereunder.
b. RECLASSIFICATION. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), the
Company shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), so
that the holder of this Warrant shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or conversion by a holder of the number of shares of Common Stock then
purchasable under this Warrant. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this SECTION 4. The provisions of this SECTION 4(b) shall
similarly apply to successive reclassification, changes and conversions.
c. SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a
3.
<PAGE>
subdivision or increased in the case of a combination, effective as of 5:00 p.m.
(New York time) on the date the subdivision or combination becomes effective.
d. STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Common Stock payable in Common Stock, or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in the foregoing SECTION 4(b) and SECTION 4(c)) of
Common Stock, then the Warrant Price(s) shall be adjusted, from and after the
date of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the then applicable
Warrant Price(s) in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
e. RIGHTS OFFERINGS. In case the Company shall, at any time
after the Date of Grant, issue rights, options or warrants to any person or
persons who are at the time of such issuance the holders of equity securities of
the Company, entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible or exchangeable into Common Stock) at a price per
share of Common Stock as determined in accordance with SECTION 4(i) below (or
having a conversion or exchange price per share of Common Stock if a security
convertible or exchangeable into Common Stock) less than the fair market value
per share of Common Stock on the record date for such issuance (or the date of
issuance, if there is no record date), the Warrant Price(s) to be in effect on
and after such record date (or issuance date, as the case may be) shall be
determined by multiplying the then applicable Warrant Price(s) in effect
immediately prior to such record date (or issuance date, as the case may be) by
a fraction (i) the numerator of which shall be the number of shares of Common
Stock outstanding on such record date (or issuance date, as the case may be)
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of such Common Stock so to be offered (or the
aggregate initial exchange or conversion price of the exchangeable or
convertible securities so to be offered) would purchase at such fair market
value on such record date (or issuance date, as the case may be) and (ii) the
denominator of which shall be the number of shares of Common Stock outstanding
on such record date (or issuance date, as the case may be) plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible securities to be offered are initially exchangeable
or convertible). In case such subscription price may be paid in part or in
whole in a form other than cash, the fair market value of such consideration
shall be determined by the Board of Directors of the Company in good faith as
set forth in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, PROVIDED, that in the event the Board of
Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under this Warrant
disagree in writing with such determination, then the fair market value of such
consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below. Such adjustment shall be made successively whenever such an
issuance occurs; and in the event that such rights, options, warrants, or
convertible or exchangeable securities are not so issued or expire or cease to
be convertible or exchangeable before they are exercised, converted, or
exchanged (as the case may be), then the Warrant Price(s) shall again be
adjusted to be the Warrant Price(s) that would then be in effect if such
issuance had not occurred, but such
4.
<PAGE>
subsequent adjustment shall not affect the number of Warrant Shares issued upon
any exercise of this Warrant prior to the date such subsequent adjustment is
made.
f. SPECIAL DISTRIBUTIONS. In case the Company shall fix a
record date for the making of a distribution to all holders of shares of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the surviving corporation) or evidences of
indebtedness or assets (other than dividends and distributions referred to in
SECTION 4(c) and SECTION 4(d) above and other than cash dividends) or of
subscription rights, options, warrants, or exchangeable or convertible
securities containing the right to subscribe for or purchase shares of any class
of equity securities of the Company (excluding those referred to in SECTION 4(e)
above), the Warrant Price(s) to be in effect on and after such record date shall
be adjusted by multiplying the then applicable Warrant Price(s) in effect
immediately prior to such record date by a fraction (i) the numerator of which
shall be the fair market value per share of Common Stock on such record date,
less the fair value (as determined by the Board of Directors of the Company in
good faith as set forth in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights,
options, warrants, or exchangeable or convertible securities applicable to one
(1) share of the Common Stock outstanding as of such record date, PROVIDED, that
in the event the Board of Directors is unable to make such a determination or
holders of at least fifty-one percent (51%) of the Warrant Shares issuable under
this Warrant disagree in writing with such determination, then the fair value of
such consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below, and (ii) the denominator of which shall be such fair market
value per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Warrant Price(s) shall again be adjusted to be the Warrant
Price(s) which would then be in effect if such record date had not been fixed,
but such subsequent adjustment shall not affect the number of Warrant Shares
issued upon any exercise of this Warrant prior to the date such subsequent
adjustment was made.
g. OTHER ISSUANCES OF SECURITIES. In case the Company or any
subsidiary shall, at any time after the Date of Grant, issue shares of Common
Stock, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding (i) shares, rights, options, warrants, or convertible or exchangeable
securities described in SECTION 11(f) or SECTION 11(g) hereof outstanding on the
Date of Grant, or issued in any of the transactions described in SECTION 4(c),
4(d), 4(e) or 4(f) above, (ii) shares issued upon the exercise of such rights,
options or warrants or upon conversion or exchange of such convertible or
exchangeable securities, (iii) the Warrants and any shares issued upon exercise
thereof, (iv) up to Eight Hundred Fifty Thousand (850,000) shares of Common
Stock issued or issuable to directors, officers, employees or consultants of the
Company or any subsidiary in connection with their service as directors,
officers, employees or consultants pursuant to any stock grant, stock option,
warrant or other right (the "EMPLOYEE SHARES")), at a price per share of Common
Stock (determined in the case of such rights, options, warrants, or convertible
or exchangeable securities by dividing (x) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities) lower
5.
<PAGE>
than the fair market value per share of Common Stock (determined in accordance
with SECTION 4(i) below) on the date the Company fixes the offering price of
such shares, rights, options, warrants, or convertible or exchangeable
securities, then the then applicable Warrant Price(s) shall be adjusted so as to
equal the price(s) determined by multiplying the Warrant Price(s) in effect
immediately prior thereto by a fraction (i) the numerator of which shall be the
sum of (A) the number of shares of Common Stock outstanding immediately prior to
such sale and issuance plus (B) the number of shares of Common Stock which the
aggregate consideration received (determined as provided below) for such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such sale and issuance. Such adjustment shall be
made successively whenever such an issuance is made. For the purposes of such
adjustment, the maximum number of shares of Common Stock which the holder of any
such rights, options, warrants or convertible or exchangeable securities shall
be entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum consideration or premium stated in
such rights, options, warrants, or convertible or exchangeable securities to be
paid for the shares of Common Stock covered thereby. In case the Company shall
sell and issue shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in determining the
price per share of Common Stock and the consideration received by the Company
for purposes of the first sentence of this SECTION 4(g), the Board of Directors
of the Company shall determine, in good faith, the fair value of said property,
and such determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, PROVIDED, that in
the event the Board of Directors is unable to make such a determination or
holders of at least fifty-one percent (51%) of the Warrant Shares issuable under
this Warrant disagree in writing with such determination, then the fair value of
such consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below. In case the Company shall sell and issue rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock together with one (1) or more
other securities as a part of a unit at a price per unit, then in determining
the price per share of Common Stock and the consideration received by the
Company for purposes of the first sentence of this SECTION 4(g), the Board of
Directors of the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, the fair value of the rights, options,
warrants, or convertible or exchangeable securities then being sold as part of
such unit, PROVIDED, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under this Warrant disagree in writing with such
determination, then the fair value of such consideration shall be determined in
the same manner as a Valuation under SECTION 4(i) below. Such adjustment shall
be made successively whenever such an issuance occurs, and in the event that
such rights, options, warrants, or convertible or exchangeable securities expire
or cease to be convertible or exchangeable before they are exercised, converted,
or exchanged (as the case may be), then the Warrant Price(s) shall again be
adjusted to the Warrant Price(s) that would then be in effect if such sale and
issuance had not occurred, but such subsequent adjustment shall not affect the
number of
6.
<PAGE>
Warrant Shares issued upon any exercise of the Warrant prior to the date such
subsequent adjustment is made.
h. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price(s), the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment in the
Warrant Price(s) by a fraction, the numerator of which shall be the then
applicable Warrant Price(s) in effect immediately prior to such adjustment and
the denominator of which shall be the Warrant Price(s) in effect immediately
thereafter.
i. DETERMINATION OF FAIR MARKET VALUE. For purposes of those
provisions of this Warrant requiring a determination in accordance with this
SECTION 4(i), "FAIR MARKET VALUE" of a share of Common Stock as of a particular
date (the "DETERMINATION DATE") shall mean (i) if shares of Common Stock are
traded on a national securities exchange (an "EXCHANGE"), the weighted average
of the closing prices of a share of the Common Stock of the Company on the last
five (5) trading days prior to the Determination Date reported on such Exchange
as reported in THE WALL STREET JOURNAL, (ii) if shares of Common Stock are not
traded on an Exchange but trade in the over-the-counter market and such shares
are quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), (A) the average of the last sale prices reported
on NASDAQ or (B) if such shares are an issue for which last sale prices are not
reported on NASDAQ, the average of the closing bid and ask prices, in each case
on the last five (5) trading days (or if the relevant price or quotation did not
exist on any of such days, the relevant price or quotation on the next preceding
business day on which there was such a price or quotation) prior to the
Determination Date as reported in THE WALL STREET JOURNAL, or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary. If the Board of Directors of the Company is unable to determine any
Valuation (as defined below), or if the holders of at least fifty-one percent
(51%) of the Warrant Shares issuable under this Warrant (the "REQUESTING
HOLDERS") disagree with the Board's determination of any Valuation by written
notice delivered to the Company within five (5) business days after the
determination thereof by the Board of Directors of the Company is communicated
to holders of the Warrants affected thereby, which notice specifies a
majority-in-interest of the Requesting Holders' determination of such Valuation,
then the Company and a majority-in-interest of the Requesting Holders shall
select a mutually acceptable investment banking firm of national reputation
which has not had a material relationship with the Company or any officer of the
Company within the preceding two (2) years, which shall determine such
Valuation. Such investment banking firm's determination of such Valuation shall
be final, binding and conclusive on the Company and the holders of all of the
Warrants issued hereunder and then outstanding. If the Board of Directors of
the Company was unable to determine such Valuation, all costs and fees of such
investment banking firm shall be borne by the Company. If the Requesting
Holders disagreed with the Board's determination of such Valuation, the party
whose determination of such Valuation differed from the Valuation determined by
such investment banking firm by the greatest amount shall bear all costs and
fees of such investment banking firm. For purposes of this SECTION 4(i), the
term "VALUATION" shall mean the determination, to be made initially by the Board
of Directors of the Company, of the fair market value per share of Common Stock
pursuant to clause (iii) above.
7.
<PAGE>
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price(s) or the
number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
SECTION 4 hereof, the Company shall make a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price(s) and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to SECTION 14 hereof, by first class mail, postage
prepaid) to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value (as determined in accordance with SECTION 4(i) above) of a share of Common
Stock on the date of exercise.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR WARRANT
SHARES.
a. COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant and the shares of Common Stock to
be issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, or any shares
of Common Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "ACT"). Upon exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to EXHIBIT A hereto, that
the shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. This Warrant and all shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's business affairs
and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Act.
8.
<PAGE>
(2) The holder understands that this Warrant and the
Warrant Shares have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the holder's investment intent as expressed herein. In
this connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and
the Warrant Shares must be held indefinitely unless subsequently registered
under the Act and any applicable state securities laws, or unless exemptions
from registration are otherwise available.
(4) The holder is aware of the provisions of Rule 144 and
144A, promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public information about the
Company, the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it
wishes to sell this Warrant and the Warrant Shares there may be no public market
upon which to make such a sale, and that, even if such a public market then
exists, the Company may not be satisfying the current public information
requirements of Rule 144 and 144A, and that, in such event, the holder may be
precluded from selling this Warrant and the Warrant Shares under Rule 144 and
144A even if the one (1)-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
b. DISPOSITION OF WARRANT OR WARRANT SHARES. With respect to
any offer, sale or other disposition of this Warrant, or any Warrant Shares
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or Warrant Shares, the holder hereof and each subsequent holder of this
Warrant agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such holder's
counsel, if reasonably requested by the Company, to the effect that such offer,
sale or other disposition may be
9.
<PAGE>
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such Warrant
Shares and indicating whether or not under the Act certificates for this Warrant
or such Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with applicable law. Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this SECTION 7(b) that the opinion of counsel for the holder is
not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made. The foregoing
notwithstanding, this Warrant or such Warrant Shares may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 and 144A have been satisfied. Each
certificate representing this Warrant or the Warrant Shares thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent or, if acting
as its own transfer agent, the Company may stop transfer on its corporate books,
in connection with such restrictions.
8. RIGHTS AS STOCKHOLDERS; INFORMATION. No holder of this Warrant,
as such, shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of the directors or upon any matter submitted to stockholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. The foregoing notwithstanding, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
stockholders.
9. REGISTRATION RIGHTS.
9.1 DEMAND REGISTRATION RIGHTS.
a. SHELF REGISTRATION. The Company covenants and agrees that
at any time after receipt of a written request (a "SHELF REGISTRATION REQUEST")
from the holder(s) of Warrant Shares and/or this Warrant (collectively, the
"SECURITYHOLDERS") constituting at least twenty-five percent (25%) of the
Warrant Shares (determined on an as-exercised basis) to have the Company
register the Warrant Shares for sale on a continuous basis pursuant to Rule 415
under the Act, then the Company shall: (i) promptly deliver written notice (the
"SHELF REGISTRATION NOTICE") to all other Securityholders of the Company's
receipt of the Shelf Registration Request; (ii) file with the SEC a registration
statement on Form S-3 or any successor form or registration to such form, or,
10.
<PAGE>
if the Company is ineligible for Form S-3, Form S-1 or any successor form of
registration to such form, for an offering to be made on a continuous basis
pursuant to Rule 415 (the "SHELF REGISTRATION STATEMENT") covering all of the
outstanding Warrant Shares (determined on an as-exercised basis) (the
"REGISTRABLE SECURITIES"), within forty-five (45) days of delivery of the Shelf
Registration Request, (iii) shall use its best efforts to cause such
registration statement to be declared effective within ninety (90) days of
delivery of the Shelf Registration Notice and (iv) shall use its best efforts,
including but not limited to the filing of any and all supplements and
amendments to the Shelf Registration Statement required under applicable rules,
regulations or instructions or reasonably requested by the holders of a majority
of the shares then registered under the Shelf Registration Statement, to keep
the Shelf Registration Statement effective under the Act until all of the
Warrant Shares so registered have been sold, subject to SECTION 9.3(b) below and
applicable law.
B. OTHER DEMAND REGISTRATIONS. The Company covenants and
agrees that in the event that it fails to file and cause to become effective a
Shelf Registration Statement covering all of the Registrable Securities within
one hundred eighty (180) days after delivery of a Shelf Registration Request, or
if it fails to keep such Shelf Registration Statement continuously effective
until all of the Registrable Securities are sold (subject to SECTION 9.3(b)
hereof), then at any time after receipt of a written request (a "DEMAND
REGISTRATION REQUEST") from Securityholders holding at least twenty-five percent
(25%) of the Registrable Securities stating that such Securityholders desire and
intend to have the Company register all or a portion of the Registrable
Securities held by them on Form S-3, or any successor form of registration to
such form, or, if the Company is ineligible therefore, Form S-1, or any
successor form of registration to such form, the Company shall give notice (the
"REGISTRATION NOTICE") to all of the Securityholders within thirty (30) days of
the Company's receipt of such registration request, the Company shall cause to
be included in such registration all Registrable Securities requested to be
included therein by any such Securityholder within fifteen (15) days after such
Registration Notice is effective (subject to the provisions of the final
sentence of this SECTION 9.1(a)). After such fifteen (15)-day period, the
Company shall file as promptly as practicable a registration statement and use
its reasonable best efforts to cause such registration statement to become
effective under the Act and remain effective for six (6) months or such shorter
period as may be required if all such Registrable Securities covered by such
registration statement are sold prior to the expiration of such six (6)-month
period; PROVIDED, HOWEVER, that the Company shall not be obligated to effect any
such registration pursuant to this SECTION 9.1(b) after the Company has effected
two (2) such registrations pursuant to this SECTION 9.1. For purposes of this
SECTION 9, a registration shall not be deemed to have been effected unless a
registration statement including at least fifty percent (50%) of the Registrable
Shares requested to be included therein has been declared effective and, subject
to SECTION 9.3(b) hereof, remained effective for a period of six (6) months (or
such shorter period as is permitted in the second sentence of this
SECTION 9.1(b)). The foregoing notwithstanding, in the event of an underwritten
offering pursuant to this SECTION 9.1(b), if the managing underwriter of such
offering shall advise the Securityholders in writing that, in its opinion, the
distribution of a specified portion of the securities requested to be included
in the registration would materially adversely affect the distribution of such
securities by increasing the aggregate amount of the offering in excess of the
maximum amount of securities which such managing underwriter believes can
reasonably be sold in the contemplated distribution, then the securities to be
included in the registration shall be included in the following order:
(i) first, pro rata among all of the Registrable Securities requested to be
included therein by the Securityholders according to the number of Registrable
Securities requested
11.
<PAGE>
to be included by each such Securityholder requesting inclusion therein, and
(ii) second, such other securities requested to be included therein by the
Company and the holders of such other securities, pro rata among the Company and
the holders of such other securities according to the number of securities
requested to be included by the Company and each such holder requesting
inclusion therein. For purposes of this SECTION 9.1(b), the Securityholders who
have requested registration of Common Stock to be acquired upon the exercise of
Warrants not theretofore exercised shall furnish the Company with an undertaking
that they or the underwriters or other persons to whom such Warrants will be
transferred have undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Shares received upon exercise of such Warrants in such
registration.
9.2 INCIDENTAL REGISTRATION.
a. The Company covenants and agrees with the Securityholders
that in the event that the Company proposes after the Date of Grant to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms), whether or not for its own account, then
the Company shall give written notice of such proposed filing to all
Securityholders promptly (and in any event at least twenty (20) days before the
anticipated filing date). Such notice shall offer to such Securityholders,
together with others who have similar rights, the opportunity to include in such
registration statement such number of Registrable Securities as they may request
(other than Registrable Securities already registered pursuant to a Shelf
Registration Statement). The Company shall direct and use its reasonable best
efforts to cause the managing underwriter of a proposed underwritten offering
(unless the offering is an underwritten offering of a class of the Company's
equity securities other than Common Stock and the managing underwriter has
advised the Company in writing that, in its opinion, the inclusion in such
offering of Common Stock would materially adversely affect the distribution of
such offering) to permit the holders of Registrable Securities requested to be
included in the registration to include such Registrable Securities in the
proposed offering and the Company shall use its reasonable best efforts to
include such Registrable Securities in such proposed offering on the same terms
and conditions as any similar securities of the Company included therein. If
the offering of which the Company gives notice is a public offering involving an
underwriter, the right of a Securityholder to registration pursuant to this
SECTION 9.2 shall be conditioned upon such Securityholder's participation in
such underwriting and the inclusion of the Registrable Securities to be sold by
such Securityholder in the underwriting. All Securityholders proposing to
distribute Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters. The foregoing notwithstanding, in the case of a
firm commitment offering on underwriting terms appropriate for such a
transaction, other than a registration requested by Securityholders pursuant to
SECTION 9.1, if any such managing underwriter of recognized standing shall
advise the Company and the Securityholders in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be included in the
following order: (i) first, the securities the Company proposes to include
therein, (ii) second, pro rata among all of the Registrable Securities requested
to be included therein by the Securityholders according to the
12.
<PAGE>
number of Registrable Securities requested to be included by each such
Securityholder requesting inclusion therein, and (iii) third, such other
securities requested to be included, pro rata among the holders of such other
securities according to the number of securities requested to be included by
each such holder requesting inclusion therein.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be included in the
following order: (i) first, all of the securities requested to be included
therein by the holder or holders making the initial request for the
registration, (ii) second, all of the Registrable Securities requested to be
included therein by the Securityholders according to the number of Registrable
Securities requested to be included by each such Securityholder requesting
inclusion therein, and (iii) third, such other securities requested to be
included therein by the Company and the holders of such other securities, pro
rata among the Company and the holders of such other securities according to the
number of securities requested to be included by the Company and each such
holder requesting inclusion therein. For purposes of this SECTION 9.2(b), the
Company agrees to request for inclusion in the registration only that number of
securities that the Company intends, in good faith, to sell, if all such
securities so requested by the Company were permitted to be included by the
managing underwriter in such registration and sold pursuant thereto.
9.3 COMPANY'S OBLIGATIONS.
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders being referred
to herein as "SELLERS") in accordance with SECTION 9.1 or SECTION 9.2 above, and
in addition to its other obligations under this SECTION 9, the Company agrees
to:
(i) with respect to any registration pursuant to
SECTION 9.1(a) or 9.1(b), prepare and file with the Commission a registration
statement on the form specified in such section, with respect to the Registrable
Securities to be registered pursuant to such section, and to use its best
efforts to cause such registration statement to become and remain effective as
provided in such section;
(ii) enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any, and each Seller;
(iii) subject to the provisions of SECTION 9.1 and
SECTION 9.2 regarding reductions in Registrable Securities to be included in a
registration, include in the registration statement filed with the SEC, the
Registrable Securities for which requests for
13.
<PAGE>
registration have been made (or, in the case of a registration under
SECTION 9.1(a), all such Registrable Securities); and promptly after filing of
such a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to each Seller copies of all such documents
filed including, if requested, documents incorporated by reference in the
registration statement; and notify each Seller of any stop order issued or
threatened by the SEC and use its best efforts to prevent the entry of such stop
order or to remove it if entered;
(iv) prepare and file with the SEC such amendments of and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
(A) with respect to a registration statement under SECTION 9.1(b) or
SECTION 9.2, for a period of six (6) months or such shorter period as may be
required if all such Registrable Securities covered by such registration
statement are sold prior to the expiration of such period or (B) with respect to
a Shelf Registration Statement, until all the Registrable Securities covered by
such registration statement are sold, and to otherwise comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the Sellers set forth in such registration
statement;
(v) furnish to each Seller and each underwriter, if any,
without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or Blue Sky laws
of such jurisdictions as any Seller or any such underwriter reasonably requests
in writing and keep such registrations or qualifications in effect for so long
as such registration statement remains in effect and do any and all acts and
things which may be reasonably necessary or advisable to enable such Seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller; PROVIDED, HOWEVER, that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this SUBSECTION 9.3(a)(vi), or
(B) consent to general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a prospectus
relating to such Seller's Registrable Securities is required to be delivered
under the Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) cause all such Registrable Securities to be listed
on any Exchange or NASDAQ on which similar securities issued by the Company are
then listed;
14.
<PAGE>
(ix) provide a transfer agent, registrar and CUSIP number
for all such Registrable Securities not later than the effective date of such
registration statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions that
the Sellers or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities;
(xi) make available for inspection by the Sellers and
their counsel, any underwriter participating in any disposition pursuant to such
registration statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Seller, underwriter or counsel in
connection with such registration statement;
(xii) with respect to any underwritten offering, use its
reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Sellers or any
underwriter may reasonably request;
(xiii) with respect to an underwritten offering, obtain an
opinion of counsel to the Company, addressed to the Sellers and any underwriter,
in customary form and including such matters as are customarily covered by such
opinions in underwritten registered offerings of equity securities as the
Sellers or any underwriter may reasonably request, such opinion to be reasonably
satisfactory in form and substance to each Seller; and
(xiv) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this SECTION 9 notwithstanding, upon
receipt by the Securityholders of a written notice signed by the chief executive
officer or chief financial officer of the Company to the effect set forth below,
the Company shall not be obligated during a reasonable period of time (not to
exceed ninety (90) days) thereafter (i) to effect any registrations pursuant to
this SECTION 9 or (ii) with respect to an effective Shelf Registration
Statement, may suspend the effectiveness of such registration statement, at any
time at which, in the Company's reasonable judgment, (i) there is a development
involving the Company or any of its affiliates which is material but which has
not yet been publicly disclosed or (ii) sales pursuant to the registration
statement would materially and adversely affect an underwritten public offering
for the account of the Company or any other material financing project or a
proposed or pending material merger or other material acquisition or material
business combination or material disposition of the Company's assets, to which
the Company or any of its affiliates is, or is expected to be, a party. In the
event a registration is postponed in accordance with this SECTION 9.3(b),
(x) the Company must (unless otherwise instructed by those holders who requested
such registration) file the requested registration within nine (9) months from
the date the Company first received the request of the
15.
<PAGE>
holders, (y) the Company may not defer the filing of a requested registration or
suspend the effectiveness of a Shelf Registration Statement pursuant to this
SECTION 9.3(b) more than once in any eighteen (18)-month period, and (z) there
shall be added to any period during which the Company is obligated to keep a
registration effective the number of days for which the registration was
postponed pursuant to this SECTION 9.3(b).
c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant hereto, furnish the
Company with such information regarding the distribution of the Registrable
Securities proposed to be sold by such Seller as the Company may from time to
time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
SECTION 9.3(a)(vii) above, such Seller shall forthwith discontinue disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Seller's receipt of copies of the supplemented
or amended prospectus contemplated by SECTION 9.3(a)(vii) above and, if so
directed by the Company, such Seller will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies in such Seller's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the period mentioned in SECTION 9.3(a)(iv) above shall be extended
by the number of days during the period from and including the date of giving of
such notice to and including the date when each Seller shall have received the
copies of the supplemented or amended prospectus contemplated by
SECTION 9.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is specifically required by the Act or any similar federal
statute then in force.
9.4 All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all registration and
filing fees, fees and expenses relating to filings with any Exchange, fees and
expenses of compliance with securities or Blue Sky laws in jurisdictions
reasonably requested by any Seller or underwriter pursuant to SECTION 9.3(a)(vi)
(including reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Securities), all word processing,
duplicating and printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and one (1) counsel for the Sellers,
independent public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such performance) and
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
attributable to the securities being registered, which discounts, commissions or
fees with respect to any Seller's respective shares shall be paid by such
Seller, and legal expenses of any person other than the Company and the Sellers,
but including liability insurance if the Company so desires), all the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the expense of any liability insurance (if the Company
determines to obtain such insurance) and the fees and expenses incurred in
connection with the listing of the securities to be registered on any Exchange
and/or NASDAQ on which such
16.
<PAGE>
securities issued by the Company are then listed, the reasonable fees and
expenses of any special experts (including attorneys) retained by the Company
(if it so desires) in connection with such registration and fees and expenses of
other persons retained by the Company (all such expenses being herein called
"REGISTRATION EXPENSES"), shall be borne by the Company.
9.5 In connection with the preparation and filing of each
registration statement under the Act pursuant to this SECTION 9, the Company
shall give the Sellers under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto, and 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 and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such Sellers' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Act.
9.6 INDEMNIFICATION.
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to SECTION 9.1
or SECTION 9.2, the Seller of any Registrable Securities covered by such
registration statement, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls such Seller
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such Seller or any
such director or officer or employee or agent or underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the 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 not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding, whether
commenced or threatened in respect thereof), or expense arises out of or is
based upon 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 Seller for the express purpose of use in the preparation thereof
and, provided, further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof), or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Act to the person asserting an untrue statement or alleged
untrue statement
17.
<PAGE>
or omission or alleged omission if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Seller or any such
director, officer, employee, agent, underwriter or controlling person and shall
survive the transfer of such Registrable Securities by such Seller.
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement filed pursuant
to SECTION 9.3, such prospective Seller shall, and hereby does, indemnify and
hold harmless the Company, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls the Company
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which the Company or any
such director or officer or employee or underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the 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 not misleading, and
such prospective Seller shall reimburse the Company and any such director,
officer, employee, agent, underwriter or controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding if, and only
if, such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment, or
supplement. In no event shall the liability of any Seller hereunder be greater
in amount than the dollar amount of the proceeds received by such Seller upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. 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, employee, agent, underwriter or controlling person and shall survive
the transfer of such Registrable Securities by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration statement.
d. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
this SECTION 9.6, such indemnified party shall, 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 subdivisions of this
SECTION 9.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action
18.
<PAGE>
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 the indemnifying party 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 such 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. If,
in the indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnified party may assume the defense of such claim, jointly with any
other indemnified party that reasonably determines such conflict of interest
to exist, and the indemnifying party shall be liable to such indemnified
parties for the reasonable legal fees and expenses of one counsel for all
such indemnified parties and for other expenses reasonably incurred in
connection with the defense thereof incurred by the indemnified party. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement of any such
action which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to sue, in respect of such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
e. Indemnification and contribution similar to that specified
in this SECTION 9.6 (with appropriate modifications) shall be given by the
Company and each Seller with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
f. The indemnification required by this SECTION 9.6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
g. If the indemnification provided for in this SECTION 9.6 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities, and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. In no event shall the liability of any Seller
19.
<PAGE>
hereunder be greater in amount than the dollar amount of the proceeds received
by such Seller upon the sale of the Registrable Securities giving rise to such
contribution obligation. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this SECTION 9.6(g) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this SECTION 9.6(g). No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
9.7 MARKET STAND-OFF AGREEMENT. If requested by the managing
underwriter of an offering for which securities of such Securityholder have been
registered, a Securityholder shall not sell or otherwise transfer or dispose of
any Registrable Securities held by such Securityholder (other than those
included in the registration) during such period following the effective date of
such registration as is usual and customary at such time in similar public
offerings of similar securities, so long as the officers, directors and all
holders of two percent (2%) or more of the Common Stock of the Company are also
required to so withhold their shares for such period. The obligations described
in this SECTION 9.7 shall not apply to offerings pursuant to a registration
statement on Form S-4 or Form S-8 or any successor or similar form.
9.8 ASSIGNMENT OF RIGHTS; TERMINATION. The rights granted under
this SECTION 9 may be assigned to the transferee of any of the Registrable
Securities and will terminate on the five (5) year anniversary of the Expiration
Date.
10. ADDITIONAL RIGHTS.
10.1 NOTICE OF SALE. In the event that the Company undertakes to
effect a Sale, the Company will use its best efforts to provide to the holder at
least thirty (30) days notice of the terms and conditions of the proposed
transaction. The Company will cooperate with the holder in consummating the
sale of this Warrant in connection with any such transaction.
10.2 RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
a. RIGHT TO CONVERT. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "CONVERSION RIGHT")
into shares of Common Stock as provided in this SECTION 10.2 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to all or a specified portion of shares subject to this
Warrant (the "CONVERTED WARRANT SHARES"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Common
Stock equal to the quotient obtained by dividing (i) the value of this Warrant
(or the specified portion hereof) on the Conversion Date (as defined in
SECTION 10.2(b) hereof), which value shall be equal to (A) the aggregate fair
market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date less (B) the
aggregate of the lowest Warrant Price(s) applicable to the Converted Warrant
Shares immediately prior to the exercise of the Conversion Right by (ii) the
fair market value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as follows:
20.
<PAGE>
X= A - B
-----
Y
Where: X= the number of shares of Common Stock
that may be issued to holder
Y= the fair market value (FMV) of one
(1) share of Common Stock
A= the aggregate FMV (I.E., FMV x
Converted Warrant Shares)
B= the aggregate Warrant Price (I.E.,
Converted Warrant Shares x Warrant
Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of SECTION 9 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
b. METHOD OF EXERCISE. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to this Warrant which are being surrendered (referred to in
SECTION 10.2(a) hereof as the Converted Warrant Shares), and the Warrant
Price(s) applicable thereto, in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "CONVERSION DATE"). Certificates for the shares issuable
upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date.
c. DETERMINATION OF FAIR MARKET VALUE. For purposes of this
SECTION 10.2, "fair market value" of a share of Common Stock shall have the
meaning set forth in SECTION 4(i) above.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
21.
<PAGE>
b. The Warrant Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and restrictions granted
to or imposed upon the Common Stock and Preferred Stock of the Company and the
holders thereof are as set forth in the certificate of incorporation of the
Company, as amended to and as of the Date of Grant (as so amended, the
"CHARTER"), a true and complete copy of which has been delivered to the original
holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof and the authorization and issuance of shares of Series B
Preferred Stock of the Company in accordance with the terms of the Agreement for
Merger, dated September 25, 1997, by and among the Company, Arcada Acquisition
Corp., and Arcada, as amended to and as of the Date of the Grant will not be,
inconsistent with the Charter or by-laws of the Company, do not and will not
contravene, in any material respect, any governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
e. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant;
f. The authorized capital stock of the Company and the capital
stock issued and outstanding, or reserved for issuance, are as set forth on
Schedule 5.8. All of the outstanding shares have been validly issued and are
fully paid, nonassessable shares free of preemptive rights;
g. Except as set forth on Schedule 5.8, there are no
subscriptions, rights, options, warrants, or calls relating to any shares of the
Company's capital stock, including any right of conversion or exchange under any
outstanding security or other instrument; and
h. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any security convertible into or exchangeable for any of its
capital stock.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
22.
<PAGE>
13. NOTICES. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the day
after delivery to Federal Express or similar overnight courier, or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to each such holder at its address as shown
on the books of the Company or to the Company at the address indicated therefor
on the signature page of this Warrant. Any party hereto may change its address
for purposes of this SECTION 13 by giving the other party written notice of the
new address in the manner set forth herein.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; PROVIDED, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder, and in addition, the Registration Rights contained in SECTION 9 above
shall survive the exercise of this Warrant. All agreements of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
23.
<PAGE>
19. REMEDIES. In case any one (1) or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.
20. ACCEPTANCE. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
21. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against material impairment. Specifically, from the Date
of Grant until the date upon which all Indebtedness (as defined in the Loan
Agreement) shall have been repaid in full and all obligations of the Borrower
(as defined in the Loan Agreement) under the Loan Agreement shall have been
satisfied in full, the Company will not amend its Charter to create any new
class or series of shares having rights or preferences prior and superior or in
parity with the Warrant Shares or increase the rights and preferences or the
number of authorized shares of a class or series having rights and preferences
prior or superior to the Warrant Shares without the prior written consent of the
holders of at least fifty-one percent (51%) of the Warrant Shares issuable
under this Warrant.
[Signature page follows.]
24.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
USTEL, INC.
By: /s/ David Otto
---------------
Title: General Counsel and Secretary
------------------------------
Address: 2033 Sixth Avenue, Suite 401
Seattle, Washington 98121
Dated: as of November 25, 1998
25.
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: UStel, Inc.
1. The undersigned hereby elects to purchase ______ shares of Common
Stock of UStel, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
--------------------------------------
(Name)
--------------------------------------
--------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undesigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
--------------------------------------
(Signature)
- ------------------
(Date)
<PAGE>
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company UStel, Inc..
Security Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"REGISTRABLE SECURITIES"), the undersigned (the "PURCHASER") represents to the
Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Registrable
Securities. The Purchaser is purchasing the Registrable Securities for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof for purposes of the Registrable
Securities Act of 1933, as amended (the "ACT").
(b) The Purchaser understands that the Registrable Securities have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Registrable
Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if the Purchaser's representation was predicated
solely upon a present intention to hold these Registrable Securities for the
minimum capital gains period specified under applicable tax laws, for a deferred
sale, for or until an increase or decrease in the market price of the
Registrable Securities, or for a period of one year or any other fixed period in
the future.
(c) The Purchaser further understands that the Registrable Securities
must be held indefinitely unless subsequently registered under the Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Registrable Securities
will be imprinted with the legend referred to in the Warrant under which the
Registrable Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Registrable Securities Exchange Act of
1934, as
<PAGE>
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Registrable Securities there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 and
144A, and that, in such event, the Purchaser may be precluded from selling the
Registrable Securities under Rule 144 and 144A even if the one-year minimum
holding period had been satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
-----------------------------------
Date:
------------------------------
<PAGE>
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"AMENDMENT") is entered into as of November 25, 1998, by and among USTEL, INC.,
a Minnesota corporation ("USTEL"), and ARCADA COMMUNICATIONS, INC., a Washington
corporation ("ARCADA"), on the one hand, and COAST BUSINESS CREDIT, a division
of Southern Pacific Bank, a California corporation ("AGENT"), and GOLDMAN SACHS
CREDIT PARTNERS L.P., a Bermuda limited partnership ("GOLDMAN") (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "LENDER" and collectively as the
"LENDERS"), on the other hand, and constitutes an amendment to that certain Loan
and Security Agreement, dated as of June 25, 1998 (as amended, restated,
supplemented, or otherwise modified from time to time, the "LOAN AGREEMENT"), by
and among UStel, Arcada and Lenders (hereinafter, collectively, the "PARTIES").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Loan Agreement, as amended hereby.
W I T N E S S E T H
WHEREAS, the Parties desire to amend the Loan Agreement, in accordance
with the amendment provisions of Section 16 thereof, as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree to amend the
Loan Agreement, effective immediately, as follows:
A. AMENDMENTS TO LOAN AGREEMENT.
1. SECTION 1.1 of the Loan Agreement hereby is amended by inserting each
of the following definitions in their entirety:
"AMENDED PET" means that certain Amended and Restated Program
Enrollment Terms entered into on or about November 1, 1996 by and between UStel
and Worldcom.
"AMENDMENT FEE" has the meaning set forth in Section 2.14(f).
"BUDGET" means that operating and financial budget for the period from
November 16, 1998, through January 31, 1999, in form and substance satisfactory
to Lenders, a true and correct copy of which is attached hereto as EXHIBIT B.
"FIRST AMENDMENT" means that certain Amendment Number One to Loan and
Security Agreement, dated as of November 25, 1998, by and among, Lenders and
Borrowers.
"FIRST AMENDMENT CLOSING DATE" means the later of (a) November 25,
1998, or (b) the date on which all conditions precedent to the First Amendment
are satisfied or waived by Lenders.
-1-
<PAGE>
"GUARANTY FEE" has the meaning set forth in SECTION 2.14(g).
"INVESTMENT BANKERS" has the meaning set forth in SECTION 6.19.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"RESTRUCTURE AGREEMENTS" has the meaning set forth in SECTION 6.22.
"SERVICE CHARGES" means those gross measured and per call Switched
Service charges provided for in paragraph 3(A) of the Amended PET.
"STRATEGIC ALTERNATIVES" has the meaning set forth in SECTION 6.19.
"WORLDCOM" means Worldcom Network Services, Inc.
"WORLDCOM GUARANTEED AMOUNT" means the amount of Lenders' contingent
obligations under the Worldcom guaranties set forth in Section 2.16(c).
"WORLDCOM GUARANTIES" means the Worldcom Note Guaranty and the
Worldcom Traffic Payables Guaranty.
"WORLDCOM NOTE" means that secured promissory note to be issued by
UStel in favor of Worldcom in the original principal amount of $818,356.21.
"WORLDCOM NOTE GUARANTY" means Lenders' guaranty of the amount
outstanding at any designated time under the Worldcom Note as described in
SECTION 2.16(a).
"WORLDCOM TRAFFIC PAYABLES" means those Service Charges owed by UStel
to Worldcom for the months of September, October and November 1998 under the
Amended PET.
"WORLDCOM TRAFFIC PAYABLES GUARANTY" means Lenders' guaranty of the
amount outstanding at any designated time under the Worldcom Traffic Payables as
described in SECTION 2.16(a).
"12% DEBENTURES" has the meaning set forth in SECTION 6.22.
"14.75% DEBENTURES" has the meaning set forth in SECTION 6.22.
2. SECTION 1.1 of the Loan Agreement hereby is amended by amending and
restating in their entirety, the following definitions:
"AVAILABILITY" means the amount of money that Borrower is entitled to
borrow as Advances under SECTION 2.1 hereof.
"LOAN DOCUMENTS" means this Agreement, the First Amendment, the
Disbursement Letter, the Letters of Credit, the Worldcom Note Guaranty, the
Worldcom Traffic Payables Guaranty, the Lockbox Agreements, the Stock Pledge
Agreement, the Guaranty, the Guarantor Security Agreement, the Amended and
Restated Warrants, the Side Letter Agreement, the Carrier Consent Agreements,
any note or notes executed by Borrower and payable to the Agent or the
-2-
<PAGE>
Lender Group, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"MAXIMUM AMOUNT" means $22,294,444.21, which comprises the Maximum
Revolving Amount (I.E., $5,643,920), the Term Loan (I.E., $15,000,000), the
Capital Expenditure Loans (I.E., $832,168), and the Worldcom Guaranty (I.E.,
$818,356.21).
"MAXIMUM REVOLVING AMOUNT" means $5,643,920, which comprises the sum
of the outstanding balance of the Revolving Advances as of November 23, 1998
(I.E., $2,543,920), PLUS $2,750,000, PLUS the Amendment Fee (I.E., $200,000)
PLUS the Guaranty Fee (I.E., $150,000).
"OBLIGATIONS" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), the Amendment Fee, the Guaranty Fee, the Worldcom
Guarantied Amount, contingent reimbursement obligations under any outstanding
Letters of Credit, premiums (including Applicable Prepayment Premiums or Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
Loan Account pursuant hereto), obligations, fees, charges, costs, or Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties owing by each Borrower to the Lender Group of any kind and
description (whether pursuant to or evidenced by the Loan Documents or pursuant
to any other agreement between the Lender Group and any Borrower, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from any Borrower to
others that the Lender Group may have obtained by assignment or otherwise, and
further including all interest not paid when due and all Lender Group Expenses
that any Borrower is required to pay or reimburse by the Loan Documents, by law,
or otherwise; PROVIDED, HOWEVER, that the Obligations shall not include that
certain note, in the original principal amount of $250,000 and dated June 30,
1998, executed by Borrower and payable to Coast in its individual capacity.
"WARRANTS" means those certain common stock purchase warrants issued
to the Lenders or their designees (in accordance with their Pro Rata Shares) by
Borrower, in form and substance identical to those Amended and Restated Warrants
attached hereto as EXHIBITS W-1 AND W-2.
3. SECTION 1.1 of the Loan Agreement hereby is amended by deleting the
following definitions in their entirety: Acquisition Loan; Borrowing Base;
Credit Reserve; Debt Service; Dilution; Dilution Reserve; Eligible Accounts;
Renewal Date; and Tangible Net Worth.
4. SECTION 2.1 of the Loan Agreement hereby is deleted and replaced with
the following:
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, each Lender agrees to make advances ("Advances") to
Borrower on a weekly basis (i) in an amount no greater than the amount projected
to be needed for such week in accordance with the Budget, provided, however,
that any amount not borrowed in any given
-3-
<PAGE>
week may be carried forward for use in any subsequent week, and (ii) in an
amount at any one time outstanding not to exceed such Lender's Pro Rata Share
of the Maximum Revolving Amount LESS the Letter of Credit Usage.
(b) The Lenders shall have no obligation to make Advances hereunder
to the extent they would cause the outstanding Facility Usage to exceed the
Maximum Amount.
(c) Amounts borrowed pursuant to this SECTION 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
5. SECTION 2.2(a) of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
2.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Agent
agrees to issue letters of credit for the account of Borrower (each, an "L/C")
or to issue guarantees of payment (each such guaranty, an "L/C Guaranty") with
respect to letters of credit issued by an issuing bank for the account of
Borrower. Agent shall have no obligation to issue a Letter of Credit if the
Letter of Credit Usage would exceed the lower of: (x) the Maximum Revolving
Amount, LESS the amount of outstanding Advances; or (y) $500,000. Borrower
expressly understands and agrees that Agent shall have no obligation to arrange
for the issuance by issuing banks of the letters of credit that are to be the
subject of L/C Guarantees. Borrower and Agent acknowledge and agree that
certain of the letters of credit that are to be the subject of L/C Guarantees
may be outstanding on the Closing Date. Each Letter of Credit shall have an
expiry date no later than February 1, 1999, and all such Letters of Credit
shall be in form and substance acceptable to Agent in its sole discretion. If
Agent is obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such amount to Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances under SECTION 2.9.
6. SECTION 2.4 of the Loan Agreement hereby is deleted and replaced with
the following:
2.4 CAPITAL EXPENDITURE LINE. As of the First Amendment Closing
Date, Lenders have made a series of term loans to Borrower (each, a "Capital
Expenditure Loan") in the aggregate amount of $832,168. Each Capital
Expenditure Loan is repayable in 48 equal monthly installments of principal,
such installments are payable on the last day of each month commencing with the
last day of the month during which the applicable Capital Expenditure Loan was
made and continuing thereafter on the last day of each succeeding month until
and including the date on which the unpaid balance of the Capital Expenditure
Loan is paid in full. The outstanding principal balance and all accrued and
unpaid interest under each Capital Expenditure Loan shall be due and payable
upon the termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. All amounts outstanding under the Capital
Expenditure Loans shall constitute Obligations.
-4-
<PAGE>
7. SECTION 2.5 of the Loan Agreement hereby is deleted in its entirety.
8. SECTION 2.9 of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
2.9 INTEREST, GUARANTY FEES, AND LETTER OF CREDIT FEES: RATES,
PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) below, (i) all
Obligations (except for undrawn Letters of Credit, the contingent obligations of
Agent for the Worldcom Guaranteed Amount, the Term Loan and the Capital
Expenditure Loans) shall bear interest at a per annum rate equal to 4.0
percentage points above the Base Rate; (ii) the Term Loan shall bear interest at
a fixed per annum rate of 14.75 percent; and (iii) the Capital Expenditure Loans
shall bear interest at a fixed per annum rate of 14.75 percent.
(b) Letter of Credit and Guaranty Fee. Borrower shall pay Agent a
fee (in addition to the charges, commissions, fees and costs set forth in
SECTION 2.2 (e) and SECTION 2.16(d)) equal to 2.5% per annum times the aggregate
undrawn amount of all outstanding Letters of Credit and the outstanding amount
of the contingent obligations of Lenders for the Worldcom Guaranteed Amount.
(c) Default Rate. Upon the occurrence and during the continuation of
an Event of Default, (i) all Obligations (except for amounts undrawn under
Letters of Credit or Worldcom Guaranties) shall bear interest at a per annum
rate equal to 4.0 percentage points above the per annum rate otherwise
applicable thereto hereunder, and (ii) the Letter of Credit and Worldcom
Guaranty fee provided for above shall be increased by 4.0 percentage points
above the per annum rate otherwise applicable hereunder.
(d) Minimum Interest. In no event shall the rate of interest
chargeable under SECTION 2.9(a)(i) for any day be less than 9% per annum. To
the extent that interest accrued hereunder at the rate set forth in such section
would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.
(e) Payments. Interest, Guaranty fees and Letter of Credit fees
payable hereunder shall be due and payable, in arrears, on the last day of
each month during the term hereof. Borrower hereby authorizes Agent, at its
option, without prior notice to Borrower, to charge such interest, Guaranty
fees and Letter of Credit fees, all Lender Group Expenses (as and when
incurred), the charges, commissions, fees, and costs provided for in SECTION
2.2(e) AND 2.16(d) (as and when accrued or incurred), the fees and charges
provided for in SECTION 2.14 (as and when accrued or incurred), and all
installations or other payments due under the Worldcom Guaranties, Term Loan,
the Capital Expenditure Loans, or any Loan Document to Borrower's Loan
Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable
to Advances hereunder.
(f) Computation. The Base Rate as of the date of this Agreement is
7.75 % per annum. In the event the Base Rate is changed from time to time
hereafter, the rates of
-5-
<PAGE>
interest hereunder automatically and immediately shall be increased or
decreased by an amount equal to such change in the Base Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis
of a 360 day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering
this Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; PROVIDED, HOWEVER, that, anything contained
herein to the contrary notwithstanding, if said rate or rates of interest or
manner of payment exceeds the maximum allowable under applicable law, then, IPSO
FACTO as of the date of this Agreement, Borrower is and shall be liable only for
the payment of such maximum as allowed by law, and payment received from
Borrower in excess of such legal maximum, whenever received, shall be applied to
reduce the principal balance of the Obligations to the extent of such excess.
9. SECTION 2.14 of the Loan Agreement hereby is amended by adding the
following sections:
(f) AMENDMENT FEE. On the First Amendment Closing Date, a fee
of $200,000, which shall be added to the principal amount of the
Obligations.
(g) GUARANTY FEE. On the First Amendment Closing Date, a fee of
$150,000, which shall be added to the principal amount of the Obligations.
10. New SECTION 2.16 hereby is added to the Loan Agreement:
2.16 WORLDCOM GUARANTEED AMOUNT.
(a) Subject to the terms and conditions of this Agreement, and
subject to the execution and delivery by Worldcom, Borrowers, and Agent of a
settlement agreement (the "Worldcom Settlement Agreement") in form and substance
satisfactory to the Lenders in their sole discretion, Agent agrees to issue in
favor of Worldcom guarantees of payment with respect to Borrower's obligations
under the Worldcom Note (the "Worldcom Note Guaranty") and the Worldcom Traffic
Payables (the "Worldcom Traffic Payables Guaranty"), both of which shall be in
form and substance identical to those guaranties attached hereto as EXHIBITS G-1
AND G-2, respectively (the Worldcom Note Guaranty and the Worldcom Traffic
Payables Guaranty are collectively referred to as the "Worldcom Guaranties").
Borrower expressly understands and agrees that the Worldcom Guarantees are not a
primary source for repayment of the Worldcom Note and the Worldcom Traffic
Payables, and Borrower shall make all required payments under the Worldcom Note
and Worldcom Traffic Payables when due.
(b) Each Lender agrees to fund its Pro Rata Share of any amount
required to be paid under the Worldcom Guaranties set forth in SECTION 2.16(a).
The obligation of each Lender to deliver to Agent an amount equal to its
respective Pro Rata Share pursuant to the preceding sentence shall be absolute
and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
-6-
<PAGE>
satisfy any condition set forth in SECTION 3.2. If any Lender fails to make
available to Agent the amount of such Lender's Pro Rata Share of any payments
made by Agent in respect of such Worldcom Guaranties as provided in this SECTION
2.16(b), Agent shall be entitled to recover such amount on demand from such
Lender together with interest at the Base Rate.
(c) Borrower hereby agrees to indemnify, save, defend, and hold Agent
harmless from any loss, cost, expense, or liability, including payments made by
Agent, expenses, and reasonable attorneys fees incurred by Agent arising out of
or in connection with any Worldcom Guaranties (the "Worldcom Guaranteed
Amount"). Borrower hereby agrees that all such amounts owed in connection with
the Worldcom Guaranteed Amount shall constitute Obligations that are payable to
Agent upon the earlier of demand therefor or upon termination of this Agreement,
whether by its terms, by prepayment, by acceleration or otherwise. Borrower
may, at its option and subject to availability under SECTION 2.1(a), repay all
or any portion of the Worldcom Guaranteed Amount with Advances set forth in
SECTION 2.1.
(d) Any and all charges, commissions, fees, and costs incurred by
Agent relating to the Worldcom Guaranties shall be considered Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Agent.
(e) Immediately upon the termination of this Agreement, Borrower
agrees either (i) to provide cash collateral to be held by Agent in an amount
equal to 105% of the Worldcom Guaranteed Amount, or (ii) cause to be delivered
to Agent releases of all of Agent's obligations under the Worldcom Guaranties.
At Agent's discretion, any proceeds of Collateral received by Agent after the
occurrence and during the continuation of an Event of Default may be held as the
cash collateral required by this SECTION 2.16(e).
11. SECTION 3.4 of the Loan Agreement is amended by deleting it in its
entirety and replacing it with the following:
3.4 TERM.
(a) This Agreement shall become effective upon the execution and
delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on February 1, 1999 ("Maturity Date");
PROVIDED, HOWEVER, if UStel has failed to enter into definitive restructuring
agreements with the holders of UStel's 12% Debentures and 14.75% Debentures by
no later than December 30, 1998, the Maturity Date shall be December 30, 1998;
and, PROVIDED, FURTHER, if Borrower (i) has entered into by no later than
February 1, 1999, a letter of intent to sell Borrower's businesses on terms and
conditions satisfactory to Lenders that would result in payment in full in cash
of all Obligations due Lenders, and (ii) has submitted to the Lender Group an
operating and financial budget for the period from February 1 through March 30,
1999, in form and substance satisfactory to Lenders, Lenders shall extend the
Maturity Date to April 1, 1999.
(b) The foregoing notwithstanding, the Lender Group shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
-7-
<PAGE>
12. SECTION 6 of the Loan Agreement hereby is amended by adding the
following affirmative covenants:
6.20 RETENTION OF INVESTMENT BANKER. Subject to the terms and
conditions of this Amendment, Borrowers agree that, no later than November 30,
1998 (the failure to do so automatically constituting an Event of Default), they
shall retain an investment banking firm ("Investment Bankers") reasonably
acceptable to Lenders to do the following:
(a) SCOPE OF SERVICES. Borrowers agree to retain the Investment
Bankers to evaluate and to assist Borrowers in pursuing all financial options
available to them whether in the form of an infusion of equity, a merger and/or
sale of Borrowers' businesses ("Strategic Alternatives") on terms reasonably
acceptable to Lenders.
(b) REPORTS TO LENDERS. Borrowers agree to provide Lenders with the
following reports and information produced by the Investment Bankers:
(i) at the time of the engagement of such Investment Bankers,
a copy of the agreement retaining the Investment Bankers, a written summary of
the Strategic Alternatives being considered by such Investment Bankers, the
steps to be taken in evaluating such Strategic Alternatives, including relevant
milestones, and the target dates for such milestones;
(ii) on a weekly basis from the date of engagement of the
Investment Bankers forward, a verbal and written report from the Investment
Bankers regarding their progress in evaluating and pursuing the Strategic
Alternatives;
(iii) within 7 calendar days after the retention of the
Investment Bankers, a time-line for marketing the Borrower's businesses and
meeting with potential investors in connection with pursuing the Strategic
Alternatives, in form and substance satisfactory to Lenders; and
(iv) by no later than December 15, 1998, the marketing
materials, such as an offering memorandum or reasonably equivalent document
which details the Borrower's businesses and the Strategic Alternatives, in form
and substance satisfactory to Lenders.
6.21 IMPLEMENTATION OF STRATEGIC ALTERNATIVES. Borrowers agree: (a)
to enter into a letter of intent by no later than February 1, 1999, to effect an
infusion of equity, a merger and/or sale of Borrower's businesses on terms and
conditions satisfactory to Lenders that would result in payment in full in cash
of all Obligations due Lenders; and (b) to use Borrower's best efforts to
consummate such infusion of equity, merger or sale by no later than April 1,
1999.
6.22 SALE OF NON-CORE BUSINESSES. Immediately after the First
Amendment Closing Date, Borrower agrees to take all steps necessary to sell
Borrower's wireless operations, including, without limitation, those operations
conducted through the entity known as Pacific Cellular. Borrower agrees to
enter into a definitive purchase and sale agreement for Pacific Cellular by no
later than December 31, 1998, for an amount that is equal to or exceeds
$2,000,000, and agrees to use best efforts to consummate such sale by no later
than January 31, 1999. Borrower agrees to deposit all proceeds from such sales
of Borrower's wireless operations
-8-
<PAGE>
into the Agent Account, and to apply such proceeds to reduce the Obligations
and the Maximum Revolving Amount.
6.23 RESTRUCTURE OF BONDHOLDERS DEBT.. By no later than December 30,
1998, UStel agrees to restructure its obligations to each of its holders of its
12% Convertible Subordinated Debentures (due December 31, 1998) which were
issued on or about January 28, 1994 ("12% Debentures"), and to each of its
holders of its 14.75% Convertible Subordinated Debentures, which were issued on
or about June 25, 1998 ("14.75% Debentures"), on terms and conditions acceptable
to Lenders ("Restructure Agreements").
6.24 RESTRUCTURE OF OTHER PAYABLES. By no later than December 15,
1998, Borrower agrees to exercise Borrower's best efforts to negotiate favorable
payment terms for Borrower's past-due payables (other than those to Worldcom and
the holders of the 12% Debentures and 14.75% Debentures), including, without
limitation, those owed to carriers, trade creditors, and any other notes payable
by UStel and/or Arcada (including, without limitation, that certain Promissory
Note dated July 1, 1998, payable to Keith Leppaluoto in the original principal
amount of $520,388.40).
6.25 CORNWELL RECOMMENDATIONS. The board of directors of Borrower
agrees to give due consideration to the recommendations of Borrower's advisors,
including, without limitation, the recommendations of the consulting team from
Cornwell Consulting Services, Inc. delivered at the board meeting that took
place on October 23, 1998, and, after such due consideration, to take
appropriate action in furtherance of such recommendations.
6.26 EMPLOYMENT OF CONTROLLER. As soon as would be practicable, but
in no event later than 30 days after the First Amendment Closing Date, Borrower
agrees either to employ a controller or to engage the services of a nationally
recognized accounting firm with the appropriate staff to discharge the duties of
such controller, either of whom must be reasonably acceptable to Lenders.
6.27 REPORTS. Borrowers agree to provide Lenders with the following
reports:
(a) by 5:00 p.m. (New York Time) on the third business day of
each week, a report that sets forth the variance between Borrowers' actual and
projected collections, operating cash flow, non-operating cash flow and total
cash flow for the immediately preceding calendar week;
(b) by 5:00 p.m. (New York Time) on the third business day of
each week, a report that sets forth the variance between Borrowers' actual and
projected retail long distance minute traffic for the immediately preceding
calendar week;
(c) by the twenty-fifth day of each month, Borrowers'
financial statement for the immediately preceding month;
(d) by the fifteenth day of each month, a report showing
Borrowers' actual retail long distance minute traffic for the immediately
preceding month;
-9-
<PAGE>
(e) by the fifth day of each month, a report showing the
actual Pacific Cellular subscribers for the immediately preceding month; and
(f) by the fifteenth day of each month, a report showing
Borrowers' actual rate of Churn for the immediately preceding month.
6.28 WORLDCOM PAYMENTS. Borrowers agree to make all required payments
under the Worldcom Note and the Worldcom Traffic Payables when due. If
Borrowers receive from Euronet International Communications or any other party
all or any portion of the $522,455 in total call charges alleged to be
fraudulent, Borrowers agree immediately to forward such funds to Worldcom to
reduce the outstanding amount of the Worldcom Note. Borrowers agree that the
receipt of a notice of termination of telephony services by Worldcom or the
actual termination of such services (in whole or in part) by Worldcom
automatically will constitute an Event of Default.
6.29 SALE OF ASSETS. Borrowers agree to deposit all proceeds from the
sale of their assets into the Agent Account, and to apply such proceeds to
reduce the Obligations and the Maximum Revolving Amount.
6.30 BANKRUPTCY COVENANTS. In the event Borrowers commence a
bankruptcy proceeding under Title 11 of the United States Code, Borrowers agree
that:
(a) Borrowers shall not oppose any motion of Lenders for
relief from the automatic stay; and
(b) Borrowers shall attempt to obtain Bankruptcy Court
approval for the sale of their businesses within 90 days of the commencement of
their bankruptcy proceedings.
6.29 Borrowers covenant that they shall provide Agent with opinions of
counsel, in form and substance satisfactory to Agent and each of the Lenders, by
no later than December 1, 1998 (the failure to do so automatically constituting
an Event of Default).
13. SECTION 7.21 of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
7.21 FINANCIAL COVENANTS.
(a) Fail to achieve the following cumulative percentages of
Borrowers' projected collections, operating cash flow, non-operating cash flow
and total cash flow as set forth on the Budget as of the dates indicated:
(i) 80% for the period from November 16 through November 20,
1998.
(ii) 80% for the period from November 16 through November 30,
1998.
-10-
<PAGE>
(iii) 90% for the period from November 16 through December 4,
1998.
(iv) 90% for the period from November 16 through December 11,
1998.
(v) 90% for each period thereafter measured on the third
business day of each week on a trailing rolling four week basis ending on the
applicable date set forth in the Budget.
(b) Fail to achieve 90% of Borrowers' projected weekly retail long
distance minute traffic as set forth in the Budget, which shall be measured on a
weekly basis.
(c) Fail to maintain:
(i) Net Revenues. Achieve Net Revenues of not less than the
amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Minimum Net Revenue
-------------------
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
<S> <C> <C>
November 30, 1998 $2,250,000 $550,000
December 31, 1998 $2,450,000 $550,000
January 31, 1999 $2,350,000 $600,000
February 28, 1999 $2,250,000 $600,000
March 31, 1999 $2,700,000 $625,000
</TABLE>
(ii) Gross Profit. Achieve gross profits, determined in
accordance with GAAP on a consolidated basis consistent with past practice, of
not less than the amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Minimum Net Revenue
-------------------
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
<S> <C> <C>
November 30, 1998 $725,000 $225,000
December 31, 1998 $850,000 $225,000
January 31, 1999 $925,000 $250,000
February 28, 1999 $850,000 $250,000
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C>
March 31, 1999 $1,000,000 $250,000
</TABLE>
(iii) Profitability. Achieve EBITDA of not less than the
amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Minimum EBITDA
---------------
For the Month Ending Ustel/Arcada Pacific Cellular
-------------------- ------------ ----------------
<S> <C> <C>
November 30, 1998 ($425,000) $25,000
December 31, 1998 ($200,000) $50,000
January 31, 1999 ($100,000) $50,000
February 28, 1999 ($100,000) $50,000
March 31, 1999 $100,000 $50,000
</TABLE>
(iv) Churn. Borrower's Churn as calculated on a monthly basis
shall not exceed the amount shown below:
<TABLE>
<CAPTION>
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
<S> <C> <C>
November 30, 1998 8.0% 5.0%
December 31, 1998 7.0% 5.0%
January 31, 1999 6.0% 5.0%
February 28, 1999 5.0% 5.0%
March 31, 1999 5.0% 5.0%
</TABLE>
(v) Minimum Retail Long Distance Minutes. Achieve minimum
retail long distance minutes not less than the amounts shown below:
<TABLE>
<CAPTION>
Month Ending UStel/Arcada
------------ ------------
<S> <C>
November 30, 1998 14,000,000
December 31, 1998 15,250,000
January 31, 1999 14,750,000
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C>
February 28, 1999 14,000,000
March 31, 1999 17,250,000
</TABLE>
(vi) Minimum Pacific Cellular Subscribers. Maintain the
following minimum number of Pacific Cellular subscribers:
<TABLE>
<CAPTION>
Month Ending Pacific Cellular
------------ ----------------
<S> <C>
November 30, 1998 7,250
December 31, 1998 7,250
January 31, 1999 7,500
February 28, 1999 7,750
March 31, 1999 8,000
</TABLE>
B. CONDITIONS PRECEDENT TO AMENDMENT.
The satisfaction of each of the following unless waived or deferred by
Lenders in their sole discretion, shall constitute conditions precedent to the
effectiveness of this Amendment and each and every provision hereof:
1. UStel shall have executed and delivered to Lenders the Amended and
Restated Warrants.
2. Borrowers shall have appointed from amongst their existing officers
and advisors a management team, or such other management team as Borrowers may
select, either of which must be reasonably acceptable to Lenders, that would be
committed to remain with Borrowers through the time period necessary to guide
Borrowers through a restructuring or sale of Borrowers' businesses.
3. The representations and warranties in this Amendment, the Loan
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date).
4. No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against the Borrowers or Lenders.
5. Lenders shall have received the reaffirmation and consent of the
Guarantor attached hereto as EXHIBIT A, duly executed and delivered by an
authorized officer of the Guarantor.
-13-
<PAGE>
6. After giving effect hereto, no Event of Default or event which with
the giving of notice or passage of time would constitute an Event of Default
shall have occurred and be continuing on the date hereof, nor shall result from
the consummation of the transactions contemplated herein.
7. No material adverse change shall have occurred in the financial
condition of Borrowers or in the value of the Collateral that has not been
disclosed to Lenders.
8. Lenders shall have received this duly executed Amendment, which shall
be in full force and effect.
9. Agent shall have received a certificate from the Secretary of each
Person composing Borrower attesting to the resolutions of each such Person's
Board of Directors authorizing its execution, delivery, and performance of this
Amendment and the other Loan Documents to which each such Person is a party and
authorizing specific officers of such Person to execute the same.
10. Agent shall have received copies of the Governing Documents of each
Person composing Borrower, as amended, modified, or supplemented to the First
Amendment Closing Date, certified by the Secretary of each such Person composing
Borrower.
11. Agent shall have received a certificate of status with respect to each
Person Composing Borrower, dated within 10 days of the First Amendment Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of each such Person, which certificate shall
indicate that such Person is in good standing in such jurisdiction.
12. Agent shall have received a certificate of status from Guarantor,
dated within 10 days of the First Amendment Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Guarantor, which certificate shall indicate that Guarantor is in good standing
in such jurisdiction.
13. Agent shall have received a certificate of status with respect to each
Person composing Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which such Person's failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such Person is
in good standing in such jurisdictions.
14. Agent shall have received verification, in form and substance
satisfactory to Agent, that all insurance premiums for the insurance required in
SECTION 6.10 have been paid and that all insurance required under such section
has been acquired and is otherwise current and enforceable.
15. Agent shall have received an opinion of each of Borrowers' counsel, in
form and substance satisfactory to Agent and each of the Lenders in their sole
discretion.
16. Agent shall have received a certificate from the president, chief
executive officer, or general counsel of Borrower that all tax returns required
to be filed by Borrower have been timely filed and all taxes upon Borrower or
its properties, assets, income, and franchises
-14-
<PAGE>
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest.
17. Agent shall have received satisfactory evidence that there are no
outstanding complaints against any Borrower made to any public utilities
commission in any jurisdiction in which any Borrower operates, except such
complaints that have been fully disclosed to the Lenders and are satisfactory to
Agent and the Lenders.
18. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Lenders
and their counsel.
C. WAIVERS OF EXISTING EVENTS OF DEFAULT.
1. ACKNOWLEDGEMENT OF DEFAULTS. Borrowers acknowledge that breaches of
the provisions of the Loan Agreement have occurred and are continuing, and that
such breaches constitute material Events of Default (each such breach as to
which the Lenders have actual knowledge is referred to as a "Known Event of
Default") under the Loan Agreement.
2. CONSEQUENCE OF DEFAULTS. Borrowers acknowledge and agree that
pursuant to section 9 of the Loan Agreement, and as a result of the existence of
the Known Events of Default, Lenders have the right to, among other things,
declare all Obligations immediately due and payable and terminate the Loan
Agreement.
3. WAIVER. Upon the effectiveness of this Amendment, Lenders hereby
waive each of the Known Events of Default. Such waiver is specific in time and
in intent and does not constitute, nor should it be construed as constituting,
except to the extent expressly set forth herein, a waiver or modification of any
term of, or right, power, or privilege under, the Loan Agreement, the other Loan
Documents, or any agreement, contract, indenture, document, or instrument
mentioned therein. Except as, and to the extent, set forth herein: (a) Lenders
hereby reserve all remedies, powers, rights, and privileges that Lenders may
have under the Loan Agreement, this Amendment or the other Loan Documents, at
law (including under the Code), in equity, or otherwise; and (b) all terms,
conditions, and provisions of the Loan Agreement, this Amendment and the other
Loan Documents are and shall remain in full force and effect and nothing herein
shall operate as a consent to or a waiver, amendment, or forbearance in respect
of any other or further matter (including any Event of Default other than the
Known Events of Default) or any other right, power, or remedy of Lenders under
the Loan Agreement, this Amendment and the other Loan Documents.
D. RELEASE OF LENDERS.
Borrowers acknowledge and agree that in connection with this
Amendment, the Loan Agreement or any and all documents executed in connection
therewith: (i) Borrowers do not have any claims or causes of action against
Lenders; (ii) Borrowers do not have any offsets or defenses against any of their
respective obligations, indebtedness or contracts in favor of Lenders; and
(iii) Lenders have heretofore properly performed and satisfied in a timely
manner all of their obligations to and contracts with Borrowers. Borrowers, for
themselves and on behalf of their parent, subsidiaries and affiliate
corporations, if any, as well as each of their respective
-15-
<PAGE>
directors, officers, agents, employees, servants, shareholders,
representatives, attorneys, assigns, predecessors and successors in interest,
and each of them, release and waive: (I) any and all liabilities,
obligations, or indebtedness of Lenders and each of their parents,
subsidiaries and affiliates, as well as each of their respective directors,
officers, agents, employees, servants, shareholders, representatives,
attorneys, assigns, predecessors and successors in interest, and each of them
(hereinafter, the "Lender Released Parties"), to Borrowers which may have
existed at any time prior to the execution and delivery of this Amendment;
(II) any and all claims, causes of action or defenses of any kind whatsoever
(if any), whether known or unknown, which Borrowers might otherwise have
against the Lender Released Parties on account of any condition, act,
omission, event, contract, liability, obligation, indebtedness, claim, cause
of action, circumstance or matter of any kind whatsoever which existed, arose
or occurred at any time prior to the execution and delivery of this Amendment
by the Parties hereto. Borrowers hereby covenant and agree that they shall
not institute or prosecute (or, to the extent required by law, in any way
assist, cooperate with the institution or prosecution of) any action, suit,
hearing, or other proceeding of any kind, nature or character, at law or in
equity, against any Lender Released Party in order to collect, enforce,
declare, assert, establish or otherwise raise any defense, claim, cause of
action, contract, liability, indebtedness or obligation which is within the
scope of those released in this Amendment or which arises out of any fact,
contract, condition, claim, cause of action, indebtedness or obligation which
is released hereunder.
This Amendment shall constitute a complete defense to any claim, cause
of action, contract, liability, indebtedness or obligation released hereunder.
Nothing in this Amendment shall be construed as an admission (or shall be
admissible in any legal action or proceeding as an admission by any Lender
Released Party) that any defense, indebtedness, obligation, liability, contract,
claim or cause of action exists which is within the scope of those released
within this Amendment since Lender Released Parties deny that any such matters
exist and regard this release as unnecessary except to confirm their
understanding of the positions of the Parties.
Borrowers acknowledge that Section 1542 of the Civil Code of
California provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing a release, which if known by him must
have materially affected his settlement with the debtor."
Borrowers have been advised by counsel with respect to the release contained
herein. Borrowers also acknowledge that Borrowers may hereafter discover facts
in addition to or different from those which Borrowers know or believe to be
true with respect to the subject matter of the release given hereby, but that it
is Borrowers' intention to, and Borrowers do hereby, fully, finally and forever
waive any and all rights and defenses as set forth hereinabove. Upon advice of
such counsel, and in furtherance of such intention, Borrowers waive all rights
granted to Borrowers by Section 1542 of the Civil Code of California, and any
similar provision under the laws of the state of New York or any other state,
and acknowledge that the release as to the matters released herein,
notwithstanding the subsequent discovery or existence of any such additional or
different facts.
-16-
<PAGE>
E. LIMITED RELEASE OF BOARD OF DIRECTORS.
Lenders acknowledge and agree that in connection with this Amendment,
the Loan Agreement or any and all documents executed in connection therewith:
(i) Lenders do not have any claims or causes of action against any member of the
board of directors of UStel ("Board") who served from and after the Closing Date
up to the date of this Amendment if and to the extent that each such member
carried out his or her duties as a director in a manner consistent with the
so-called "business judgment rule," as that rule has been interpreted under the
laws of the state of Delaware (it being understood that UStel is a Minnesota
corporation and that Delaware corporate law is not applicable to the duties of
the directors of UStel, but that the Parties hereto have agreed, as amongst
themselves, that the business judgment rule, as interpreted by the Delaware
courts as of the date hereof (and irrespective of whether such courts would
apply such rule to the directors of a corporation that is insolvent or in the
zone of insolvency) is to be the applicable standard that is to govern the
limited release contained in this Section. Lenders, for themselves and on
behalf of their parents, subsidiaries and affiliate corporations, if any, as
well as each of their respective directors, officers, agents, employees,
servants, shareholders, representatives, attorneys, assigns, predecessors and
successors in interest, and each of them, release and waive: (I) any and all
liabilities, obligations, or indebtedness of the Board and each of them
(hereinafter, the "Board Released Parties"), to Lenders which may have existed
at any time prior to the execution and delivery of this Amendment arising out of
the Board's failure to conduct itself in a manner consistent with the exercise
of the so-called Business Judgment Rule, as that rule has been interpreted under
the laws of the state of Delaware; (II) any and all claims, causes of action or
defenses of any kind whatsoever (if any), whether known or unknown, which
Lenders might otherwise have against the Board Released Parties on account of
any condition, act, omission, event, contract, liability, obligation,
indebtedness, claim, cause of action, circumstance or matter of any kind
whatsoever which existed, arose or occurred at any time prior to the execution
and delivery of this Amendment by the Parties hereto arising out of the Board's
failure to conduct itself in a manner consistent with the exercise of the
so-called Business Judgment Rule, as that rule has been interpreted under the
laws of the state of Delaware. Lenders hereby covenant and agree that they
shall not institute or prosecute (or, to the extent required by law, in any way
assist, cooperate with the institution or prosecution of) any action, suit,
hearing, or other proceeding of any kind, nature or character, at law or in
equity, against any Board Released Party in order to collect, enforce, declare,
assert, establish or otherwise raise any defense, claim, cause of action,
contract, liability, indebtedness or obligation which is within the scope of
those released in this Amendment or which arises out of any fact, contract,
condition, claim, cause of action, indebtedness or obligation which is released
hereunder.
This Amendment shall constitute a complete defense to any claim, cause
of action, contract, liability, indebtedness or obligation released hereunder.
Nothing in this Amendment shall be construed as an admission (or shall be
admissible in any legal action or proceeding as an admission by any Board
Released Party) that any defense, indebtedness, obligation, liability, contract,
claim or cause of action exists which is within the scope of those released
within this Amendment since Board Released Parties deny that any such matters
exist and regard this release as unnecessary except to confirm their
understanding of the positions of the Parties.
-17-
<PAGE>
Lenders acknowledge that Section 1542 of the Civil Code of California
provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing a release, which if known by him must
have materially affected his settlement with the debtor."
Lenders have been advised by counsel with respect to the release
contained herein. Lenders also acknowledge that Lenders may hereafter discover
facts in addition to or different from those which Lenders know or believe to be
true with respect to the subject matter of the release given hereby, but that it
is Lenders' intention to, and Lender so hereby, fully, finally and forever waive
any and all rights and defenses as set forth hereinabove. Upon advice of such
counsel, and in furtherance of such intention, Lenders waive all rights granted
to Lenders by Section 1542 of the Civil Code of California, and any similar
provision under the law of the state of New York or any other state, and
acknowledge that the release as to the matters released herein, notwithstanding
the subsequent discovery or existence of any such additional or different facts.
F. ACKNOWLEDGEMENT OF BORROWERS.
1. Borrowers acknowledge and agree that Lenders, and each of them, have
not (i) exercised control over Borrowers and their businesses; (ii) told
Borrowers what creditors they should and should not pay; (iii) interfered with
Borrowers' corporate governance; (iv) interfered with Borrowers' contractual
relationships and/or prospective economic advantages; (v) entered into a
partnership or joint venture with Borrowers; (vi) established an agency
relationship with Borrowers; (vii) become a fiduciary of Borrowers;
(viii) provided Borrowers with false or misleading information; and/or
(ix) disclosed confidential information of Borrowers. Borrowers also
acknowledge and agree that any statements they may have made that are
inconsistent with the foregoing acknowledgment were and are incorrect and
improper.
2. Borrowers acknowledge and agree that Lenders have observed and acted
consistent with their obligation, if any, to deal with Borrowers in good faith
and with fair dealing.
3. Borrowers acknowledge and agree that any and all costs, expenses and
fees (including without limitation, attorneys fees) incurred by Lenders in
connection with this Amendment and the Worldcom Settlement Agreement shall
constitute Lender Expenses.
G. REPRESENTATIONS AND WARRANTIES.
Borrowers hereby represent and warrant to Lenders that (a) the
execution, delivery, and performance of this Amendment, are within their
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) the Loan Agreement, as amended by this
Amendment, constitutes Borrowers' legal, valid, and binding obligation,
enforceable against Borrowers in accordance with its terms.
-18-
<PAGE>
H. FURTHER ASSURANCES.
Borrowers agree to investigate and to disclose to Lenders any and all
actual and potential actions for damages that Borrowers hold against third
parties, and shall execute and deliver all financing statements, agreements,
documents, and instruments, in form and substance satisfactory to Lenders, and
take all actions as Lenders may reasonably request from time to time, to perfect
and maintain the perfection and priority of Agent's security interests in the
Collateral, and to fully consummate the transactions contemplated under the Loan
Agreement and this Amendment.
I. EFFECT ON LOAN DOCUMENTS.
The Loan Agreement, as amended hereby, and the other Loan Documents
shall be and remain in full force and effect in accordance with their respective
terms and each hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of or as an amendment of any right,
power, or remedy of Lenders under the Loan Agreement, as in effect prior to the
date hereof. This Amendment shall be deemed a part of and hereby is
incorporated into the Loan Agreement.
J. MISCELLANEOUS.
1. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to its conflicts-of-laws
principles (other than any provisions thereof validating the choice of the laws
of the State of New York as the governing law).
2. This Amendment, and the terms and provisions hereof, constitute the
entire agreement among the Parties pertaining to the subject matter hereof and
supersedes any and all prior or contemporaneous amendments relating to the
subject matter hereof. Except as expressly amended hereby, the Loan Agreement
and other Loan Documents shall remain unchanged and in full force and effect.
To the extent any terms or provisions of this Amendment conflict with those of
the Loan Agreement or other Loan Documents, the terms and provisions of this
Amendment shall control. This Amendment shall be deemed part of and is hereby
incorporated into the Loan Agreement.
3. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any Party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment, but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
4. This Amendment cannot be altered, amended, changed or modified in any
respect or particular unless each such alteration, amendment, change or
modification shall have been
-19-
<PAGE>
agreed to by each of the Parties and reduced to writing in its entirety and
signed and delivered by each Party.
5. Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.
6. Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.
-20-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
and delivered as of the date first written above.
USTEL, INC., a Minnesota corporation
By: /s/ David M. Otto
-----------------------------------------
Name: David M. Otto
----------------------------------
Title: General Counsel and Secretary
---------------------------------
ARCADA COMMUNICATIONS, INC.,
a Washington corporation
By: /s/ David M. Otto
-----------------------------------------
Name: David M. Otto
----------------------------------
Title: Secretary
---------------------------------
COAST BUSINESS CREDIT, a division of Southern
Pacific Bank, a California corporation
By: /s/ R. Britton Terrell
-----------------------------------------
Name: R. Britton Terrell
----------------------------------
Title: Vice President
---------------------------------
GOLDMAN SACHS CREDIT PARTNERS L.P.,
a Bermuda limited partnership
By: /s/ John Urban
-----------------------------------------
Name: John Urban
----------------------------------
Title: Managing Director
---------------------------------
-21-
<PAGE>
EXHIBIT A
REAFFIRMATION AND CONSENT
All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Amendment Number One to
Loan and Security Agreement, dated as of November 25, 1998 (the "AMENDMENT").
The undersigned hereby (a) represent and warrant to Agent that the execution,
delivery, and performance of this Reaffirmation and Consent are within its
corporate or organizational powers, have been duly authorized by all necessary
corporate or other organizational action, and are not in contravention of any
law, rule, or regulation, or any order, judgment, decree, writ, injunction, or
award of any arbitrator, court, or governmental authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to which it is a party
or by which any of its properties may be bound or affected; (b) consents to the
amendment of the Loan Agreement by the Amendment; (c) acknowledges and reaffirms
its obligations owing to Agent under the Guaranty and each of the other Loan
Documents to which it is party; and (d) agrees that its Guaranty and the other
Loan Documents to which they are parties is and shall remain in full force and
effect. Although the undersigned has been informed of the matters set forth
herein and has acknowledged and agreed to same, it understands that Agent has no
obligation to inform the undersigned of such matters in the future or to seek
its acknowledgement or agreement to future amendments, and nothing herein shall
create such a duty.
[remainder of page intentionally left blank]
-1-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Reaffirmation and Consent as of the date first written above.
CONSORTIUM 2000, INC., a California
corporation
By___________________________________
Its Authorized Signatory
-2-
<PAGE>
EXHIBIT E
POWERS OF ATTORNEY
This power of attorney will expire December 31, 1998.
KNOW ALL PERSONS BY THESE PRESENTS that THE GOLDMAN SACHS GROUP, L.P. (the
"Company") does hereby make, constitute and appoint each of Hans-Linhard Reich
and Roger S. Begelman, acting individually, its true and lawful attorney, to
execute and deliver in its name and on its behalf whether the Company is acting
individually or as representative of others, any and all filings required to be
made by the Company under the Securities Exchange Act of 1934, as amended,
giving and granting unto each said attorney-in-fact power and authority to act
in the premises as fully and to all intents and purposes as the Company might or
could do if personally present by one of its authorized signatories, hereby
ratifying and confirming all that said attorney-in-fact shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly subscribed these presents as
of September 8, 1997.
THE GOLDMAN SACHS GROUP, L.P.
By: THE GOLDMAN SACHS CORPORATION
By: /s/ ROBERT J. KATZ
-------------------
ROBERT J. KATZ
Managing Director
<PAGE>
This power of attorney will expire December 31, 1998.
KNOW ALL PERSONS BY THESE PRESENTS that GOLDMAN, SACHS & CO. (the
"Company") does hereby make, constitute and appoint each of Hans-Linhard Reich
and Roger S. Begelman, acting individually, its true and lawful attorney, to
execute and deliver in its name and on its behalf whether the Company is acting
individually or as representative of others, any and all filings required to be
made by the Company under the Securities Exchange Act of 1934, as amended,
giving and granting unto each said attorney-in-fact power and authority to act
in the premises as fully and to all intents and purposes as the Company might or
could do if personally present by one of its authorized signatories, hereby
ratifying and confirming all that said attorney-in-fact shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly subscribed these presents as
of September 8, 1997.
GOLDMAN, SACHS & CO.
By: /s/ ROBERT J. KATZ
-------------------
ROBERT J. KATZ
Managing Director
