EXHIBIT 4.35
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SECURITIES PURCHASE AGREEMENT
dated as of March 14, 2000
among
WAM!NET INC.
AND
CERBERUS PARTNERS, L.P.
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TABLE OF CONTENTS
Page
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Section 1. Authorization......................................................1
Section 2. Closing............................................................1
Section 3. Sale and Purchase of Shares........................................1
3.1. Shares.............................................................1
Section 4. Representations and Warranties of the Corporation..................2
4.1. Organization; Subsidiaries.........................................2
4.2. Qualification; Good Standing.......................................3
4.3. Corporate Authorization; Enforceability............................3
4.4. No Conflict........................................................3
4.5. Capitalization.....................................................3
4.6. Securities Laws; Applicable Corporation Laws.......................6
4.7. Financial Information..............................................6
4.8. Absence of Changes.................................................6
4.9. Reserved...........................................................8
4.10. Agreements.........................................................8
4.11. Title to Assets...................................................10
4.12. Real Property.....................................................10
4.13. Intellectual Property Rights; Proprietary Information of
Third Parties.....................................................10
4.14. Compliance with Laws; Governmental Authorizations.................12
4.15. Litigation........................................................12
4.16. Environmental Matters.............................................12
4.17. Tax Matters.......................................................13
4.18. Employee Benefit Plans and Employment Matters.....................13
4.19. Insurance.........................................................15
4.20. Related Transactions..............................................15
4.21. Offering of the Shares............................................15
4.22. Disclosure........................................................15
4.23. Reserved..........................................................16
4.24. Reserved..........................................................16
4.25. Brokers and Finders...............................................16
4.26. Year 2000 Compliance..............................................16
4.27. Reserved..........................................................16
Section 5. Representations and Warranties of the Purchaser...................17
5.1. Due Authorization.................................................17
5.2. Investment Representations........................................17
5.3. Brokers and Finders...............................................18
5.4. Investor Sophistication...........................................18
5.5. Reserved..........................................................18
Section 6. Covenants of the Corporation and the Purchaser....................18
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6.1. Regulatory Approvals; Reasonable Best Efforts;
Further Assurances................................................18
6.2. Certain Filings...................................................18
6.3. Confidentiality...................................................19
6.4. Public Announcements..............................................19
Section 7. Covenants of the Corporation......................................19
7.1. Certificate of Designation........................................19
7.2. Restrictions Pending the Closing..................................20
7.3. Reservation of Shares.............................................20
7.4. Use of Proceeds...................................................20
7.5. Access to Records.................................................20
7.6. Reserved..........................................................20
7.7. Financial Reporting and other Information.........................20
7.8. Payment of Obligations............................................21
7.9. Insurance.........................................................22
7.10. Certain Notices...................................................22
7.11. Conduct of Business...............................................22
7.12. Related Transactions..............................................22
7.13. Internal Controls.................................................22
7.14. Board Designees...................................................23
7.15. Reserved..........................................................24
7.16. Purchaser Lock-Up.................................................24
7.17. Tag-Along Agreements..............................................24
7.18. Consents..........................................................24
Section 8. Registration Rights of the Purchaser..............................24
8.1. Demand Registration...............................................24
8.2. "Piggy-Back" Registration.........................................25
8.3. General Terms.....................................................26
8.4. Underwriting Agreement............................................27
8.5. Road Show.........................................................27
8.6. Reserved..........................................................27
Section 9. Conditions to Each Closing........................................27
9.1. Conditions of Each Party..........................................27
9.2. Conditions to Obligations of the Purchaser........................28
9.3. Conditions to Obligations of the Corporation......................29
Section 10. Termination......................................................29
10.1. Effect of Termination............................................30
Section 11. Miscellaneous....................................................30
11.1. Survival.........................................................30
11.2. Indemnification..................................................30
11.3. Nominee; Benefits................................................31
11.4. Assignment; Parties in Interest..................................32
11.5. Entire Agreement.................................................32
11.6. Notices..........................................................32
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11.7. Amendments.......................................................33
11.8. Counterparts.....................................................33
11.9. Headings.........................................................33
11.10. Governing Law....................................................33
11.11. Jurisdiction.....................................................33
11.12. No Waiver........................................................34
11.13. Binding Effect...................................................34
11.14. Cumulative Powers................................................34
INDEX........................................................................38
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SECURITIES PURCHASE AGREEMENT, dated as of March 14, 2000, by and between
WAM!NET INC., a Minnesota corporation (the "Corporation"), and Cerberus
Partners, L.P., a Delaware Limited Partnership ("Purchaser").
WHEREAS, the Corporation desires to sell to Purchaser 15,000 shares (the
"Shares") of its Class E Convertible Preferred Stock, $.01 par value (the "Class
E Preferred Stock"), and Purchaser desires to purchase the Shares from the
Corporation upon the terms and subject to the conditions set forth below.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Authorization.
The Corporation has authorized the issuance and sale, upon the terms and
subject to the conditions set forth in this Agreement, of the Shares for a
purchase price of $1000.00 per Share ("Per Share Price") or $15,000,000 million
in the aggregate (the "Purchase Price"). The powers, designations, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations, and restrictions of the Class E Preferred Stock are set forth in
the Statement of Rights and Preferences of Class E Preferred Stock ("Class E
Certificate of Designation") attached hereto as Exhibit A.
Section 2. Closing.
Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned in accordance with this Agreement,
the closing of the sale and purchase of the Shares and the other transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m. on the date
which is the third business day after the conditions in Section 9 have been
satisfied or waived (other than those of such conditions which are customarily
satisfied at a closing), at the office of Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019 (or at such other time, date and place as the
parties may mutually agree). The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date."
Section 3. Sale and Purchase of Shares.
3.1. Shares.
At the Closing, the Corporation shall issue, sell and deliver to Purchaser
15,000 Shares of Class E Preferred Stock and Purchaser shall deliver to the
Corporation, as full payment therefor, the Purchase Price in cash by wire
transfer of immediately available funds to such bank account or bank accounts
designated by the Corporation.
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Section 4. Representations and Warranties of the Corporation.
The Corporation hereby represents and warrants to the Purchaser as of the
date hereof and as of the Closing Date that:
4.1. Organization; Subsidiaries.
(a) Organization. The Corporation and each Subsidiary (as defined
below) is a corporation duly organized and validly existing under the laws
of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate the assets used in its
business, to carry on its business as presently conducted, to enter into
the Documents (as hereinafter defined), to perform its obligations
thereunder, and to consummate the transactions contemplated thereby.
Attached as Schedule 4.1(a) are correct and complete copies of the Articles
of Incorporation of the Corporation including all amendments and
certificates of Designation, and the By-laws of the Corporation and each
Subsidiary, each as in effect on the date hereof (collectively, the
"Organizational Documents"). No amendments, revisions or waivers of any
provisions of any Organizational Documents have occurred, are in the
process of occurring or otherwise have been requested. For purposes of this
Agreement, "Documents" collectively means (i) this Agreement and (ii) the
Class E Certificate of Designation.
(b) Subsidiaries. Set forth on Schedule 4.1(b) hereto is a complete
list of all of the subsidiaries of the Corporation (each a "Subsidiary").
Except as set forth on Schedule 4.1(b) hereto, the Corporation does not
own, directly or indirectly, any capital stock or other equity securities
of any corporation, nor does the Corporation have any direct or indirect
ownership interest, including interests in partnerships and joint ventures,
in any other entity or business and there are no agreements to acquire such
interests. Each Subsidiary has been duly organized, is validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation and is duly qualified and in good standing as a foreign
corporation, and is authorized to do business, in all jurisdictions in
which the character of its properties or the nature of its businesses
requires such qualification or authorization, except for qualifications and
authorizations the lack of which, individually or in the aggregate, would
not reasonably be expected to result in a material adverse effect upon the
business, prospects, properties, liabilities, assets, operations, results
of operations, condition (financial or otherwise), or affairs of the
Corporation or result in the loss from employment of any Principal
Executive Officer as such term is defined on Schedule I (a "Material
Adverse Effect"). Each Subsidiary has the requisite power and authority to
own and hold its properties and to carry on its business as now being
conducted. Except as disclosed on Schedule 4.1(b) hereto: (i) all of the
outstanding shares of capital stock of each Subsidiary are owned
beneficially and of record by the Corporation, another Subsidiary or any
combination thereof, in each case free and clear of any liens, charges,
restrictions, claims or encumbrances other than restrictions on transfer
imposed by the Securities Act of 1933, as amended (the "Securities Act");
and (ii) there are no outstanding subscriptions, warrants, options,
convertible securities or other rights (contingent or other) pursuant to
which any Subsidiary is or may become obligated to issue any shares of its
capital stock to any person other than the Corporation or a Subsidiary.
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4.2. Qualification; Good Standing.
Each of the Corporation and every Subsidiary is authorized to do business
and is in good standing as a foreign corporation in each jurisdiction the laws
of which require such respective entity to be so authorized, except where the
failure to be so qualified or in good standing could not reasonably be expected
to have a Material Adverse Effect.
4.3. Corporate Authorization; Enforceability.
The Corporation has taken all corporate action necessary to authorize its
execution and delivery of the Documents, the performance of its obligations
thereunder, and its consummation of the transactions contemplated thereby. Each
Document has been executed and delivered by an officer of the Corporation in
accordance with such authorization. Each Document constitutes a valid and
binding obligation of the Corporation, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, fraudulent conveyance,
insolvency, moratorium, and similar laws now or hereafter in effect affecting
creditors' rights generally and to general principles of equity.
4.4. No Conflict.
The execution and delivery by the Corporation of the Documents, its
consummation of the transactions contemplated thereby, and its compliance with
the provisions thereof, will not other than in instances which could not
reasonably be expected to have a Material Adverse Effect, (i) violate or
conflict with any of the Organizational Documents, (ii) violate, conflict with,
result in a breach of, constitute a default under, or give rise to any right of
termination, cancellation, or acceleration (with or without notice or lapse of
time, or both) under any agreement, lease, security, license, permit, or
instrument to which the Corporation or any Subsidiary is a party, or to which it
or any of them or any of their respective assets or businesses are subject,
(iii) result in the imposition of any Encumbrance (as hereinafter defined) on
any asset of the Corporation, (iv) violate or conflict with any Laws applicable
to the Corporation or its properties or assets, or (v) require any consent,
approval or other action of, notice to, or filing with any entity or person
(governmental or private), except for the filing of the Class E Certificate of
Designations and those that have been obtained or made. For purposes of this
Agreement, "Encumbrance" means any security interest, mortgage, lien, pledge,
charge, easement, reservation, clouds, equities, rights of way, options, rights
of first refusal and any other encumbrances, whether or not relating to the
extension of credit or the borrowing of money. For purposes of this Agreement,
"Laws" means all laws, statutes, rules, regulations, ordinances, bylaws, writs,
Permits, Orders and other legislative, administrative or judicial restrictions.
4.5. Capitalization.
(a) Capitalization.
(i) As of the date hereof, the authorized capital stock of the
Corporation consists of 500,000,000 shares, the Designation and
classes of which are set
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forth on Schedule 4.5(a) hereto. The Corporation does not hold any of
its shares in treasury.
(ii) As of the date hereof, 9,494,797 shares of the Corporation's
common stock, par value $.01 per share ("Common Stock"), 115,206
shares of the Corporation's Class A Preferred Stock par value $10.00
per share (the "Class A Preferred Stock"), 5,710,425 shares of the
Corporation's Class B Preferred Stock par value $.01 per share (the
"Class B Preferred Stock"), 878,527 shares of the Corporation's Class
C Preferred Stock, par value $.01 per share (the "Class C Preferred
Stock"), and 2,196,317 shares of the Corporation's Class D Preferred
Stock, par value $.01 per share (the "Class D Preferred Stock") are
issued and outstanding and have been validly issued and are fully paid
and nonassessable and are not subject to preemptive rights. Except as
set forth herein, there are no other shares of capital stock of the
Corporation outstanding. As of the date hereof, the Class B Preferred
Stock, Class C Preferred Stock and Class D Preferred Stock are
convertible into 5,710,425, 878,527 and 2,196,317 shares of Common
Stock, respectively. The Corporation has also entered into an
agreement, dated as of December 31, 1999, with Winstar Communications,
Inc. with respect to the sale of 50,000 shares of the Class E
Preferred Stock, and an option to acquire an additional 50,000 shares
of the Class E Preferred Stock. The Shares of Class E Preferred Stock
to be sold pursuant to this Agreement constitute 15,000 of the shares
underlying the option. The 100,000 shares of Class E Preferred Stock
subject to sale are convertible into 19,379,844 shares of Common
Stock, representing an initial conversion price of $5.16 per share of
Common Stock (or 143.8 shares of Common Stock per share of Class E
Preferred Stock). Upon issuance of the Common Stock underlying such
preferred shares, in accordance with their respective Certificates of
Designation, such Common Stock will be validly issued, fully paid and
non-assessable.
(b) Options, Warrants, Convertible Securities. Except as set forth on
Schedule 4.5(a) hereto, as of the date hereof there are no outstanding
subscriptions, options, warrants or other agreements or rights of any kind
to acquire any additional shares of capital stock of the Corporation or
other instruments or securities convertible into or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares of capital stock, nor is the Corporation or any
Subsidiary committed to issue any such option, warrant, right or security.
Except as set forth on Schedule 4.5(b) hereto, the Corporation has no
obligation (contingent or other) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend
or make any other distribution in respect thereof. Schedule 4.5(a)
additionally sets forth (i) all of the outstanding warrants of the
Corporation, specifying the exercise prices and periods of such warrants
and amount of Common Stock issuable upon exercise of such warrants; and
(ii) stock options of the Corporation, specifying the exercise prices and
periods of such options and the amount of Common Stock issuable upon
exercise of the stock option held by each such holder. As of the date
hereof, 73,621,344 shares of Common Stock are issuable upon exercise or
conversion of all of the Corporation's outstanding options, warrants, and
other rights of any kind to acquire shares of the Corporation's Common
Stock (not including Class B Warrants issued in September 1997 to MCI
WorldCom, Inc.).
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(c) Agreements.
(i) Except as set forth in Schedule 4.5(c)(i), as of the date
hereof, there are no agreements relating to the purchase or sale of
capital stock between the Corporation and any of its shareholders or
affiliates, and to the best of the Corporation's knowledge, there are
no such agreements among any of its shareholders and other parties.
(ii) Except as contemplated hereby and as set forth in Schedule
4.5(c)(ii), there are no agreements or understandings granting to any
person or entity any right to cause the Corporation or any Subsidiary
to effect a registration under the Securities Act of 1933, as amended
("Securities Act"), of any shares of the Corporation's capital stock.
(iii) Except as set forth on Schedule 4.5(c)(iii), there are no
voting trusts, voting agreements, proxies or other agreements,
instruments or understandings with respect to the voting of the
capital stock of the Corporation between the Corporation and any of
its shareholders or affiliates and to the best of the Corporation's
knowledge, there are no such agreements among any of its shareholders
and any other parties.
(d) Due Authorization. The Shares are duly authorized and, when issued
and paid for pursuant to the terms of this Agreement, will be validly
issued, fully paid and nonassessable and will have the rights, preferences
and privileges specified in the Class E Certificate of Designation. The
shares of the Corporation's Common Stock issuable upon conversion of the
Shares ("Conversion Shares") are duly authorized and have been reserved for
issuance and, when issued upon conversion in accordance with the terms of
the Class E Certificate of Designation, will be validly issued, fully paid
and nonassessable, and will be free and clear of all liens, encumbrances
and restrictions (other than the restrictions on transfer imposed by the
Securities Act or any other applicable federal or state securities laws,
and the rules and regulations promulgated thereunder). Neither the
issuance, sale or delivery of the Shares nor the contemplated issuance or
delivery of the Conversion Shares is subject to or will trigger any
preemptive or other similar right of shareholders of the Corporation, any
anti-dilution right or right of first refusal or other preemptive or
similar right in favor of any person, in each case except for rights that
have been listed on Schedule 4.5(d).
(e) Securityholders. Schedule 4.5(a) sets forth the name and address
of each record holder of more than five-percent of the outstanding shares
of any of the Common Stock, the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock
and the Class E Preferred Stock and the number of such shares of Common
Stock or Preferred Stock held by each such holder.
(f) Reservation of Shares. The Corporation has reserved, and at all
times from and after the date hereof will keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of all shares of
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock,
Class D Preferred Stock, Class E Preferred Stock and Class F Preferred
Stock, sufficient shares of Common Stock to provide for the conversion of
all such shares of Preferred Stock.
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4.6. Securities Laws; Applicable Corporation Laws.
(a) The sale of the Shares contemplated hereby is exempt from
registration under the Securities Act. The issuance of all other shares of
capital stock of the Corporation on or before the date hereof has been made
in compliance with the Securities Act and all applicable state securities
or blue sky laws.
(b) The sale of the Shares contemplated hereby and the other
transactions contemplated hereby are in compliance with all applicable
laws, including the Minnesota Business Corporation Act, and any consents
which are required to be obtained pursuant to such laws have either been
obtained or waived in writing.
4.7. Financial Information.
(a) Schedule 4.7 sets forth (i) the audited consolidated balance sheet
of the Corporation at December 31, 1998 (the "Balance Sheet") and the
related statements of operations, shareholders' equity and cash flows of
the Corporation for the 12 months then ended and (ii) the unaudited
consolidated balance sheet of the Corporation at September 30, 1999 (the
"Interim Balance Sheet") and the related unaudited consolidated statements
of operations, shareholders' equity and cash flows for the Corporation for
the 9 months then ended (collectively, the "Financial Statements").
(b) The Financial Statements: (i) present fairly the financial
position of the Corporation and the results of operations, shareholders'
equity and cash flows of the Corporation at the dates and for the periods
indicated, (ii) are in accordance with the books and records of the
Corporation which books and records are complete and correct and fairly
reflect all material transactions of the Corporation's business, and (iii)
have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied (except as set forth in the notes
thereto and subject, in the case of unaudited Financial Statements, to
normal year-end adjustments, and the absence of notes thereto). Except as
incurred under agreements on Schedule 4.10(a) or as set forth on Schedule
4.7, at the date of the Interim Balance Sheet, the Corporation did not have
any material Liability of any nature or any loss contingency (as such term
is used in the Statement of Financial Accounting Standards No. 5 issued by
the Financial Accounting Standards Board in March 1975) that was not
adequately disclosed or provided for on the Interim Balance Sheet,
including the notes thereto. For purposes of this Agreement, "Liability"
means any liability or obligation, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due, regardless of when asserted.
4.8. Absence of Changes.
(a) Since the date of the Interim Balance Sheet there has not been:
(i) any change in the assets, liabilities or financial condition
of the Corporation (on a consolidated basis), except for changes (i)
in the ordinary course of
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business or (ii) which in the aggregate have not resulted in and would
not reasonably be expected to result in a Material Adverse Effect;
(ii) any event or change that would reasonably be expected to
result in a Material Adverse Effect, individually or in the aggregate,
whether or not insured against;
(iii) to the best of the Corporation's knowledge, any damage,
destruction or loss (whether or not covered by insurance) affecting
any asset of the Corporation in excess of $100,000;
(iv) any liability or loss contingency incurred by the
Corporation that would have to be disclosed on financial statements
(including the notes thereto) (on a consolidated basis) in accordance
with GAAP, other than liabilities incurred in the ordinary course of
business consistent with past practice;
(v) to the best of the Corporation's knowledge, any commitment to
borrow money from or provide financial support to any person or entity
entered into by the Corporation;
(vi) any payment or discharge of any Liability by the Corporation
outside the ordinary course of business consistent with past practice
to the best of the Corporation's knowledge;
(vii) any sale, assignment, license, or other disposition of any
asset or right of the Corporation or any Subsidiary outside the
ordinary course of business consistent with past practice;
(viii) any declaration or payment of any dividend or other
distribution with respect to any shares of capital stock of the
Corporation, or the direct or indirect acquisition of any equity
securities by the Corporation;
(ix) any labor trouble, problem or grievance affecting the
business of the Corporation other than such matters which would not
reasonably be expected to have a Material Adverse Effect;
(x) any write-down of the value of any inventory of the
Corporation, or any write-off as uncollectible of any accounts or
notes receivable of the Corporation, which could reasonably be
expected to result in a Material Adverse Effect;
(xi) any increase in the direct or indirect compensation of
senior officers of the Corporation or any Subsidiary (including,
without limitation, any increase pursuant to any bonus, pension,
profit-sharing, deferred compensation, or other plan or commitment),
in excess of 20% above the prior year;
(xii) any capital expenditure or commitment therefor by the
Corporation or any Subsidiary for additions to property, plant or
equipment in excess of $250,000;
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(xiii) any change in the accounting or tax methods, practices, or
assumptions followed by the Corporation or any Subsidiary; or
(xiv) any other transaction or event not in the ordinary course
of business consistent with past practice.
(b) The Corporation's independent accountants have not advised the
Corporation that the Interim Balance Sheet and the related unaudited
financial statements (i) do not comply in all material respects with the
applicable accounting requirements of the Securities Act and the related
published rules and regulations thereunder and (ii) are not in conformity
with GAAP.
4.9. Reserved.
4.10. Agreements.
(a) Schedule 4.10(a) sets forth a list of all material written and
oral contracts, agreements, licenses, commitments, instruments and
understandings ("Agreements"), and all Agreements of the following types
regardless of materiality, to which the Corporation or any Subsidiary is a
party ("Disclosed Agreements"):
(i) individually provide for the future purchase by the
Corporation or any Subsidiary of products or services in excess of
$50,000 or call for expenditures of the Corporation or any Subsidiary
in excess of $50,000, which expenditures or commitments have not been
disclosed in the Initial Budget;
(ii) provide for the employment by the Corporation or any
Subsidiary of any director or officer or consultant (other than for
legal or accounting services) earning $100,000 or more for any
engagement or provide for any payments or benefits (including
severance payments or benefits) to any director, officer or employee;
(iii) provide for the borrowing of money or a line of credit by
the Corporation or any Subsidiary, or a leasing transaction of a type
required to be capitalized by the Corporation in accordance with GAAP;
(iv) provide for a strategic relationship regarding the
Corporation or any Subsidiary and a third party, including any joint
venture, partnership or similar arrangement;
(v) provide for the sale, assignment, license, or other
disposition of any asset or any material right of the Corporation with
a value in excess of $30,000;
(vi) provide for the lease by the Corporation or any Subsidiary
of any real property;
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(vii) provide for the lease by the Corporation or any Subsidiary
of any personal property with a value, or reflecting replacement
costs, in excess of $30,000 or involving lease payments in excess of
$30,000 per year;
(viii) were entered into with any labor union;
(ix) provide for a tax sharing;
(x) provide for any distribution, agency, or licensing
arrangement with the Corporation or any Subsidiary;
(xi) require the Corporation to issue dividends or shares of its
Common Stock upon exercise of warrants;
(xii) restrict the Corporation or any Subsidiary, or any of the
officers or employees listed on Schedule 4.10(a)(ii), from engaging in
any business activity in any way related to the business of the
Corporation anywhere in the world, restrict any such person in the
performance of his or her obligations and responsibilities to the
Corporation or any Subsidiary, or create any other obligation or
liability of any such person, in any way related to the business of
the Corporation, arising from his or her prior employment;
(xiii) grant to any person or entity, other than the Corporation
or any Subsidiary, any right, title, or interest in any invention or
know-how conceived by employees of the Corporation or any Subsidiary
and related to the business of the Corporation;
(xiv) provide for a loan guaranty, surety, indemnity, or other
financial support by the Corporation or any Subsidiary to any person
or entity; or
(xv) grant to any person or entity a security interest in any
asset or right of the Corporation or any Subsidiary.
(b) Each Disclosed Agreement or understanding required to be set forth
on Schedule 4.10(a) is in full force and effect and constitutes a valid and
binding obligation of all parties thereto. Except as set forth on Schedule
4.10(a), the Corporation and, to the extent a Subsidiary is a party, the
Subsidiary has performed in all material respects the obligations required
to be performed by it and is not in material default and has not received
notice alleging it to be in default under any such Disclosed Agreement. To
the knowledge of the Corporation, there exists no event or condition which,
after notice or lapse of time, or both, would constitute such a material
default under any Disclosed Agreement. To the knowledge of the Corporation,
there are no material defaults by any other party to any such Disclosed
Agreement. The Corporation has made available to the Purchaser correct and
complete copies of all Disclosed Agreements set forth on Schedule 4.10(a).
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4.11. Title to Assets.
Except for properties leased by the Corporation or any Subsidiary, the
Corporation and each Subsidiary has good and marketable title to all assets
reflected on the Interim Balance Sheet as being owned by it, or acquired by it
after the date of the Interim Balance Sheet (except for inventory sold or
otherwise disposed of in the ordinary course of business, and accounts and notes
receivable paid in full, since the date of the Interim Balance Sheet), free and
clear of all Encumbrances, other than Permitted Liens and other than those which
would not reasonably be expected to result in a Material Adverse Effect. Such
assets are in good operating condition and repair, are adequate and suitable for
their intended use in the business of the Corporation and are sufficient for the
conduct of the business except as would not reasonably be expected to result in
a Material Adverse Effect. There does not exist any condition which interferes
with the economic value or use of such assets except as would not reasonably be
expected to result in a Material Adverse Effect. The term "Permitted Liens"
means (i) liens arising by operation of law in the ordinary course of business
that, individually and in the aggregate, do not in any respect interfere with
the use or value of any of the assets subject thereto, (ii) minor imperfections
of title which do not detract from the value of the property affected or impair
the operations of the Corporation, (iii) liens for taxes not yet due and
payable, (iv) liens arising in connection with debt incurred pursuant to and in
accordance with the covenant section, and (v) liens relating to monies borrowed
by the Corporation or any Subsidiary. Any property held under lease by the
Corporation and each Subsidiary is held by them under a valid, subsisting and
enforceable lease with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property by the Corporation
and each Subsidiary.
4.12. Real Property.
Except as disclosed on Schedule 4.12, neither the Corporation nor any
Subsidiary owns or holds, directly or indirectly, any real property. Neither the
Corporation nor any Subsidiary leases, directly or indirectly, any real property
other than as listed on Schedule 4.12. Any real property or facility held under
lease by the Corporation and each Subsidiary is held by them under a valid,
subsisting and enforceable lease with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and
buildings by the Corporation and each Subsidiary.
4.13. Intellectual Property Rights; Proprietary Information of Third
Parties.
(a) Each of the Corporation and each Subsidiary owns or is licensed to
use all patents, trademarks, copyrights, service marks, and applications
and registrations therefor, and all trade names (including WAM!NET,
WAM!BASE and WAM!PROOF), domain names, URLs, customer lists, trade secrets,
proprietary processes and formulae, inventions, know-how, other
confidential and proprietary information, and other industrial,
intellectual property and/or proprietary rights and all goodwill of the
business associated therewith and represented thereby (collectively
"Intellectual Property") necessary to permit such entities to carry on
their respective business as presently conducted and as currently
contemplated to be conducted. All such rights are free of all Encumbrances
and are fully assignable by the Corporation and each Subsidiary to any
third party, without payment, consent of any third party or other condition
or restriction.
10
Schedule 4.13 sets forth a list of all patents, trademarks, copyrights,
service marks, and applications and registrations therefor, and all trade
names, domain names or URLs held or owned by the Corporation and each
Subsidiary and all other Intellectual Property rights of the Corporation
and each Subsidiary. All registered and/or material patents, copyrights,
trademarks, domain name and URL rights and service marks listed on Schedule
4.13 are valid, in full force and effect and are not subject to any taxes
or maintenance fees and the Corporation or a Subsidiary has the right and
standing to bring infringement Proceedings with respect thereto. Neither
the Corporation nor any Subsidiary (i) licenses or grants to anyone other
than to the Corporation or any Subsidiary rights of any nature to use any
Intellectual Property right that is material to its business, other than
certain software and equipment which is provided to the Corporation's
clients which enable them to access the Corporation's network solely in
order to avail themselves of the Corporation's services, (ii) is not
obligated to and does not pay royalties to anyone for use of its
Intellectual Property rights, and (iii) does not market or sell any product
or service that violates any Intellectual Property right of a third party.
Except as set forth on such Schedule, there is no pending or, to the
knowledge of the Corporation and each Subsidiary threatened claim or
litigation against the Corporation or any Subsidiary contesting the right
to use its Intellectual Property rights, asserting the misuse of any
thereof, or asserting the infringement or other violation of any
Intellectual Property rights of a third party.
(b) All Intellectual Property conceived or developed by employees of
the Corporation and each Subsidiary, while in the employ of the Corporation
or such Subsidiary, and related to the business of the Corporation or any
Subsidiary were either "works for hire," owned exclusively by the
Corporation or a Subsidiary and/or all right, title, and interest therein
was transferred and assigned to the Corporation or a Subsidiary and the
Corporation or a Subsidiary has maintained all exclusive right, title and
interest therein without any Encumbrances thereon. The Corporation has
taken all reasonable security measures to protect the secrecy,
confidentiality, and value of its trade secrets, proprietary processes and
formulae, inventions, know-how and other confidential and proprietary
information (including without limitation entering into appropriate
non-disclosure and non-use agreements with all officer, directors,
employees, independent contractors and other person with access to such
information).
(c) No third party has claimed or, to the Company's knowledge, has
reason to claim that the Corporation or any Subsidiary has (i) violated or
may be violating any of the terms or conditions of any non-competition or
non-disclosure agreement with such third party, (ii) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (iii) interfered or may
be interfering in the employment relationship between such third party and
any of its present or former employees. Neither the Corporation or any
Subsidiary has utilized nor proposes to utilize any trade secret or any
information or documentation proprietary to any other person in violation
of existing arrangements with such person, and neither the Corporation or
any Subsidiary has violated any confidential relationship which any such
person may have had with any third party, in connection with the
development, manufacture, or sale or other use or exploitation of any
product of any service of the Corporation or any Subsidiary.
(d) There exists no event, condition or occurrence which, with the
giving of notice or lapse of time, or both, would constitute a breach or
default by the Corporation or a
11
Subsidiary under any Agreement concerning Intellectual Property. No party
to any Agreement concerning Intellectual Property has given the Corporation
or any Subsidiary notice of its intention to cancel, terminate or fail to
renew any such Agreement.
(e) To the knowledge of the Corporation and the Subsidiaries, no third
party is violating any material Intellectual Property right of the
Corporation or a Subsidiary.
4.14. Compliance with Laws; Governmental Authorizations.
The Corporation and each Subsidiary is in compliance in all respects with
all Laws, except for such instances where non-compliance would not result in a
Material Adverse Effect. Each of the Corporation and each Subsidiary has all
permits, licenses, authorizations, registrations, franchises, approvals,
certificates or variances (collectively, "Permits") from each Governmental
Authority that is necessary or advisable in the conduct of its business as
presently conducted except in such cases which would not reasonably be expected
to result in a Material Adverse Effect. For purposes of this Agreement,
"Governmental Authority" means any federal, state, municipal, local or foreign
government and any court, tribunal, administrative agency, commission, board,
agency or other governmental or regulatory authority or agency, whether domestic
or foreign. Neither the Corporation nor any Subsidiary is licensed to provide
communication services under any state, federal or foreign laws nor is any one
of them required to be so licensed.
4.15. Litigation.
Except as set forth on Schedule 4.15, there are no (i) actions, suits,
claims, investigations or other proceedings (collectively, "Proceedings") by or
before any Governmental Authority or other arbitration or mediation body,
pending or, to the knowledge of the Corporation, threatened against the
Corporation or any Subsidiary, or (ii) judgments, writs, decrees, injunctions,
compliance agreements, or orders of any Governmental Authority or other
arbitration or mediation body, against the Corporation or any Subsidiary.
4.16. Environmental Matters.
Each of the Corporation and each Subsidiary is in compliance with all Laws
relating to the protection of the environment (the "Environmental Laws"). Except
for the operation of machinery and equipment in the ordinary course of business
in compliance with applicable Environmental Laws, neither the Corporation nor
any Subsidiary has handled, stored or released, or exposed any person to, any
hazardous substance, as defined in 42 U.S.C.A. Section 9601(14) or any other
applicable Environmental Laws (a "Hazardous Substance"). Neither the Corporation
nor any Subsidiary is liable or responsible for clean-up costs, remedial work or
damages in connection with the handling, storage, release, or exposure by it of
any Hazardous Substance except in cases which would not reasonably be expected
to result in a Material Adverse Effect. No claims for clean-up costs, remedial
work or damages have been made by any person or entity in connection with the
handling, storage, release, or exposure by the Corporation and/or any Subsidiary
of any Hazardous Substance.
12
4.17. Tax Matters.
(a) (i) The Corporation has timely filed or been included in all
required returns, declarations of estimated tax, reports, and statements
relating to any Taxes due and payable by it (collectively, the "Returns");
(ii) all Returns were correct and complete as of the time of filing; (iii)
the Corporation has timely paid all Taxes required to be paid by it through
the date hereof; (iv) the Corporation has made provision on its most recent
interim balance sheet for all Taxes payable by it for all periods prior to
the date of such interim balance sheet for which no Returns have yet been
filed; (v) the Corporation has made provision on its books for all Taxes
payable by it for all periods beginning on or after the date of its most
recent interim balance sheet for which no Returns have yet been filed; (vi)
the Corporation has no knowledge of any pending tax audits of any Returns;
(vii) the Corporation has no knowledge that any deficiency or addition to
any Taxes has been proposed, asserted or assessed in writing against the
Corporation; and (viii) the Corporation has not granted any extension of
the statute of limitations applicable to any Return or other claim for
Taxes.
(b) "Taxes" means, with respect to any person or entity, (i) all
material Federal, state, local, and foreign taxes, including, without
limitation, all taxes on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings,
or profits, and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, or windfall profits taxes,
alternative or add-on minimum taxes, customs duties, or other taxes, fees,
assessments or charges of any kind, together with any interest, penalties,
additions to tax or additional amounts imposed by any taxing authority on
such person or entity, and (ii) any material liability for the payment of
any amount of the type described in the preceding clause (i) as a result of
being a "transferee" (within the meaning of Section 6901 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any other applicable
Laws) of another person or entity.
4.18. Employee Benefit Plans and Employment Matters.
(a) Schedule 4.18 sets forth a list of all "employee pension benefit
plans" and "employee benefit plans," as defined in Section 3(2) and (3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), and other
written or formal plans or group arrangements involving direct or indirect
compensation (not including any government-mandated programs) currently or
previously maintained or contributed by the Corporation or any ERISA
Affiliate for the benefit of any employee or former employee thereof under
which the Corporation and/or any Subsidiary has or may have any present or
future obligation or liability (collectively, the "Employee Plans"). "ERISA
Affiliate" means any entity which is a member of (i) a "controlled group of
corporations," as defined in Section 414(b) of the Code, (ii) a group of
entities under "common control," as defined in Section 414(c) of the Code,
or (iii) an "affiliated service group," as defined in Section 414(m) of the
Code, any of which includes the Corporation.
(b) Schedule 4.18 further sets forth a list of all plans, trusts, or
arrangements (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation, medical benefits,
disability benefits, supplemental unemployment
13
benefits, vacation benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation, or other forms
of incentive compensation, insurance or benefits (collectively, the
"Benefit Arrangements") that (i) are not Employee Plans, (ii) are
maintained or contributed to by the Corporation or any Subsidiary, and
(iii) cover any director, officer, employee, consultant, or former employee
of the Corporation or any Subsidiary.
(c) Each Employee Plan and Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed
by applicable Laws. There has not been any "accumulated funding
deficiency," as defined in Section 412 of the Code, with respect to any
Employee Plan. There has not been any partial or complete withdrawal by the
Corporation or any Subsidiary with respect to any Employee Plan which is a
"multiemployer plan," as defined in Section 3(37) of ERISA, and the
Corporation does not have any current plans to withdraw from any such
Employee Plan. There has been no "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code involving any
Employee Plan. There are no pending or threatened investigations or claims
by the Internal Revenue Service, Department of Labor, Pension Benefit
Guaranty Corporation or any other governmental agency or any individual
relating to any of the Employee Plans or Benefit Arrangements. Except as
required under Section 4980B of the Code, the Company has no obligation to
provide post-retirement health or life benefits. Except as set forth on
Schedule 4.18, neither the Corporation or any Subsidiary is in default or
alleged to be in default in the payment or other provision of any benefit
under any Employee Plan or Benefit Arrangement. Except as set forth on
Schedule 4.18, no actions have been taken or are currently planned with
respect to any Employee Plan or Benefit Arrangement that would increase the
expense of maintaining or the benefits provided under such Employee Plan or
Benefit Arrangement above the level of the expense incurred or benefits
provided in respect thereof for each of the years 1999 and 1998.
(d) The execution and delivery by the Corporation of the Documents and
its consummation of the transactions contemplated thereby will not
constitute a triggering event under any Employee Plan or Benefit
Arrangement that will, or upon the occurrence of subsequent events would,
accelerate the time of payment or vesting, or increase the amount of
compensation or benefits, for any director, officer, employee, or former
employee of the Corporation.
(e) Neither the Corporation nor any Subsidiary is a party to any
employment, labor or collective bargaining agreement and there are no
employee, labor or collective bargaining agreements which pertain to
employees, consultants, officers or directors of the Corporation or any
Subsidiary and no labor union or employee organization has been certified
or recognized as the collective bargaining representative of any employees
of the Corporation or any Subsidiary and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened to be brought or filed with the National
Labor Relations Board. There are no existing or threatened labor strikes,
work stoppages, slowdowns, disputes, grievances, unfair labor practice
charges, labor arbitration proceedings or other disturbances affecting any
employee of the Corporation or and Subsidiary. There are no complaints,
charges, or claims against the Corporation or any Subsidiary pending or
threatened in writing to be brought or filed with any governmental entity
or arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment of any individual
by the Corporation or any Subsidiary. The Corporation and its
14
Subsidiaries are in compliance with all laws governing the employment of
labor, including, but not limited to, all such laws relating to wages,
hours, collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding
and/or Social Security taxes and similar taxes.
4.19. Insurance.
The Corporation maintains valid and effective insurance policies, issued by
financially sound and reputable insurers, to insure it against all risks usually
insured against by persons or entities conducting businesses similar to that of
the Corporation or such Subsidiary in the locality in which such businesses are
conducted. The Corporation has paid all due premiums with respect to all
policies of insurance currently maintained by the Corporation.
4.20. Related Transactions.
(a) Except as set forth on Schedule 4.20, and except for compensation
to regular employees, since January 1, 1998, no current director or
executive officer of the Corporation or holder of at least 5% of the
outstanding capital stock of the Corporation has been (i) a party to any
transaction with the Corporation valued in excess of $60,000 during any
twelve-month period, or (ii) the direct or indirect owner of an interest in
any business organization that is or was a competitor, supplier or customer
of the Corporation (other than interests in non-affiliated publicly held
companies). 4.21. Offering of the Shares.
The Corporation has not, directly or indirectly, solicited any other offer
to buy or offer to sell, and will not, directly or indirectly, solicit any other
offer to buy or offer to sell, any security which is or would be integrated with
the sale of the Shares in a manner that would require the Shares to be
registered under the Securities Act.
4.22. Disclosure.
The Corporation has filed all required registration statements, reports and
proxy statements with the Securities and Exchange Commission ("SEC Reports")
when due (or within permitted extension periods) in accordance with the
Securities Act and the Securities Exchange Act of 1934, as amended ("Exchange
Act"), as the case may be. As of their respective dates (or, in the case of any
amended SEC Report, as of the date of the amendment), the SEC Reports complied
in all material respects with all applicable requirements of the Securities Act
or the Exchange Act, as the case may be. As of their respective dates (or, in
the case of any amended SEC Report, as of the date of the amendment), none of
the SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. This Agreement does
not contain an untrue statement of a material fact nor does it omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. None of the statements, documents,
15
certificates or other items prepared by the Corporation and supplied to
Purchaser or its counsel in connection with the transactions contemplated hereby
(other than those relating to (i) projected financial information, (ii) plans
and objectives regarding the Corporation's future operations, (iii) future
economic performance and (iv) assumptions underlying any of the matters
described in (i) through (iii), each as to which no representation or warranty
is given other than, however, that such representations are reasonable in light
of existing or known facts or trends and were prepared in good faith) contains
an untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
4.23. Reserved.
4.24. Reserved.
4.25. Brokers and Finders.
No person or entity acting on behalf or under the authority of the
Corporation is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the sale of the Shares.
4.26. Year 2000 Compliance.
(a) The Corporation and each Subsidiary has used (or is in the process
of using) appropriate procedures to verify that its software which is
licensed or otherwise provided to its customers and the software used in
its business will recognize and process date fields after the turn of the
century, and perform date-dependent calculations and operations (including
sorting, comparing and reporting) after the turn of the century correctly,
and the Corporation and each Subsidiary has used (or is in the process of
using) reasonable efforts to ensure that such software will not produce
invalid and incorrect results as a result of the change of century (all
without human intervention, other than original data entry of valid dates).
(b) The Corporation has (i) analyzed the operations of the Corporation
and the Subsidiaries that could be adversely affected by failure to become
Year 2000 compliant and (ii) developed a plan for becoming Year 2000
compliant in a timely manner, the implementation of which is on schedule in
all material respects. The disclosure in the Corporation's Exchange Act
reports (e.g., Form 10-K, 10-Q, etc.) regarding the progress of the Year
2000 compliance program and Year 2000 remediation were accurate when made.
(c) Based upon responses to its inquiries to its suppliers and
vendors, the Corporation reasonably believes any suppliers and vendors that
are material to the operations of the Corporation and the Subsidiaries will
be Year 2000 compliant for their own computer applications except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
4.27. Reserved.
16
Section 5. Representations and Warranties of the Purchaser.
Each Purchaser represents and warrants to the Corporation on behalf of
itself (and not any other Purchaser) as of the date hereof and the Closing Date
that:
5.1. Due Authorization.
The Purchaser has taken all action necessary to authorize its execution and
delivery of the Documents to which it is a party, the performance of its
obligations thereunder, and its consummation of the transactions contemplated
thereby. Each Document to which the Purchaser is a party has been executed and
delivered by an officer of the Purchaser in accordance with such authorization
or by the Purchaser. Each Document to which the Purchaser is a party constitutes
a valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting creditors' rights generally and to
general principles of equity.
5.2. Investment Representations.
(a) The Purchaser is acquiring the Shares for its own account, for
investment and not with a view to the distribution thereof, nor with any
present intention of distributing the same.
(b) The Purchaser understands that the Shares have not been, and the
Conversion Shares will not be, registered under the Securities Act or
applicable state securities laws, by reason of their issuance in a
transaction exempt from the registration requirements of the Securities
Act, and such shares must be held indefinitely unless subsequent
disposition thereof is registered under applicable securities laws or is
exempt from registration.
(c) The Purchaser understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Purchaser)
promulgated under the Securities Act depends on the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for
sales under certain circumstances and only in limited amounts.
(d) The Purchaser is an "accredited investor," as such term is defined
in Rule 501 (the provisions of which are known to the Purchaser)
promulgated under the Securities Act.
(e) The Purchaser has such knowledge and experience in financial, tax
and business matters so as to enable the Purchaser to utilize the
information made available to the Purchaser in connection with the
investment in the Shares to evaluate the merits and risks of an investment
in the Shares and to make an informed investment decision with respect
thereto; provided, however, that the foregoing shall in no way affect,
diminish or derogate from the representations and warranties made by the
Corporation hereunder or the right of the Purchaser to rely thereon and to
seek indemnification hereunder.
(f) The Purchaser has not been formed for the specific purpose of
acquiring the Shares.
17
(g) The Purchaser hereby acknowledges that the purchase and sale of
the Shares is intended to be exempt from registration under the Securities
Act by virtue of Section 4(2) and/or Section 3(b) of the Securities Act
and, if applicable, in the sole judgment of the Corporation, the provisions
of Regulation D thereunder, which exemption is dependent upon the truth,
completeness and accuracy of the statements made by the Purchaser herein
and in any other documents furnished by the Purchaser to the Corporation.
5.3. Brokers and Finders.
No person or entity acting on behalf or under the authority of the
Purchaser is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the transactions contemplated hereby.
5.4. Investor Sophistication.
Purchaser has sufficient knowledge and experience and is capable of
evaluating the merit and risks of its investment in the Corporation as
contemplated by this Agreement and is able to bear the economic risk of such
investment for an indefinite period of time. Purchaser has been given access to
SEC Reports. Purchaser has had the opportunity to ask questions of and receive
answers from representatives of the Corporation concerning the terms and
conditions of this Agreement, to discuss the Corporation's business, management
and financial affairs with the Corporation's management and to obtain any other
additional information Purchaser desires or deems relevant.
5.5. Reserved.
Section 6. Covenants of the Corporation and the Purchaser.
6.1. Regulatory Approvals; Reasonable Best Efforts; Further Assurances.
The Corporation and the Purchaser acknowledge that certain regulatory or
governmental approvals may be required to lawfully consummate the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, the Corporation and the Purchaser will, and will cause their
Affiliates to, use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. The Corporation and the Purchaser agree to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
6.2. Certain Filings.
The Corporation and the Purchaser will, and will cause their Affiliates to,
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with
18
the consummation of the transactions contemplated by this Agreement or the
conversion by such Purchaser of such Purchaser's Shares and (ii) in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers. Without limiting the generality of the foregoing, the
Corporation and the Purchaser obligated to file a notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act")
shall promptly after the date of this Agreement prepare and file the
notifications required under the HSR Act in connection with the transactions
contemplated by this Agreement. The Corporation and the Purchaser shall (A) give
the other parties prompt notice of the commencement of any action, suit,
litigation, arbitration, preceding or investigation by or before any
governmental body with respect to the transactions contemplated by this
Agreement, (B) keep the other parties informed as to the status of any such
action, suit, litigation, arbitration, preceding or investigation, and (C)
promptly inform the other parties of any communication to or from the Federal
Trade Commission, the Department of Justice or any other governmental body
regarding the transactions contemplated by this Agreement.
6.3. Confidentiality.
Except as set forth in Section 6.4 below and as required by applicable
securities laws upon the advice of counsel, without the consent of the other
party, neither the Corporation nor any Purchaser shall make any public comment,
statement or communication with respect to, or otherwise disclose or permit the
disclosure of the terms of this Agreement and the transactions contemplated
hereby, and each party shall cause its authorized officers, directors, partners,
employees, counsel, accountants, agents and other representatives to strictly
comply with the foregoing.
6.4. Public Announcements.
Neither party to this Agreement may publicly disseminate a press release or
file a public report (on Form 8-K or otherwise) with the Securities and Exchange
Commission or otherwise publicly announce the transactions contemplated by this
Agreement, unless the other parties consent. Such parties shall not unreasonably
withhold or delay their approval to any such proposed announcements.
Section 7. Covenants of the Corporation.
Unless otherwise indicated, and as long as any of the Shares or Conversion
Shares remain outstanding, the Corporation shall and shall cause each Subsidiary
to abide and perform with respect to the following covenants:
7.1. Certificate of Designation.
Following the execution of this Agreement, the Corporation shall cause to
be filed the Class E Certificate of Designation as required pursuant to the law
of the State of Minnesota.
19
7.2. Restrictions Pending the Closing.
After the date hereof and prior to the Closing Date, except as expressly
provided for in this Agreement or as consented to in writing by the Purchaser,
the Corporation will not:
(i) amend its certificate of incorporation or bylaws, except to file
the Class E Certificate of Designation;
(ii) split, combine or reclassify any shares of its capital stock
without appropriately adjusting the conversion price and/or ratio
applicable to the Shares prior to their issuance at the Closing;
(iii) declare or pay any dividend or distribution (whether in cash,
stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action, that could
reasonably be expected to result in (A) any of the representations and
warranties of the Corporation set forth in Article 4 becoming untrue or (B)
any of the conditions to the obligations of the Purchaser set forth in
Section 8.1 or 8.2 not being satisfied; or
(v) enter into any agreement or commitment to do any of the foregoing.
7.3. Reservation of Shares.
For so long as any of the Shares are outstanding, the Corporation shall
keep reserved for issuance a sufficient number of shares of Common Stock to
satisfy its conversion obligations under the Class E Certificate of Designation.
7.4. Use of Proceeds.
The Corporation shall use the cash proceeds received by it upon the sale of
the Shares for general working capital purposes.
7.5. Access to Records.
The Corporation shall, and shall cause each Subsidiary to, afford to the
Purchaser and its authorized employees, counsel, accountants and other
representatives, upon reasonable notice and during ordinary business hours, (i)
full access to all books, records and properties of the Corporation and such
Subsidiary, and (ii) the opportunity to interview any officer of the Corporation
or such Subsidiary regarding its affairs; any investigation pursuant to this
Section shall be conducted in a manner that does not interfere unreasonably with
the conduct of the business of the Corporation and such Subsidiary.
7.6. Reserved.
7.7. Financial Reporting and other Information.
20
(a) So long as the Purchaser beneficially owns Shares or Conversion
Shares, the Corporation shall deliver to such Purchaser the following:
(i) within 30 days after the end of each month, commencing with
the month of December, (A) the unaudited balance sheet of the
Corporation at the end of such month, (B) the unaudited statements of
income and cash flows of the Corporation for such month, (C)
comparative statements of income of the Corporation for the year to
date, the comparable figures for the prior year, the current Budget
for the year to date and projected figures for the year and (D)
textual discussion describing changes from prior periods and
describing operating trends;
(ii) within 45 days after the end of each fiscal quarter,
commencing with the quarterly period ending March 31, 2000, (A) the
unaudited balance sheet of the Corporation at the end of such fiscal
quarter, (B) the unaudited statements of income and cash flows of the
Corporation for such fiscal quarter, and (C) comparative statements of
income of the Corporation for such fiscal quarter and the year to
date, the comparable figures for the corresponding fiscal quarter and
the year to date period of the prior year and the current Budget for
such fiscal quarter and for the year to date; and
(iii) within 90 days after the end of each fiscal year commencing
with the current fiscal year of the Corporation, (A) the audited
balance sheet of the Corporation at the end of such fiscal year,
together with comparisons to the balance sheet of the Corporation at
the end of the prior fiscal year and to the current Budget, (B) the
audited statements of income and cash flows of the Corporation for
such fiscal year, together with comparisons to the statements of
income and cash flows of the Corporation for the prior fiscal year and
to the current Budget, and (C) an audit report of Ernst & Young,
independent certified public accountants, on such balance sheets and
statements; and
(iv) any other financial and operating data and other information
relating to the Corporation and each Subsidiary as the Purchaser may
reasonably request;
(v) all information made available to the Corporation's
shareholders or directors, at the same time as such information is
delivered to such persons; and
(vi) monthly management reports in a form reasonably acceptable
to the Purchaser.
(b) All financial information to be delivered under this Section shall
be in accordance with the books and records of the Corporation and shall
have been prepared in accordance with GAAP, subject to year-end and audit
adjustments.
7.8. Payment of Obligations.
The Corporation shall, and shall cause each Subsidiary to, pay or discharge
or cause to be paid or discharged all material claims or demands, and all Taxes
levied or imposed upon the Corporation or its Subsidiaries or upon the income,
profits or property of the Corporation or its
21
Subsidiaries; provided, however, that the Corporation or such Subsidiary shall
not be required to pay or discharge or cause to be paid or discharged any such
claim, demand, or Tax the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
provision has been made.
7.9. Insurance.
The Corporation shall, and shall cause each Subsidiary to, maintain with
financially sound and reputable insurers such insurance as may be required by
law and such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated and
exercising sound business practice.
7.10. Certain Notices.
The Corporation shall promptly notify the Purchaser of (i) the commencement
or notice of any threat of any Proceeding, dispute or grievance against or
affecting the Corporation, which, if adversely determined, might reasonably be
expected to have a Material Adverse Effect, (ii) any material default under any
indebtedness of the Corporation and (iii) any material default or breach under
any of the items required to be listed on Schedule 4.10(a) or any of the items
which would have been required to be listed on Schedule 4.10(a) if such item
were effective prior to the date hereof.
7.11. Conduct of Business.
The Corporation shall (i) take all actions required to assure that the
Corporation remains duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) take all actions
required to assure that the Corporation maintains all Permits to conduct its
business, and (iii) conduct its business in compliance with all Laws.
7.12. Related Transactions.
Excluding any existing arrangements between Winstar Communications, Inc.
and MCI WorldCom, Inc., the Corporation shall not directly or indirectly enter
into any transaction with any Related Party, other than any transaction entered
into in the ordinary course of business and on terms and conditions not less
favorable to the Corporation as the terms and conditions which would apply in a
similar transaction negotiated on an arms-length basis with a party that is not
a Related Party. "Related Party" means (a) each current or future director or
executive officer of the Corporation, (b) each parent, sibling, spouse, or
descendant of any of the foregoing, (c) each entity of which any of the
foregoing is a director, officer, partner or holder of more than 10% of the
outstanding voting power of any class of capital stock and (d) any person or
entity which is the beneficial owner of 5% or more of the outstanding voting
power of the Corporation.
7.13. Internal Controls.
(a) Internal Controls.
22
The Corporation maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization, (ii) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets and (iii) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
7.14. Board Designees.
The Corporation shall expand the number of members on its Board of
Directors ("Board") by two. Each of the two Purchasers that purchase the largest
number of Class E Preferred Stock pursuant to this Agreement shall be entitled
to appoint one member to the Board for so long as such Purchaser continues to
own Shares and/or Conversion Shares which together represent at least 40% of the
number of shares of Common Stock issuable upon conversion or redemption of the
Class E Preferred Stock initially purchased by such Purchaser (without giving
effect to anti-dilution rights in the Class E Certificate of Designation). The
persons so elected to be members of the Board shall be entitled to serve on each
of the Audit, Compensation, Nominating and any other committee created by the
Board; provided, however, that in the event any such committee fails to satisfy
specific requirements under the rules and regulations of the Securities and
Exchange Commission any exchange or trading system due to such persons
affiliations, such person will agree to serve solely as an observer of such
committee. Such appointed directors shall be entitled to receive the same
compensation that is paid to other non-management Board members and committee
members and shall be entitled to receive reimbursement for all reasonable costs
incurred in attending such meetings, including, but not limited to, food,
lodging and transportation. To the extent permitted by law, the Corporation will
indemnify such persons and the Purchasers who elected such persons for the
actions of such persons as members of the Board and/or any committee thereof,
unless such actions are found by a court of law to have been grossly and
intentionally negligent. As long as such persons remain as members of the Board,
the Corporation will maintain director and officer insurance policies in amounts
and on terms, which are reasonable for companies similarly situated to the
Corporation and, reasonably acceptable to the Purchasers that appointed such
designees. Any vacancy in the position of a director appointed pursuant to this
Section 7.14 shall be filled by and only by the Purchaser that appointed the
director whose position has become vacant. Each such director may, during his or
her term of office, be removed at any time, with or without cause, by and only
by the Purchaser who appointed such director.
In addition, any Purchaser making an initial investment of $20 million or
more of the Class E Preferred Stock who does not have a member of its
organization serving on the Board at the time of such Board or Committee
meeting, will have the right to appoint a non-voting Board observer with full
information rights. This right shall continue for so long as such Purchaser
continues to own Shares and/or Conversion Shares which together represent at
least 20% of the number of shares of Common Stock issuable upon conversion or
redemption of the Class E Preferred Stock initially purchased by such Purchaser
(without giving effect to anti-dilution rights). Such observer shall be entitled
to be reimbursed for all reasonable, customary expenses
23
associated with attending the Board meetings, but shall not be entitled to any
other form of compensation.
The Corporation shall give written notice, to the Purchaser who nominated a
person to be a Board member and/or observer and to such persons and observers,
of each Board meeting and shall provide to such persons an agenda and minutes of
such Board meeting no later than it gives such notice and provides such items to
the other Board members.
7.15. Reserved.
7.16. Purchaser Lock-Up.
The Purchaser agrees that, without the consent of the Corporation, it will
not directly or indirectly offer, sell, dispose of, pledge, encumber or
otherwise transfer any of the Shares or the Conversion Shares until six months
after the consummation of the Company's initial public offering of Common Stock.
7.17. Tag-Along Agreements.
Prior to the Closing the Corporation will use its commercially reasonable
best efforts to cause the Purchasers to be joined as parties to the Tag-Along
Rights Agreements entered into (i) among the Corporation, Silicon Graphics, Inc.
and MCI WorldCom, Inc. dated March 4, 1999; (ii) two separate tag-along
agreements regarding the Corporation, Silicon Graphics, Inc., MCI WorldCom,
Inc., and CCPRE-Eagan LLC, each dated September 30, 1999; and (iii) the Right of
First Refusal Agreement dated December 16, 1996 among Edward J. Driscoll, Allen
Witters and MCI WorldCom, Inc. (collectively "Restricted Stock Agreements").
7.18. Consents.
Prior to the Closing, the Corporation shall use its commercially reasonable
best efforts to obtain all consents and approvals of third parties, if any,
required to consummate the transactions contemplated by this Agreement so that
such consummation shall not conflict with or cause a breach of or default under
any agreement or other obligation binding upon the Corporation, including
without limitation all such consents and approvals required with respect to its
obligations for borrowed money and under its Articles of Incorporation and
Certificates of Designation.
Section 8. Registration Rights of the Purchaser.
8.1. Demand Registration.
(a) Grant of Right. The Corporation agrees to register on two
occasions, upon written demand ("Initial Demand Notice") of the Purchaser,
all of the Conversion Shares, regardless of whether the Shares have been
converted (the "Registrable Securities"). The Corporation will file a
registration statement covering the Registrable Securities within 60 days
after receipt of the Initial Demand Notice and use its best efforts to have
such registration statement declared effective promptly thereafter. The
demand for registration may be made at
24
any time during a period commencing on the earlier of (i) the six month
anniversary of the consummation of the Corporation's initial public
offering of its Common Stock, and (ii) the one year anniversary of the date
Shares are first issued.
(b) Terms. The Corporation shall bear all fees and expenses attendant
to registering the Registrable Securities, including the expenses of one
legal counsel selected by the Purchaser to represent them in connection
with the sale of the Registrable Securities but not including any and all
underwriting commissions and discounts which will be the responsibility of
the Purchaser participating in the underwriting. The Corporation will
qualify or register the Registrable Securities in such states as are
reasonably requested by the Purchaser. The Corporation shall cause any
registration statement filed pursuant to the demand rights granted under
this Section to remain effective with respect to the Registrable Securities
covered by such registration statement until all such securities have been
sold.
8.2. "Piggy-Back" Registration.
(a) Grant of Right. The Purchaser shall have the right at any time and
from time to time to include the Registrable Securities as part of any
other registration of securities filed by the Corporation (other than
pursuant to Form S-4, Form S-8 or any equivalent forms or in connection
with the Corporation's initial public offering to the extent that no other
selling shareholder is included in the registration statement).
Notwithstanding the foregoing, if, in the written opinion of the managing
underwriter or underwriters of a public offering by the Corporation of its
shares of Common Stock, the inclusion of the Registrable Securities, when
added to the securities being registered by the Corporation, will exceed
the maximum amount of the Corporation's securities that can be marketed
without materially and adversely affecting the entire offering, then (i)
the Corporation will include in such registration first, only those
securities, the holders of which as of the date hereof have piggy-back
registration rights (as listed on Schedule 8.2), second, the Registrable
Securities allocated (if necessary) among the holders thereof on a pro rata
basis based on the number of Registrable Securities requested to be
included in such registration statement, and third, capital stock of the
Corporation to be sold for the account of others with applicable piggy-back
registration rights, with such priorities among them as the Corporation
shall decide. If, subsequent to the exercise of all of the demand
registration rights referred to in Section 8.1, any Registrable Securities
requested to be included in an offering ("Other Offering") pursuant to the
"piggy-back" rights described in this Section 8.2. are not so included
because of the operation of the first proviso of the preceding sentence,
then the holders of the Registrable Securities shall have the right to
require the Corporation, at its expense, to prepare and file a registration
statement under the Securities Act covering such Registrable Securities.
(b) Terms. The Corporation shall bear all fees and expenses attendant
to registering the Registrable Securities, including the reasonable
expenses of any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities, but the Purchaser
participating in the registration shall pay any and all discounts and
underwriting commissions. In the event of such a proposed registration, the
Corporation shall furnish the owners of the Registrable Securities with not
less than 30 days written notice prior to the proposed date of filing of
such registration statement. Such notice shall continue to be given
25
for each registration statement filed by the Corporation until such time as
all of the Registrable Securities have been sold by the Purchaser. The
owners of the Registrable Securities shall exercise the "piggy-back" rights
provided for herein by giving written notice within 15 days of the receipt
of the Corporation's notice of its intention to file a registration
statement. The Corporation shall cause any registration statement filed
pursuant to the "piggyback" rights granted under this Section to remain
effective with respect to the Registrable Securities covered by such
registration statement until all of the such securities have been sold by
the Purchaser. Notwithstanding the foregoing, in no event shall the
Corporation be obligated to maintain the effectiveness of any registration
statement filed pursuant to Sections 8.1 and 8.2 for a period in excess of
three years from the initial date of issuance of the Shares.
8.3. General Terms.
(a) Indemnification. The Corporation shall indemnify the owner(s) of
the Registrable Securities to be sold pursuant to any registration
statement hereunder and each person, if any, who controls such person
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage, expense or liability
(including all reasonable attorneys' fees and other expenses reasonably
incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Securities
Act, the Exchange Act or otherwise, arising from such registration
statement, except to the extent that any loss, claim, damage, expense or
liability arises out of or relates to written information furnished by or
on behalf of the Purchaser, for inclusion in such registration statement
("Purchaser Information"). The owner(s) of the Registrable Securities to be
sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Corporation
against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which it may become subject under the Securities Act, the Exchange Act or
otherwise, arising from Purchaser Information furnished by or on behalf of
such owner(s).
(b) Exercise of Shares. Nothing contained in this Section 8 shall be
construed as requiring the Purchaser to convert the Shares prior to or
after the filing of any registration statement or the effectiveness
thereof.
(c) Documents Delivered to Holders. The Corporation shall deliver
promptly to the Purchaser participating in any of the foregoing offerings
who requests it, all correspondence between the Securities and Exchange
Commission and the Corporation, its counsel or auditors and all memoranda
relating to discussions with the Securities and Exchange Commission or its
staff with respect to the registration statement. The Corporation also
shall furnish to the Purchaser participating in any of the foregoing
offerings that are underwritten, and to each underwriter of any such
offering, a signed counterpart, addressed to the Purchaser and underwriter,
of (i) an opinion of counsel to the Corporation, dated the effective date
of such registration statement (and an opinion dated the date of the
closing under the underwriting agreement relating to such offering), and
(ii) a "cold comfort" letter dated the effective date of such registration
statement (and a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who
have issued a report on the
26
Corporation's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities. In the event that the
Purchaser requests information pursuant to this Section (c), then, prior to
furnishing such information, the Corporation shall have the right to
require the Purchaser to enter into a confidentiality agreement with the
Corporation with respect to any information to be provided to the Purchaser
that the Corporation reasonably considers to be proprietary, non-public or
otherwise confidential.
8.4. Underwriting Agreement.
In the event that the demand registration filed by the Purchaser pursuant
to Section 8.1(a) is for an underwritten offering, then the Purchaser shall have
the right to select the underwriters of the offering, which underwriters shall
be reasonably acceptable to the Corporation. The Corporation shall enter into an
underwriting agreement with the managing underwriter selected by the Purchaser
whose Registrable Securities are being registered pursuant to Section 8.1. Such
agreement shall be reasonably satisfactory in form and substance to the
Corporation, each such person and such managing underwriter, and shall contain
such representations, warranties and covenants by the Corporation and such other
terms as are customarily contained in agreements of that type used by the
underwriter. Such persons shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all of the representations, warranties and
covenants of the Corporation to or for the benefit of such underwriter shall
also be made to and for the benefit of such persons. Such persons shall not be
required to make any representations or warranties to or agreements with the
Corporation or the underwriter except as they may relate to such persons, their
shares and their intended methods of distribution.
8.5. Road Show.
In connection with any underwritten public offering concerning the
Purchaser, the Corporation will participate in road-shows regarding such
offering.
8.6. Reserved.
Section 9. Conditions to Each Closing.
9.1. Conditions of Each Party.
The respective obligations of each of the Corporation and the Purchaser to
consummate the transactions contemplated hereby are subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part to the extent permitted by applicable
law;
(a) All filings required to be made, and all consents, approvals,
permits and authorizations required to be obtained, prior to the Closing,
from any Governmental Authorities
27
in connection with the execution and delivery by the parties of the
Documents and the consummation of the transactions contemplated thereby
shall have been made or obtained; and
(b) No court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) or taken any action that
prohibits the consummation of the transactions contemplated by this
Agreement; provided, however, that any party invoking this condition shall
use its reasonable best efforts to have any such judgment, decree,
injunction or order vacated.
9.2. Conditions to Obligations of the Purchaser.
The obligations to be performed by the Purchaser under this Agreement at or
after the Closing are subject to the satisfaction at or prior to each of the
Closing of the following conditions, unless waived by the Purchaser:
(a) Material Adverse Effect. There shall not have been any event which
has or is reasonably likely to have a Material Adverse Effect.
(b) Accuracy of Representations and Warranties. Each of the
representations and warranties of the Corporation contained in this
Agreement and in any certificate or other writing delivered by the
Corporation pursuant hereto qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all
material respects, in each case at and as of the Closing Date as if made at
and as of such respective times (except to the extent it relates to a
particular date).
(c) Performance of Covenants. The Corporation shall have performed in
all material respects all covenants and agreements required to be performed
by it under this Agreement and each other Document.
(d) Class E Certificate of Designation. Prior to the Closing, the
Class E Certificate of Designation shall have been filed with and accepted
by the Secretary of State of the State of Minnesota and shall have become
effective.
(e) Stock Certificates. At the Closing Stock certificates representing
the Class E Preferred Stock sold at such closing shall have been delivered
by the Corporation to the Purchaser.
(f) Use of Proceeds. At the Closing the Purchaser shall have received
a certificate of the Corporation describing in reasonable detail the
proposed use of proceeds received by the Corporation upon the sale of the
Shares.
(g) Legal Opinion. Purchaser shall have received an opinion dated as
of the Closing Date of Willkie Farr & Gallagher, in a form and substance
attached hereto as Exhibit C.
28
(h) Officer's Certificate. At the Closing the Purchaser shall receive
a certificate from an officer of the Corporation to the effect that all
conditions set forth in this Section 9.2 shall have been satisfied.
(i) Required Consents and Approvals. Prior to the Closing Date, the
Corporation shall have received all consents and approvals of third
parties, if any, required to consummate the transactions contemplated by
this Agreement so that such consummation shall not conflict with or cause a
breach of or default under any agreement or other obligation binding upon
the Corporation, including without limitation all such consents and
approvals required with respect to its obligations for borrowed money and
under its Articles of Incorporation and Certificates of Designation.
9.3. Conditions to Obligations of the Corporation.
The obligations to be performed by the Corporation under this Agreement at
or after the Closing are subject to the satisfaction at or prior to the Closing
and the Option Closing, if any, of the following conditions, unless waived by
the Corporation:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of the Purchaser contained in this Agreement
and in any certificate or other writing delivered by the Purchaser pursuant
hereto qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, in each
case at and as of the Closing Date as if made at and as of such respective
times (except to the extent it relates to a particular date);
(b) Performance of Covenants. The Purchaser shall have performed in
all material respects all covenants and agreements required to be performed
by it under this Agreement and each other Document to which it is a party.
Section 10. Termination.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Closing:
(a) by joint written agreement of the Corporation and the Purchaser;
(b) by the Corporation, if any Purchaser has breached any
representation, warranty, covenant or agreement contained in this Agreement
and has not cured such breach within ten (10) business days after written
notice to Purchaser (provided that the Corporation is not then in material
breach of the terms of this Agreement; and provided further that no cure
period shall be required for a breach which by its nature cannot be cured);
(c) by the Purchaser, if the Corporation has breached any
representation, warranty, covenant or agreement contained in this Agreement
and has not cured such breach within ten (10) business days after written
notice to the Corporation (provided that the Purchaser is not then in
material breach of the terms of this Agreement; and provided further that
no cure period shall be required for a breach which by its nature cannot be
cured);
29
(d) by any party, if the Closing has not occurred on or before March
31, 2000; provided, however, that a party may not terminate this Agreement
pursuant to this Section if the failure of such party to fulfill any of its
obligations hereunder shall have been the principal reason that the Closing
shall not have occurred on or before said date;
(e) by any party if there shall be a change of law or regulation that
makes consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions contemplated
hereby would violate any nonappealable, final order, decree or judgment of
any court or governmental body having competent jurisdiction; or
The party desiring to terminate this Agreement pursuant to the above-referenced
clauses shall give notice of such termination to the other parties hereto.
10.1. Effect of Termination.
(a) If this Agreement is terminated, such termination shall be without
liability of either party (or any shareholder, director, officer, employee,
agent, consultant or representative of such party) to the other parties to
this Agreement; provided that if such termination shall result from the (i)
willful failure by any party to fulfill a condition to the performance of
the obligations of the other parties, (ii) failure by any party to perform
a covenant of this Agreement, (iii) breach by any party hereto of any
representation, warranty, covenant or agreement contained herein, or (iv) a
Closing Failure by any party, such party shall be fully liable for any and
all damages incurred or suffered by the other parties as a result of such
failure or breach.
Section 11. Miscellaneous
11.1. Survival.
The representations, warranties, covenants and other agreements contained
herein, shall survive the Closing and the consummation of the transactions
contemplated hereby. No right of the Purchaser for indemnification hereunder
shall be affected by any examination made for or on behalf of the Purchaser, the
knowledge of any of the Purchaser's officers, directors, shareholders, employees
or agents, or the acceptance by the Purchaser of any certificate or opinion.
11.2. Indemnification.
(a) The Corporation shall indemnify, defend and hold the Purchaser and
its officers, directors, employees, shareholders, partners, members,
affiliates and agents harmless against all Liability, loss or damage,
together with all reasonable costs and expenses related thereto (including
reasonable legal fees and expenses), relating to or arising from the
untruth, inaccuracy or breach of any of the representations, warranties or
agreements of the Corporation contained in this Agreement.
(b) The Purchaser shall indemnify, defend and hold the Corporation and
its respective officers, directors, employees, shareholders, partners,
members, affiliates and agents harmless against all Liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including reasonable legal fees and expenses), relating to or arising from
the
30
untruth, inaccuracy or breach of any of the representations, warranties or
agreements of the Purchaser contained in this Agreement.
(c) Promptly after receipt by any party entitled to indemnification
under either Section 11.2(a) or Section 11.2(b) (an "indemnified party") of
notice of the commencement of any action involving a claim which may give
rise to a claim for indemnity under the preceding paragraphs of this
Section, the indemnified party will give written notice to the party
against whom indemnification is sought (the "indemnifying party") of the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate
in and to assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be responsible
for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof; provided, however, that if
any indemnified party shall have reasonably concluded that there may be one
or more legal or equitable defenses available to it which are additional to
or conflict with those available to the indemnifying party, or that such
claim or litigation involves or could have an effect upon matters beyond
the scope of the indemnity agreement provided in this Section, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party and the indemnifying party shall
reimburse the indemnified party and any person controlling the indemnified
party for that portion of the fees and expenses of any counsel retained by
the indemnified party which is reasonably related to the matters covered by
the indemnity agreement provided in this Section.
(d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, claim, damage, liability or action referred to
herein, then the indemnifying party, in lieu of indemnifying the
indemnified party hereunder, shall contribute to the amounts paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions which resulted in such loss, claim, damage or liability as well
as any other relevant equitable considerations. The amount paid or payable
to an indemnified party as a result of the losses, claims, damages,
liabilities or expenses referred to above shall be deemed to include any
legal or other expenses reasonably incurred in connection with
investigating or defending the same.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
person of the indemnified party and will survive the transfer of
securities.
11.3. Nominee; Benefits.
All references to Purchaser in this Agreement shall include the person or
persons for whom the Purchaser is a nominee, and the benefits of and rights and
obligations under the Agreement shall accrue to such person or persons which
have a beneficial interest in the Class E
31
Preferred Stock being acquired hereunder and for whom the Purchaser is a
nominee. Upon request, the Corporation shall provide separate stock certificates
for each person or persons which have a beneficial interest in the Class E
Preferred Stock being acquired hereunder and for whom the Purchaser is a
nominee. The Purchaser makes the representations in Section 5 for all such
persons for whom the Purchaser is a nominee.
11.4. Assignment; Parties in Interest.
This Agreement shall bind and inure to the benefit of the parties and each
of their respective successors and permitted assigns (it being understood that
this Agreement may be assigned by the Purchaser without the consent of any
person solely in connection with the transfer of Shares).
11.5. Entire Agreement.
This Agreement (including all Schedules and Exhibits hereby) together with
the other Documents contain the entire understanding of the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
11.6. Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:
(a) if to the Corporation:
WAM!NET INC.
655 Lone Oak Drive, Building A
Eagan, Minnesota 55121
Attention: Edward J. Driscoll, III, President
Telephone: (651) 256-2165
Facsimile: (651) 994-9591
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attention: Daniel D. Rubino, Esq.
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
(b) if to the Purchaser:
32
Cerberus Partners, L.P.
450 Park Avenue
New York, NY 10022
Attention: General Partner
Telephone: (212) 891-2100
Telecopier: (212) 750-5212
In any case, with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Peter Halasz
Telephone: (212) 756-2238
Telecopier: (212) 593-5955
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the date of receipt.
11.7. Amendments.
The terms and provisions of this Agreement may only be modified or amended
pursuant to an instrument signed by all of the parties hereto.
11.8. Counterparts.
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
11.9. Headings.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.10. Governing Law.
Except as to matters governed by the MBCA, this Agreement shall be governed
by and construed in accordance with the domestic laws of the State of New York,
without giving effect to any law or rule that would cause the laws of any
jurisdiction other than the State of New York to be applied.
11.11. Jurisdiction.
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The parties hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may only be brought
in the United States District Court for the Southern District of New York or any
New York State court sitting in New York City, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in the Section entitled "Notices" shall be deemed
effective service of process on such party.
11.12. No Waiver.
No delay by or on behalf of an Purchaser in exercising any rights conferred
hereunder, and no course of dealing between an Purchaser and the Corporation
shall operate as a waiver of any right granted hereunder, unless expressly
waived in writing by the party whose waiver is alleged.
11.13. Binding Effect
All covenants, representations, warranties and other stipulations in this
Agreement and other documents referred to herein, given by or on behalf of any
of the parties hereto, shall bind and inure to the benefit of the respective
successors, heirs, personal representatives and assigns of the parties hereto.
11.14. Cumulative Powers.
No remedy herein conferred upon the Purchaser or any holder of the Class E
Preferred Stock is intended to be exclusive of any other remedy, and each such
remedy shall be cumulative and in addition to every other remedy given hereunder
or now or hereafter existing at law, or in equity or by statue or otherwise.
34
IN WITNESS WHEREOF, the parties have executed and delivered this Stock
Purchase Agreement on the date first above written.
WAM!NET INC.
By: /s/ Edward J. Driscoll III
-----------------------------------
Name:
Title:
Address: 655 Lane Oak Drive
Building A
Eagan, Minnesota 55121
CERBERUS PARTNERS, L.P.
by its General Partner
CERBERUS ASSOCIATES, L.L.C.
By: /s/ Stephen A. Feinberg
-----------------------------------
Name: Stephen A. Feinberg
Title: Managing Member
Address: 450 Park Avenue
New York, NY 10022
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Index
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Exhibit A Statements of Rights and Preferences of Class
E Preferred Stock
Exhibit C Willkie Farr & Gallagher Legal Opinion
Schedule I Certain Management
Schedule 4.1(a) Articles of Incorporation and Bylaws
Schedule 4.1(b) List of Subsidiaries
Schedule 4.5(a) Designation and Classes of Capital Stock
Schedule 4.5(a)(vi) Right of First Refusal Agreements
Schedule 4.5(b) Options, Warrants and Convertible Securities
Schedule 4.5(c)(i) Purchase Agreements
Schedule 4.5(c)(ii) Registration Rights Agreements
Schedule 4.5(e) Record Holders
Schedule 4.7 Financial Statements
Schedule 4.10(a) Material Contracts
Schedule 4.12 Real Property
Schedule 4.13 Intellectual Property
Schedule 4.14 License to Provide Communications Services
Schedule 4.15 Litigation
Schedule 4.18 Employee Pension Benefit Plans
Schedule 4.20 Related Transactions
Schedule 8.2 Piggy-back Registration Rights