sec document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 5)(1)
Metro One Telecommunications, Inc.
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(Name of Issuer)
Common Stock, No Par Value
--------------------------
(Title of Class of Securities)
59163F 10 5
-----------
(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 5, 2007
------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
NOTE. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. SEE Rule 13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 59 Pages)
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(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
NOTES).
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CUSIP No. 59163F 10 5 13D Page 2 of 59 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
EVEREST SPECIAL SITUATIONS FUND L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 713,928(1)
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
502,390
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
713,928(1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.1%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Includes 211,538 shares of Common Stock over which the Reporting Persons
have voting power, as a result of the purchase of 44 shares of Preferred Stock
that are convertible into 247,191 shares of Common Stock (subject to certain
adjustments) only upon approval from the Issuer's shareholders. Such shares of
Preferred Stock are entitled to vote together with Common Stock on a discounted
as-converted basis (the discount is equal to the difference between the
conversion price and the market price on the date of issuance) on all matters
other than the approval of the transactions contemplated by the Purchase
Agreement (as defined herein). See Item 4.
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CUSIP No. 59163F 10 5 13D Page 3 of 59 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MAOZ EVEREST FUND MANAGEMENT LTD.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
ISRAEL
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 713,928(1)
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
502,390
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
721,428(1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.1%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Includes 211,538 shares of Common Stock over which the Reporting Persons
have voting power, as a result of the purchase of 44 shares of Preferred Stock
that are convertible into 247,191 shares of Common Stock (subject to certain
adjustments) only upon approval from the Issuer's shareholders. Such shares of
Preferred Stock are entitled to vote together with Common Stock on a discounted
as-converted basis (the discount is equal to the difference between the
conversion price and the market price on the date of issuance) on all matters
other than the approval of the transactions contemplated by the Purchase
Agreement (as defined herein). See Item 4.
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CUSIP No. 59163F 10 5 13D Page 4 of 59 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ELCHANAN MAOZ
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
ISRAEL
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 721,428(1)(2)
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
509,890(2)
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
721,428(1)(2)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.1%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Includes 211,538 shares of Common Stock over which the Reporting Persons
have voting power, as a result of the purchase of 44 shares of Preferred Stock
that are convertible into 247,191 shares of Common Stock (subject to certain
adjustments) only upon approval from the Issuer's shareholders. Such shares of
Preferred Stock are entitled to vote together with Common Stock on a discounted
as-converted basis (the discount is equal to the difference between the
conversion price and the market price on the date of issuance) on all matters
other than the approval of the transactions contemplated by the Purchase
Agreement (as defined herein). See Item 4.
(2) Includes 7,500 options granted to Elchanan Maoz in his capacity as director
of the Issuer, and exercisable within 60 days from the date hereof.
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CUSIP No. 59163F 10 5 13D Page 5 of 59 Pages
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The following constitutes Amendment No. 5 ("Amendment No. 5") to the
Schedule 13D filed by the undersigned. This Amendment No. 5 amends the
Schedule 13D as specifically set forth.
Item 3 is hereby amended to include the following:
The aggregate purchase price of the 44 shares of Preferred Stock (as
defined below) purchased by Everest and reported in this Amendment No. 5 is
$440,000.
Item 4 is hereby amended to include the following:
On June 5, 2007, Everest entered into a Securities Purchase Agreement (the
"Purchase Agreement") by and among Everest, the Issuer and Columbia Ventures
Corporation ("Columbia"). Pursuant to the Purchase Agreement, on June 5, 2007,
the Issuer issued (i) 220 shares of its newly authorized Series A Convertible
Preferred Stock, no par value, at a purchase price of $10,000 per share (the
"Preferred Stock"), of which 44 shares were issued to Everest, (ii) Stock
Purchase Warrants to purchase an additional 77 shares of the Preferred Stock
(representing 35% of the total shares of Preferred Stock issued on such date) at
an exercise price of $10,000 per share during a two-year exercise period (the
"Warrants"), of which Warrants to purchase 15.4 shares were issued to Everest,
and (iii) Senior Secured Convertible Revolver Bridge Note having an aggregate
maximum principal amount of $7,800,000, and, subject to approval of the Issuer's
shareholders, convertible into shares of Preferred Stock (the "Notes"), of which
a Note with a maximum principal amount of $1,560,000 was issued to Everest.
The Preferred Stock is convertible into shares of Common Stock at an
initial conversion price of $1.78 per share. However, under the terms of the
Preferred Stock, the shares of Preferred Stock held by Everest are not
convertible into shares of Common Stock until the issuance of such Preferred
Stock is approved by the Issuer's shareholders. The Warrants issued to Everest
are also not exercisable until the issuance of such Warrants is approved by the
Issuer's shareholders. At the initial conversion price, the 44 shares of
Preferred Stock issued to Everest are convertible into an aggregate of 247,191
shares of Common Stock and, if the Warrants issued to Everest are exercised in
full, the additional 15.4 shares of Preferred Stock will be convertible into an
aggregate of 86,516 shares of Common Stock.
Under the terms of the Preferred Stock, the shares of Preferred Stock will
vote together with shares of Common Stock on all matters other than the approval
of the transactions contemplated by the Purchase Agreement. Holders of Preferred
Stock are entitled to the number of votes per share equal to the quotient
obtained by dividing (A) the conversion price by (B) $2.08 (the market price of
the Common Stock on the date of issuance), for each share of Common Stock into
which such shares of Preferred Stock could be converted. Based on the initial
conversion price of $1.78, the 44 shares of Preferred stock held by Everest
would entitle it to exercise voting power over 211,538 shares of Common Stock.
For a description of the full terms and conditions of the Preferred Stock,
see the Articles of Amendment to the Third Restated Articles of Incorporation of
the Issuer, which are attached as an exhibit to the Issuer's Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 8, 2007.
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CUSIP No. 59163F 10 5 13D Page 6 of 59 Pages
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The Notes have a four-month term and accrue interest due at maturity at
13% per annum on outstanding amounts. Funds available under the Notes may be
drawn by the Issuer only when its non-restricted cash balance falls below $3
million and the amount that can be drawn may not exceed the amount necessary to
raise the Issuer's non-restricted cash balance to $3.5 million. No amounts have
yet been drawn under the Notes. The Issuer has granted a security interest in
certain of its assets as security for repayment of amounts outstanding under the
Notes. If the Issuer's shareholders fail to approve the issuance of the
additional shares, any amounts outstanding under the Notes will become
immediately due and payable.
Immediately following shareholder approval, the Issuer will draw down the
full remaining principal amount of the Notes and the Notes will be immediately
converted into a total of 780 shares of Preferred Stock, with the Note owned by
Everest being converted into 156 shares of Preferred Stock. Any accrued interest
will also convert into Preferred Stock. Upon conversion of the Notes, the Issuer
will issue additional Warrants to purchase an aggregate of 273 shares of
Preferred Stock (representing 35% of the principle amount of the Notes), of
which Warrants to purchase 54.6 shares will be issued to Everest. The issuance
of the Preferred Stock and Warrants upon conversion of the Notes is subject to
certain closing conditions under to the Purchase Agreement.
Copies of the Purchase Agreement, the Warrant issued to Everest and the
Note issued to Everest are attached hereto as exhibits and incorporated herein
by reference.
Item 5(a) is hereby amended and restated to read as follows:
(a) At the close of business on June 8, 2007, Everest may be deemed to
beneficially own 713,928 shares of Common Stock, including the 211,538 shares of
Common Stock over which Everest has voting power, but not dispositive power,
through its ownership of 44 shares of Preferred Stock as described above, which
constitutes approximately 11.1% of the outstanding shares of the Common Stock as
of May 11, 2007 (based upon the 6,233,326 shares of Common Stock that were
reported to be outstanding in the Issuer's quarterly report for the period March
31, 2007 on Form 10-Q and filed with Securities and Exchange Commission on March
15, 2007, plus the 211,538 shares of Common Stock over which Everest has voting
power, but not dispositive power). MEFM, by virtue of its status as the general
partner of Everest, may be deemed to beneficially own the shares of Common Stock
held by Everest. Elchanan Maoz may be deemed to beneficially own 721,428 shares
of Common Stock (consisting of (i) 713,928 shares of Common Stock beneficially
owned by Everest that Mr. Maoz, by virtue of his status as a controlling
stockholder of MEFM, the general partner of Everest, may be deemed to
beneficially own and (ii) 7,500 options granted to Mr. Maoz in his capacity as
director of the Issuer and exercisable within 60 days from the date hereof).
MEFM and Elchanan Maoz disclaim beneficial ownership of such shares of Common
Stock except to the extent of their pecuniary interest therein.
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CUSIP No. 59163F 10 5 13D Page 7 of 59 Pages
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Item 6 is hereby amended to include the following:
In connection with the execution of the Purchase Agreement, the Issuer
entered into a Registration Rights Agreement with the Everest and Columbia dated
as of June 5, 2007 (the "Registration Rights Agreement"), which requires the
Issuer to use its best efforts to register on Form S-3 under the Securities Act
of 1933, as amended (the "Securities Act"), the shares of Common Stock issuable
upon conversion of the Preferred Stock (including those shares of Preferred
Stock issuable on exercise of the Warrants). Under the Registration Rights
Agreement, the Issuer is required to file a registration statement covering such
shares of Common Stock within 30 days from the date of the Purchase Agreement,
subject to extension upon certain conditions. The Registration Rights Agreement
also provides Everest with demand and piggyback registration rights under the
Securities Act for shares of Common Stock issuable upon conversion of the
Preferred Stock (including shares of Preferred Stock issuable on exercise of the
Warrants or conversion of the Notes). A copy of the Registration Rights
Agreement is attached hereto as exhibits and incorporated herein by reference.
Other than as described herein, there are no contracts, arrangements,
understandings or relationships among the Reporting Persons, or between the
Reporting Persons and any other person, with respect to the securities of the
Issuer.
Item 7 is hereby amended to include the following exhibits:
Exhibit A -- Securities Purchase Agreement, dated June 5, 2007, by and
between the Issuer, Everest and Columbia.
Exhibit B -- Stock Purchase Warrant, dated June 5, 2007, issued to
Everest.
Exhibit C -- Senior Secured Convertible Revolver Bridge Note, dated June
5, 2007, issued to Everest.
Exhibit D -- Registration Rights Agreement, dated June 5, 2007, by and
between the Issuer, Everest and Columbia.
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CUSIP No. 59163F 10 5 13D Page 8 of 59 Pages
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SIGNATURES
After reasonable inquiry and to the best of his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: June 11, 2007 EVEREST SPECIAL SITUATIONS FUND L.P.
By: Maoz Everest Fund Management Ltd.,
its General Partner
By: /s/ Elchanan Maoz
---------------------------------------
Name: Elchanan Maoz
Title: Chairman and Chief Executive Officer
MAOZ EVEREST FUND MANAGEMENT LTD.
By: /s/ Elchanan Maoz
---------------------------------------
Name: Elchanan Maoz
Title: Chairman and Chief Executive Officer
/s/ Elchanan Maoz
-------------------------------------------
ELCHANAN MAOZ
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CUSIP No. 59163F 10 5 13D Page 9 of 59 Pages
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EXHIBIT INDEX
Exhibit Page
A Securities Purchase Agreement, dated June 5, 2007, by and 10
between Metro One Telecommunications, Inc., Columbia
Ventures Corporation and Everest Special Situations Fund
L.P.
B Stock Purchase Warrant, dated June 5, 2007, issued to 30
Everest Special Situations Fund L.P.
C Senior Secured Convertible Revolver Bridge Note, dated June 38
5, 2007, issued to Everest Special Situations Fund L.P.
D Registration Rights Agreement, dated June 5, 2007, by and 43
between Metro One Telecommunications, Inc., Columbia
Ventures Corporation and Everest Special Situations Fund
L.P.
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CUSIP No. 59163F 10 5 13D Page 10 of 59 Pages
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Exhibit A
METRO ONE TELECOMMUNICATIONS, INC.
SECURITIES PURCHASE AGREEMENT
JUNE 5, 2007
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CUSIP No. 59163F 10 5 13D Page 11 of 59 Pages
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METRO ONE TELECOMMUNICATIONS, INC.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT") is made as of June 5,
2007 by and among Metro One Telecommunications, Inc. (the "COMPANY") and the
purchasers listed on EXHIBIT A attached to this Agreement (each a "PURCHASER"
and together the "PURCHASERS").
RECITALS
A. The Company has authorized the sale and issuance of shares of the
Company's Series A Convertible Preferred Stock (the "PREFERRED STOCK"), warrants
for the purchase of shares of Preferred Stock, in substantially the form
attached to this Agreement as EXHIBIT B (each a "WARRANt", and collectively, the
"WARRANTS") and senior secured convertible revolver bridge notes in
substantially the form attached to this Agreement as EXHIBIT C (each, a "NOTE",
and collectively, the "NOTES", and together with the Preferred Stock and
Warrants, the "SECURITIES");
B. The Purchasers desire to purchase, and the Company desires to issue and
sell, the Securities on the terms and conditions set forth herein.
C. In connection with the issuance and sale of the Securities, the Company
and the Purchasers also intend to enter into (i) a Registration Rights Agreement
of even date herewith (the "REGISTRATION RIGHTS AGREEMENT") and (ii) a Security
Agreement of even date herewith (the "SECURITY Agreement," and together with
this Agreement, the Warrants, the Notes, and the Registration Rights Agreement,
the "TRANSACTION DOCUMENTS"). In addition, the Purchasers intend to enter into
an Intercreditor Agreement (the "INTERCREDITOR AGREEMENT").
AGREEMENT
In consideration of the mutual promises contained herein and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) INITIAL CLOSING. The purchase and sale of an aggregate of two
hundred twenty (220) shares of Preferred Stock, Warrants for the purchase of
seventy-seven (77) shares of Preferred Stock (the "INITIAL WARRANTS"), and up to
seven million eight hundred thousand dollars ($7,800,000) principal amount of
Notes shall take place at the offices of Heller Ehrman LLP, 701 Fifth Avenue,
Seattle, Washington, at 10:00 a.m., on June 5, 2007, or at such other time and
place and such other manner as the Company and the Purchasers mutually agree
upon, orally or in writing, including by electronic means (which time and place
are designated as the "INITIAL CLOSING"). Subject to the terms and conditions of
this Agreement, each Purchaser agrees, severally and not jointly, to purchase at
the Initial Closing and the Company agrees to sell and issue to each Purchaser
(i) the number of shares of Preferred Stock set forth opposite such Purchaser's
name on EXHIBIT A as the Initial Closing Preferred Stock, with each share of
Preferred Stock having a purchase price per share of ten thousand dollars
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CUSIP No. 59163F 10 5 13D Page 12 of 59 Pages
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($10,000), (ii) the Initial Warrant to purchase the number of shares of
Preferred Stock set forth opposite such Purchaser's name on EXHIBIT A as the
Initial Warrant Amount and (iii) a Note in the principal amount set forth
opposite such Purchaser's name on EXHIBIT A. Subject to the terms and conditions
of this Agreement, at the Initial Closing, the Company will deliver to each
Purchaser the shares of Preferred Stock, the Initial Warrant and the Note to be
purchased by such Purchaser against payment of the "Initial Closing Investment
Amount" set forth on EXHIBIT A therefor by wire transfer to a bank account
designated by the Company.
(b) NOTE TAKEDOWN CLOSINGS. From time to time prior to (A) the
conversion of the Notes to Preferred Stock or (B) maturity of the Notes, the
Company may request additional amounts (each, an "ADDITIONAL AMOUNT") to be
drawn under the Notes. The Company may only draw an Additional Amount when its
non-restricted cash balance as reflected on its balance sheet is less than three
million dollars ($3,000,000) and in each such case only up to the amount
necessary to raise the Company's non-restricted cash balance as reflected on its
balance sheet to three million five-hundred thousand dollars ($3,500,000);
PROVIDED; HOWEVER; that the Additional Amounts, in the aggregate, shall not
exceed seven million eight hundred thousand dollars ($7,800,000) (the "TOTAL
NOTE AMOUNT"). If the Company desires and is eligible to draw an Additional
Amount, the Company shall deliver to each Purchaser a written request
("ADDITIONAL REQUEST") for such Purchaser's Pro Rata Percentage (as set forth in
EXHIBIT A) of the Additional Amount. The payment by Purchaser by wire transfer
to a bank designated by the Company of such Purchaser's Pro Rata Percentage of
the Additional Amount (each, a "NOTE TAKEDOWN CLOSING") shall occur on a date as
soon as reasonably possible, but no later than three (3) business days after the
date specified in the Additional Request (each such date, a "NOTE TAKEDOWN
CLOSING DATE"). At each Note Takedown Closing, the Company will amend EXHIBIT A
hereto to reflect the credit extended by each of the Purchasers to the Company
in the Note Takedown Closing and such Purchasers' aggregate credit extended
under the Note as of such date.
(c) SECOND CLOSING. Within one (1) business day following approval
by the Company's shareholders of the issuance of Preferred Stock upon the
conversion of the Notes, the Company shall deliver to each Purchaser a written
request for such Purchaser's remaining amount available under the Note as set
forth on EXHIBIT A (the "REMAINING AMOUNT AVAILABLE"). Subject to the terms and
conditions of this Agreement, each Purchaser agrees, severally and not jointly,
to make payment by wire transfer to a bank designated by the Company of such
Purchaser's Remaining Amount Available (the "SECOND CLOSING"), which shall occur
on a date as soon as reasonably possible but no later than two (2) business days
after the date specified in the written request (the "SECOND CLOSING DATE").
Subject to the terms and conditions of this Agreement and the Notes, at the
Second Closing, the Company will deliver to each Purchaser (A) (i) the shares of
Preferred Stock set forth opposite such Purchaser's name on EXHIBIT A as the
Second Closing Preferred Stock, (ii) additional shares of Preferred Stock
representing payment of interest on the Note and (iii) a Warrant to purchase the
number of shares of Preferred Stock set forth opposite such Purchaser's name on
EXHIBIT A as the Note Conversion Warrants, and (B) a payment by wire transfer,
in lieu of any fractional shares of Preferred Stock, in respect of interest
accrued and payable under the Note.
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CUSIP No. 59163F 10 5 13D Page 13 of 59 Pages
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2. SENIOR SECURITY INTEREST. The indebtedness represented by the Notes
shall be secured by assets of the Company in accordance with the provisions of
the Security Agreement among the Company and the Purchasers in the form attached
to this Agreement as EXHIBIT E, which shall, among other things, provide for
certain affirmative and negative covenants of the Company and a first priority,
perfected security interest in such assets of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Purchaser that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oregon, has qualified to do business in all jurisdictions in
which the absence of such qualification would have a material adverse effect on
the assets, condition (financial or otherwise), affairs, earnings, business or
operations of the Company (a "Material Adverse Effect") and has all necessary
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby and to conduct
its business. Except for the shareholder approval contemplated by Section 5(a),
the execution and delivery of this Agreement by the Company, the performance by
the Company of its obligations hereunder and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies.
(b) NO CONFLICT. The execution, delivery and performance of this
Agreement, the Security Agreement and the Registration Rights Agreement by the
Company and the issuance of the Securities contemplated hereby do not and will
not: (i) violate, conflict with or result in the breach of any provision of the
articles of incorporation or by-laws (or similar organizational documents) of
the Company as in effect on the date hereof; (ii) materially conflict with or
violate any law or governmental order as in effect on the date hereof applicable
to the Company, or any of its assets, properties or businesses; or (iii)
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration of performance required by, suspension, revocation or
cancellation of any rights pursuant to, any material note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement as in effect on the date hereof to which the
Company is a party or by which any of Company's assets or properties is bound or
affected, which individually or in the aggregate would have a Material Adverse
Effect.
(c) ISSUANCE AND DELIVERY OF THE SECURITIES. The Securities have
been duly authorized by the Company and, when issued, sold and delivered in
accordance with this Agreement, the Securities will be (i) validly issued (in
the case of the Preferred Stock and the Warrants), fully paid and nonassessable
------------------------ ----------------------
CUSIP No. 59163F 10 5 13D Page 14 of 59 Pages
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(in the case of the Preferred Stock), (ii) free from all taxes, liens and
charges with respect to the issue thereof, and shall not be subject to
preemptive rights or other similar rights of shareholders of the Company or any
liens or encumbrances and (iii) entitled to the rights set forth in the Amended
and Restated Articles of Incorporation, as amended through the date hereof (the
"ARTICLES")(in the case of the Preferred Stock). The shares of the Company's
common stock ("COMMON STOCK") issuable upon conversion of the Preferred Stock
and the shares of Preferred Stock issuable upon exercise of the Warrants and
conversion of the Notes have been duly authorized and reserved by the Company
and, when issued upon conversion or exercise in accordance with the Articles,
the Notes and Warrants, as applicable, will be validly issued, fully paid and
nonassessable.
(d) AUTHORIZED CAPITAL STOCK. As of the date hereof and immediately
prior to the issuance of the Preferred Stock and Warrants hereunder, the
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, of which as of the date hereof, 6,233,326 shares are issued and
outstanding, and 10,000,000 shares of Preferred Stock, of which as of the date
hereof no shares are issued or outstanding. All of the outstanding shares have
been validly issued and are fully paid and nonassessable. No shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as set forth in the
SEC Reports (defined below), or as disclosed on SCHEDULE 3(H), as of the date
hereof, (i) there are no outstanding options (except for options granted under
the Company's existing equity incentive plans), warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company and (ii) there are no agreements or arrangements under which the
Company is obligated to register the sale of any of its securities under the
Securities Act of 1933, as amended (the "SECURITIES ACT"). There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of any of the Securities as described in this
Agreement. The Company has furnished to the Purchasers true and correct copies
of the Articles, and the Company's By-laws.
(e) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the notification pursuant to an
Application for Listing of Additional Shares to The Nasdaq Stock Market and
filings pursuant to applicable state securities laws and Regulation D of the
Securities Act.
(f) PRIVATE PLACEMENT. Subject to the truth and accuracy of the
Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Securities as contemplated by this Agreement is exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
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CUSIP No. 59163F 10 5 13D Page 15 of 59 Pages
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(g) SEC REPORTS; FINANCIAL STATEMENTS.
(i) The Company has filed all forms, reports and documents
required to be filed by it with the United States Securities and Exchange
Commission (the "COMMISSION"), and has heretofore made available to the
Purchaser (or in the case of forms, reports and documents filed after the date
hereof and prior to the Second Closing, will make available to the Purchaser) in
the form filed with the Commission (excluding any exhibits thereto) (i) its
Annual Report on Form 10-K for the fiscal year ended December 31, 2005, (ii) its
Annual Report on Form 10-K for the fiscal year ended December 31, 2006, (iii)
its Quarterly Report on Form 10-Q for the quarter ending March 31, 2007, (iv)
its Quarterly Reports on Form 10-Q filed after the date hereof and prior to the
Second Closing, and (v) its Current Reports on Form 8-K filed with the
Commission on or after December 31, 2006 and prior to the Second Closing
(collectively, the "SEC REPORTS").
(ii) The SEC Reports were prepared in all material respects in
accordance with the requirements of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and the rules and regulations thereunder and did
not at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(iii) The financial statements (including, in each case, any
notes thereto) contained in the SEC Reports were prepared in accordance with
U.S. GAAP applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto), and each fairly presented the
financial position, results of operations and cash flows of the Company as at
the respective dates thereof and for the respective periods indicated therein.
(h) ABSENCE OF CERTAIN CHANGES. Since March 31, 2007, except as
disclosed on SCHEDULE 3(H) or (A) with respect to the Initial Closing, in the
SEC Reports filed prior to the date of the Initial Closing, (B) with respect to
each Note Takedown Closing, in the SEC Reports filed prior to each Note Takedown
Closing Date, and (C) with respect to the Second Closing, in the SEC Reports
filed prior to the Second Closing Date, there has not been:
(i) any change in the assets, liabilities, condition
(financial or otherwise), affairs, earnings, business or operations of the
Company from that reflected in (A) the financial statements referred to in
Section 3(g)(iii) above and (B) the balance sheet, dated April 30, 2007 and
income statement and statement of cash flows for the month ended April 30, 2007
provided to Purchasers, except for changes in the ordinary course of business
which, either individually or in the aggregate, have not had, or may be
reasonably expected to result in, a Material Adverse Effect;
(ii) any incurrence of liabilities or obligations by the
Company, contingent or otherwise, whether due or to become due, whether by way
of guaranty, endorsement, indemnity, warranty, or otherwise, except liabilities
and obligations incurred in the ordinary course of business, none of which has
had, or is reasonably likely to result in, a Material Adverse Effect;
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CUSIP No. 59163F 10 5 13D Page 16 of 59 Pages
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(iii) any hiring by the Company of any new officer or any
material increase in compensation of any of its existing officers, or the rate
of pay of its employees as a group (except as part of regular compensation
increases in the ordinary course of business), or any material change of such
officers' or employees' employment agreements or of any benefit plan relating to
the Company's employees;
(iv) any resignation or termination of employment of any
officer of the Company and the Company has not received any written notice of
the impending resignation or termination of employment of any such officer;
(v) any change in the accounting methods or practices followed
by the Company;
(vi) any issuance of any stock, bonds, or other securities of
the Company or options, warrants, or rights or agreements or commitments to
purchase or issue such securities or grant such options, warrants or rights,
except for those issuances contemplated or permitted by the Transaction
Documents;
(vii) any changes to the Articles or the Company's By-laws,
except for those changes contemplated by the Transaction Documents;
(viii) any waiver or compromise by the Company of a material
valuable right or of a material debt owed to it;
(ix) any loss of any customer of the Company which, either
individually or in the aggregate, has had or may reasonably be expected to
result in a Material Adverse Effect;
(x) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties or
financial condition of the Company (as such business is presently conducted and
as it is presently proposed to be conducted);
(xi) any sale, lease, mortgage or other disposition of any
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights or processes necessary for the Company's
business as now conducted and as proposed to be conducted; or
(xii) any material change to a material contract or
arrangement by which the Company or any of its assets is bound or subject which,
either individually or, in the aggregate, has had or may be reasonably expected
to, result in a Material Adverse Effect.
(i) LITIGATION. Except as disclosed in the SEC Reports, (a) there
are no suits, actions, proceedings or investigations pending or, to the
Company's knowledge, threatened, against the Company before any governmental
authority that, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement; and (b) the
Company is not subject to any outstanding judgment, order, writ, injunction or
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CUSIP No. 59163F 10 5 13D Page 17 of 59 Pages
------------------------ ----------------------
decree that could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
(j) PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted (collectively, the
"INTELLECTUAL PROPERTY"). Except as set forth on SCHEDULE 3(J), attached hereto
and incorporated herein by this reference, the Company has no knowledge as of
the date hereof of, any infringement of or conflict with asserted rights of
others with respect to the Intellectual Property that has or reasonably may be
expected to result in a Material Adverse Effect, and the Company is unaware of
any facts or circumstances which might give rise to the foregoing.
(k) PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business the lack of
which could, individually or in the aggregate, have, or may be reasonably
expected to result in a Material Adverse Effect. The Company is not in default
in any material respect under any of such franchises, permits, licenses, or
other similar authority.
(l) GOVERNMENTAL REGULATION. The Company is not subject to
regulation under the Investment Company Act of 1940, or to any United States of
America, state or local statute or regulation limiting its ability to incur
indebtedness.
(m) FINDERS' FEES. Except for XRoads Solutions Group LLC. there is
no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of the Company who might be
entitled to any fee or commission from the Investor upon consummation of the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
represents, warrants and covenants individually and not jointly to the Company
that:
(a) AUTHORIZATION. Such Purchaser has full power and authority to
enter into this Agreement and the Note. This Agreement, when executed and
delivered by such Purchaser, will constitute valid and legally binding
obligations of such Purchaser, enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of a specific performance, injunctive relief, or other
equitable remedies.
(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
such Purchaser in reliance upon such Purchaser's representation to the Company,
which by such Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by such Purchaser will be acquired
for investment for such Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that such
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, such Purchaser
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CUSIP No. 59163F 10 5 13D Page 18 of 59 Pages
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further represents that such Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Such Purchaser has not been formed for the specific purpose of
acquiring any of the Securities.
(c) KNOWLEDGE. Such Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Securities.
(d) NO PUBLIC MARKET. Such Purchaser understands that no public
market now exists for any of the securities issued by the Company other than the
Common Stock, that the Company has made no assurances that a public market will
ever exist for the Securities, other than the Common Stock.
(e) LEGENDS. Such Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
(i) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS (THE "ACTS"). NO INTEREST MAY BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACTS COVERING THE TRANSACTION, (B) THIS CORPORATION RECEIVES AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THIS CORPORATION STATING THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR (C) THIS CORPORATION OTHERWISE
SATISFIES ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER THE ACTS."
(ii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
(f) ACCREDITED INVESTOR. Such Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
(g) NO HEDGING ACTIVITY. Such Purchaser and its affiliates have not
bought, sold, sold short or otherwise directly or indirectly traded in the
Common Stock or in any puts, options or futures with respect to the Common Stock
from April 20, 2007 through the date hereof, and will not sell short or trade in
any puts, options or futures with respect to the Common Stock for a period of
twenty (20) days from the date hereof.
5. ADDITIONAL AGREEMENTS
(a) SHAREHOLDER APPROVAL. The Company shall (i) promptly following
the Initial Closing prepare a proxy statement (the "PROXY Statement") to be
mailed to the shareholders of the Company in connection with transactions
contemplated hereby requiring shareholder approval under The Nasdaq Stock Market
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CUSIP No. 59163F 10 5 13D Page 19 of 59 Pages
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rules and regulations and other applicable law, which shall conform in all
material respects to all applicable legal requirements; (ii) call a meeting of
the shareholders of the Company to be held as soon as practicable for purposes
of voting upon such transactions; and (iii) use its best efforts to solicit and
obtain votes of the shareholders of Company in favor of such transactions. When
the Proxy Statement is mailed to the shareholders of the Company, and at all
times subsequent to such mailing, up to and including the date of the
shareholder's meeting, such Proxy Statement and all supplements thereto, with
respect to all information set forth therein (x) will comply in all material
respects with the provisions of the Exchange Act and any other applicable
statutory or regulatory requirements, and (y) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading.
(b) NOTICE OF DEVELOPMENTS.
(i) The Company shall promptly notify each Purchaser in
writing of all events, circumstances, facts and occurrences arising subsequent
to the date of this Agreement which could reasonably be expected to result in
any breach of a representation or warranty or covenant of the Company in this
Agreement or which could reasonably be expected to have the effect of making any
representation or warranty of the Company in this Agreement untrue or incorrect
at any time from the date hereof through the Second Closing.
(ii) Each Purchaser shall promptly notify the Company in
writing of all events, circumstances, facts and occurrences arising subsequent
to the date of this Agreement which could reasonably be expected to result in
any breach of a representation or warranty or covenant of the Purchaser in this
Agreement or which could reasonably be expected to have the effect of making any
representation or warranty of the Purchaser in this Agreement untrue or
incorrect at any time from the date hereof through the Second Closing.
(c) OFFICER AND DIRECTOR AGREEMENTS. From the date hereof through
the Second Closing, without the prior written consent of the Purchasers, the
Company shall not enter into any new agreement or arrangement, or substantively
modify or supplement any existing agreement or arrangement, with any officer or
director of the Company, except as described on SCHEDULE 3(H).
(d) FURTHER ACTION. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement. Should Elchanan (Nani) Maoz remain
on the Company's Board of Directors following the Second Closing, the parties
agree to cause Mr. Maoz to be designated a Series A director (for purposes of
calculating the majority of directors that the Preferred Stock is entitled to
designate as provided in the Articles of Incorporation).
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CUSIP No. 59163F 10 5 13D Page 20 of 59 Pages
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6. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Initial Closing, each Note Takedown Closing or the
Second Closing, as expressly provided below, of each of the following
conditions, unless otherwise waived:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 3 shall be accurate on and as of
the Initial Closing, and shall be accurate in all material respects (except for
such representations and warranties that are qualified by their terms by a
reference to materiality or Material Adverse Effect, which representations and
warranties as so qualified shall be true and correct in all respects) as of each
Note Takedown Closing or the Second Closing (except for representations and
warranties which address matters only as to a specified date, which
representations and warranties shall be accurate with respect to such specified
date). The Company shall have performed or fulfilled in all material respects
all agreements, obligations, and conditions contained herein required to be
performed or fulfilled by the Company before the Initial Closing, each Note
Takedown Closing or the Second Closing, as applicable.
(b) QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be obtained and effective as of
the Initial Closing, each Note Takedown Closing or the Second Closing, as
applicable.
(c) COMPLIANCE CERTIFICATE. At the Initial Closing, the Company
shall have delivered to the Purchasers a certificate dated as of the Initial
Closing signed by the Company's Chief Executive Officer, certifying that the
conditions set forth in Section 6(a) have been satisfied. At each Note Takedown
Closing and the Second Closing, the Company shall have delivered to the
Purchasers a certificate in the applicable form attached hereto as EXHIBIT D.
(d) GOOD STANDING CERTIFICATE. At the Initial Closing, the Company
shall have delivered to the Purchasers a certificate evidencing the valid
existence of the Company in Oregon issued by the Secretary of State, as of a
date within five days of the Initial Closing.
(e) SECURITY AGREEMENT. The Company and the Purchasers shall have
executed the Security Agreement in substantially the form attached hereto as
EXHIBIT E on the Initial Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and each Purchaser
shall have executed and delivered the Registration Rights Agreement in
substantially the form attached as EXHIBIT F on the Initial Closing.
(g) INTERCREDITOR AGREEMENT. Each Purchaser shall have executed the
Intercreditor Agreement in substantially the form attached as EXHIBIT G on the
Initial Closing.
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CUSIP No. 59163F 10 5 13D Page 21 of 59 Pages
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(h) AMENDED ARTICLES. The Company shall have filed the Articles of
Amendment in the form attached hereto as EXHIBIT H with the Secretary of State
of Oregon on or prior to the Initial Closing.
(i) COMPANY'S BOARD OF DIRECTORS. As of the Initial Closing, Murray
Swanson shall have resigned and William Rutherford shall have retired from the
Company's Board of Directors and Kenneth Peterson and Jonathon Ater shall have
been appointed as Class III and Class II directors, respectively.
(j) WAIVERS. The Company shall have delivered to the Purchasers, at
or prior to the Initial Closing evidence reasonably satisfactory to the
Purchasers of (A) Credit Suisse Securities (USA) LLC waiver of any fee it may be
entitled to collect from the Company with respect to the transactions
contemplated by this Agreement and (B) XRoads Solutions Group LLC
acknowledgement that its total fees (excluding recurring monthly fees and
expenses) shall not exceed $250,000 in connection with the transactions
contemplated by this Agreement.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Initial Closing, each Note Takedown Closing and
the Second Closing, as expressly provided below, of each of the following
conditions, unless otherwise waived:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in Section 4 shall be true and correct on
and as of the Initial Closing, and shall be true and correct in all material
respects as of Note Takedown Closing(s) or Second Closing (except for
representations and warranties which address matters only as to a specified
date, which representations and warranties shall be true and correct with
respect to such specified date). The Purchasers shall have performed or
fulfilled in all material respects all agreements, obligations, and conditions
contained herein required to be performed or fulfilled by the Purchasers before
the Initial Closing, each Note Takedown Closing or the Second Closing, as
applicable.
(b) QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state, that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be obtained and effective as of
the Initial Closing, each Note Takedown Closing and Second Closing, as
applicable.
(c) DELIVERY OF FORM W-8 BEN OR FORM W-9. Each Purchaser shall have
completed and delivered to the Company a validly executed IRS Form W-8 BEN or
IRS Form W-9, as applicable, establishing such Purchaser's exemption from
withholding tax.
8. INDEMNIFICATION. To the extent permitted by law, the Company shall
indemnify and hold each Purchaser harmless from and pay any and all losses,
expenses, costs and damages, reasonable attorneys' fees, attributable to any
third party claim, suit or proceeding against any Purchaser arising from or
alleging any breach or inaccuracy of any representation or warranty or any
breach of any covenant, agreement, or undertaking made by the Company in this
Agreement; provided, however, that the indemnity contained in this Section 8
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CUSIP No. 59163F 10 5 13D Page 22 of 59 Pages
------------------------ ----------------------
shall not apply to any amounts paid in settlement or compromise of any such
loss, damage, claim, suit, or proceeding if such settlement is effected without
the consent of the Company (which will not be unreasonably withheld).
9. TERMINATION.
(a) This Agreement may be terminated at any time prior to the Second
Closing:
(i) Upon the mutual written consent of the Company and the
Purchasers;
(ii) By the Company if any of the conditions set forth in
Section 7 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(iii) By the Purchasers if any of the conditions set forth in
Section 6 shall have become incapable of fulfillment, and shall not have been
waived by the Purchasers;
(iv) By either the Company or the Purchasers if the Second
Closing has not occurred on or prior to October 5, 2007, unless the failure of
the Second Closing to have occurred on or prior to such date is the result of
any action or inaction under this Agreement by the party seeking to terminate
the Agreement pursuant to the terms of this Section 9(a)(iv).
(b) In the event of termination of this Agreement and abandonment of
the transactions contemplated by this Agreement pursuant to and in accordance
with Section 9(a), this Agreement shall forthwith become void and of no further
force or effect whatsoever and there shall be no liability on the part of any
party to this Agreement; PROVIDED, HOWEVER, that notwithstanding the foregoing,
nothing contained in this Agreement shall relieve any party to this Agreement
from any liability resulting from or arising out of any intentional, material
breach of any agreement or covenant hereunder; AND PROVIDED FURTHER, that
notwithstanding the foregoing, the terms of this Section 9(b) and Section 10
shall survive any termination of this Agreement, whether in accordance with
Section 9(a) or otherwise.
10. MISCELLANEOUS.
(a) SUCCESSOR AND ASSIGNS. Subject to compliance with applicable
federal and state securities laws, the Purchasers (or subsequent holder of any
Preferred Stock) may assign and transfer its rights and obligations under this
Agreement at such times and upon such conditions as each Purchaser shall
determine in its sole discretion subject to the obligations imposed on such
Purchaser by this Agreement; PROVIDED, HOWEVER, that (i) each such transferee
shall be of sufficiently sound financial condition to satisfy the obligations
being transferred and only if such transfer or assignment and delivery will not
adversely affect the Company's ability to independently enforce its rights
against any such transferee and (ii) each such permitted transferee or assignee
shall be bound by the terms and conditions of this Agreement and the other
applicable Transaction Documents pursuant to a written instrument signed by such
permitted transferee reasonably satisfactory to the Company. Subject to the
foregoing, this Agreement will bind and inure to the parties and their
respective successors and permitted assigns.
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CUSIP No. 59163F 10 5 13D Page 23 of 59 Pages
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(b) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Oregon, without giving effect to principles of conflicts of law.
(c) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(d) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the U.S. mail as certified or registered mail
with postage prepaid, if such notice is addressed to the party to be notified at
such party's address or facsimile number as set forth below or as subsequently
modified by written notice.
(f) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the Purchaser
against whom enforcement is sought. Any amendment or waiver effected in
accordance with this Section 8(f) shall be binding upon each Purchaser and each
transferee of the Securities, each future holder of all such Securities, and the
Company.
(g) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) FINDERS' FEES. Each of the Company and each Purchasers will
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders' fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
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CUSIP No. 59163F 10 5 13D Page 24 of 59 Pages
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(i) EXPENSES. The Company shall be responsible for and shall bear
all expenses directly and necessarily incurred in connection with this Agreement
and the transactions contemplated by this Agreement, including, but not limited
to (in an amount not to exceed $100,000), all legal fees and out-of-pocket
expenses of counsel to the Purchasers and the out-of-pocket expenses of the
Purchasers or any of their affiliates. The fees and expenses of counsel to the
Purchasers and the Purchaser's out-of-pocket expenses shall be payable by the
Company at the Initial Closing upon delivery of invoices reflecting such
expenses by the Purchasers.
(j) ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents (and the Exhibits hereto and thereto) constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements existing between the parties hereto are
expressly canceled.
(k) EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that neither Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
(l) SHAREHOLDERS, OFFICERS AND DIRECTORS NOT LIABLE. In no event
shall any shareholder, officer or director of the Company be liable for any
amounts due or payable pursuant to the Note.
(m) LOSS OF NOTE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of the Note or
any Note exchanged for it, and indemnity satisfactory to the Company (in case of
loss, theft or destruction) or surrender and cancellation of such Note (in case
of mutilation), the Company will make and deliver to Purchaser in lieu of such
Note a new Note of like tenor.
[Signature Pages Follow]
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CUSIP No. 59163F 10 5 13D Page 25 of 59 Pages
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The parties have executed this Securities Purchase Agreement as of the
date first written above.
COMPANY:
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ Gary E. Henry
---------------------------------------
Name: Gary E. Henry
Title: Chief Executive Officer
Address: 11200 Murray Scholls Place
Beaverton, Oregon 97007
Fax: (503) 521-8443
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
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CUSIP No. 59163F 10 5 13D Page 26 of 59 Pages
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PURCHASER: COLUMBIA VENTURES CORPORATION
By: /s/ Kenneth D. Peterson, Jr.
-------------------------------
Name: Kenneth D. Peterson, Jr.
Title: Chief Executive Officer
Address: 203 S.E. Park Plaza Drive
Suite 270
Vancouver, Washington 98684
Fax: (360) 816-1841
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
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CUSIP No. 59163F 10 5 13D Page 27 of 59 Pages
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PURCHASER: EVEREST SPECIAL SITUATIONS FUND L.P.
By: Maoz Everest Fund Management Ltd.,
its General Partner
By: /s/ Elchanan Maoz
-----------------------------------
Name: Elchanan Maoz
Title: Chairman and Chief
Executive Officer
Address: Platinum House
21 Ha'arbaa Street
Tel Aviv 64739, Israel
Fax: 011-972-3-685-8557
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
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CUSIP No. 59163F 10 5 13D Page 28 of 59 Pages
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Schedule 3(h) Certain Exceptions
Schedule 3(j) Patents and Trademarks Conflicts
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Warrant
Exhibit C - Form of Note
Exhibit D - Officer Certificate for Note Takedown Closings
Exhibit E - Form of Security Agreement
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Intercreditor Agreement
Exhibit H - Form of Articles of Amendment
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CUSIP No. 59163F 10 5 13D Page 29 of 59 Pages
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EXHIBIT A
SCHEDULE OF PURCHASERS
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Initial Initial Second
Total Closing Closing Initial Note Closing Note
Preferred Commitment Pro Rata Investment Preferred Warrant Principal Preferred Conversion
Shareholder Amount Percentage Amount Stock Amount Amount Stock* Warrants*
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Columbia Ventures
Corporation $8,000,000 80% $1,760,000 176 61.6 $6,240,000 624 218.4
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Everest Special
Situations Fund L.P. $2,000,000 20% $440,000 44 15.4 $1,560,000 156 54.6
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Totals $10,000,000 100% $2,200,000 220 77.0 $7,800,000 780 273
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*Excludes any interest which may become due under the Notes.
Note Takedown Closing(s):
[Insert Date]
-----------------------------------------------------------
Aggregate Remaining
Credit Credit Amount
Preferred Extended Extended Available
Shareholder this Closing under Note under Note
-----------------------------------------------------------
Columbia Ventures
Corporation $[_____] $[_____] $[_____]
-----------------------------------------------------------
Everest Special
Situations Fund L.P. $[_____] $[_____] $[_____]
-----------------------------------------------------------
-----------------------------------------------------------
Totals
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CUSIP No. 59163F 10 5 13D Page 30 of 59 Pages
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Exhibit B
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS (THE
"ACTS"). NO INTEREST MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACTS COVERING THE
TRANSACTION, (B) THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THIS CORPORATION STATING THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACTS, OR (C) THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACTS.
STOCK PURCHASE WARRANT
To Purchase 15.4 Shares of Series A Preferred Convertible Stock of
METRO ONE TELECOMMUNICATIONS, INC.
THIS STOCK PURCHASE WARRANT CERTIFIES that, for value received, Everest
Special Situations Fund L.P. (the "HOLDER"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after approval of the issuance of this Warrant by shareholders
of the Company (the "INITIAL EXERCISE DATE") and on or prior to the close of
business on the second anniversary of the Initial Exercise Date (the
"TERMINATION DATE") but not thereafter, to subscribe for and purchase from Metro
One Telecommunications, Inc., a corporation incorporated in the State of Oregon
(the "COMPANY"), up to 15.4 shares (the "WARRANT SHARES") of Series A
Convertible Preferred Stock of the Company (the "PREFERRED STOCK"). The purchase
price of one share of Preferred Stock or fraction of a share (the "EXERCISE
PRICE") under this Warrant shall be $10,000.00 per share, subject to adjustment
hereunder. The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein.
1. AUTHORIZATION OF SHARES. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
2. EXERCISE OF WARRANT.
(a) Except as provided elsewhere herein, exercise of the purchase
rights represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and until 5:00 P.M. (Beaverton, Oregon time) on the
Termination Date by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
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CUSIP No. 59163F 10 5 13D Page 31 of 59 Pages
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registered Holder at the address of such Holder appearing on the books of the
Company) and upon payment of the Exercise Price of the shares (or fraction
thereof) thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the Holder shall be entitled to receive the number of Warrant
Shares so purchased. As soon as practicable after the exercise of this Warrant
and in any event within five business days thereafter, upon the terms and
subject to the conditions of this Warrant, the Company at its expense will cause
to be issued in the name of and delivered to the Holder, or as the Holder may
direct to a broker or other persons, a certificate or certificates for the
number of shares of Preferred Stock to which the Holder shall be entitled on
such exercise, in such denominations as may be requested by the Holder.
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Shares or electronic transmittal of such Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
3. FRACTIONAL SHARES OR SCRIP. Fractional shares of Preferred Stock or
scrip representing fractional shares of Preferred Stock may be issued upon the
exercise of this Warrant. No fractional shares of Common Stock of the Company
(the "COMMON STOCK") or scrip representing fractional shares of Common Stock
shall be issued upon exercise of this Warrant. As to any fraction of a share of
Common Stock which Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder.
5. CLOSING OF BOOKS. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
6. TRANSFER, DIVISION AND COMBINATION.
(a) Subject to compliance with applicable federal and state
securities laws, this Warrant and all rights hereunder are transferable in whole
or in part by the Holder to any person or entity upon written notice to the
Company of the name and address of such transferee. Within a reasonable time
after the Company's receipt of such written notice, the transfer shall be
recorded on the books of the Company upon the surrender of this Warrant,
properly endorsed, to the Company at its principal offices. In the event of a
partial transfer, the Company shall issue to the new holders one or more
appropriate new warrants. Subject to the foregoing, this Warrant will bind and
inure to the parties and their respective successors and permitted assigns.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the denominations in which new Warrants are to be
issued, signed by the Holder or its agent or attorney. The Company shall
prepare, issue and deliver at its own expense (other than transfer taxes) the
new Warrant or Warrants under this Section 7(b).
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CUSIP No. 59163F 10 5 13D Page 32 of 59 Pages
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7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be
deemed to be issued to such Holder as the record owner of such shares as of the
close of business on the later of the date of such surrender or payment.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
9. SATURDAYS, SUNDAYS, HOLIDAYS. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
10. ADJUSTMENTS
(a) If all of the Preferred Stock is redeemed or converted into
shares of Common Stock, then this Warrant shall automatically become exercisable
for that number of shares of Common Stock equal to the number of shares of
Common Stock that would have been received if this Warrant had been exercised in
full and the shares of Preferred Stock received thereupon had been
simultaneously converted into shares of Common Stock immediately prior to such
event, and the Exercise Price shall be automatically adjusted to equal the
number obtained by dividing (i) the aggregate Exercise Price of the shares of
Preferred Stock for which this Warrant was exercisable immediately prior to such
redemption or conversion, by (ii) the number of shares of Common Stock for which
this Warrant is exercisable immediately after such redemption or conversion.
(b) If outstanding shares of the Preferred Stock shall be
subdivided into a greater number of shares or a dividend in Preferred Stock
shall be paid in respect of Preferred Stock, the Exercise Price in effect
immediately prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or immediately
after the record date of such dividend be proportionately reduced. If
outstanding shares of Preferred Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Exercise Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Exercise Price
in effect immediately prior to such adjustment, by (ii) the Exercise Price in
effect immediately after such adjustment.
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CUSIP No. 59163F 10 5 13D Page 33 of 59 Pages
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(c) In case there occurs any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
(or any other corporation the stock or securities of which are at the time
receivable upon the exercise of this Warrant) or any merger, sale of assets
transaction or similar corporate reorganization on or after the date hereof,
then and in each such case the Holder, upon the exercise hereof at any time
after the consummation of such reclassification, change, reorganization, merger
or sale of assets transaction shall be entitled to receive, in lieu of the stock
or other securities and property receivable upon the exercise hereof prior to
such consummation, the stock or other securities or property to which such
Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section 10.
(d) In order to avoid doubt, it is acknowledged that the holder of
this Warrant shall be entitled to the benefit of all adjustments in the number
of shares of Common Stock of the Company issuable upon conversion of the
Preferred Stock of the Company which occur prior to the exercise of this
Warrant, including without limitation, any increase in the number of shares of
Common Stock issuable upon conversion.
11. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.
12. NOTICE OF CORPORATE ACTION. If at any time:
(a) the Company shall take a record of the holders of its Preferred
Stock for the purpose of entitling them to receive a special dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right;
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with (other than a consolidation or
merger in which the Company is the surviving corporation), or any sale, transfer
or other disposition of all or substantially all the property, assets or
business of the Company to, another corporation;
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) there shall be any redemption of the Preferred Stock or
mandatory conversion of the Preferred Stock into Common Stock of the Company,
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CUSIP No. 59163F 10 5 13D Page 34 of 59 Pages
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then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution, redemption or mandatory conversion or
for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (y) the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, the date on
which the holders of Preferred Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (z) the date on
which any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of
Preferred Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution,
liquidation or winding up. Each such written notice shall be sufficiently given
if addressed to Holder at the last address of Holder appearing on the books of
the Company and delivered in accordance with Section 14(c).
13. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Preferred Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the principal market
upon which the Common Stock may then be traded.
Except and to the extent as waived or consented to by the Holder,
the Company shall not by any action, including, without limitation, amending its
articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant, and (b) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
14. MISCELLANEOUS.
(a) JURISDICTION. This Warrant shall constitute a contract under
the laws of the State of Oregon, without regard to its conflict of law
principles or rules.
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CUSIP No. 59163F 10 5 13D Page 35 of 59 Pages
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(b) NONWAIVER. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date.
(c) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered by first class mail to Holder at the last address of Holder appearing
on the books of the Company.
(d) LIMITATION OF LIABILITY. No provision hereof, in the absence of
any affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Preferred
Stock or as a shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the holders
of Warrants representing two-thirds of the Warrant Shares issuable under
Warrants then outstanding as of the date such consent is sought; PROVIDED,
HOWEVER, that no amendment may increase the Exercise Price, decrease the number
of shares or class of shares obtainable upon exercise of this Warrant or
decrease the time period in which this Warrant can be exercised without the
written consent of each Holder.
(f) SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(g) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
********************
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CUSIP No. 59163F 10 5 13D Page 36 of 59 Pages
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: June 5, 2007
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ Gary E. Henry
----------------------------------
Name: Gary E. Henry
Title: Chief Executive Officer
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CUSIP No. 59163F 10 5 13D Page 37 of 59 Pages
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NOTICE OF EXERCISE
To: Metro One Telecommunications, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares of Metro One Telecommunications, Inc. pursuant to the
terms of the attached Warrant (only if exercised in full),
and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] wire transfer; or
[ ] cashier's check.
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
-------------------------------
The Warrant Shares shall be delivered to the following:
-------------------------------
-------------------------------
-------------------------------
[NAME OF PURCHASER]
By:
----------------------------------
Name:
Title:
Dated:
-------------------------------
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CUSIP No. 59163F 10 5 13D Page 38 of 59 Pages
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Exhibit C
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS (THE
"ACTS"). NO INTEREST MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACTS COVERING THE
TRANSACTION, (B) THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THIS CORPORATION STATING THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACTS, OR (C) THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACTS.
SENIOR SECURED CONVERTIBLE REVOLVER BRIDGE NOTE
$1,560,000 June 5, 2007
Beaverton, Oregon
For value received, Metro One Telecommunications, Inc., an Oregon
corporation (the "COMPANY"), promises to pay to Everest Special Situations Fund
L.P. (the "HOLDER"), the principal sum of One Million Five Hundred Sixty
Thousand Dollars ($1,560,000) or such lesser sum as may be advanced and
outstanding pursuant to the terms hereof, together with interest accruing on
each outstanding advance from the date of each advance at the rate herein
provided, in lawful money of the United States of America, until paid in full in
accordance with the terms of this Senior Secured Convertible Revolver Bridge
Note (the "NOTE"). The principal amount of this Note at any time shall be the
principal sum of all advances made to such time less the principal amount of any
advances previously repaid. This Note is one of the Notes referred to in and is
entitled to the benefits of that certain Securities Purchase Agreement dated
June 5, 2007 (the "PURCHASE AGREEMENT") Such Notes are referred to herein as the
"NOTES," and the holders thereof are referred to herein as the "HOLDERS."
"MAJORITY OF THE HOLDERS" means the Holders of a majority of the aggregate
principal amount of Notes then outstanding. Capitalized terms used but not
defined herein shall have the meanings ascribed to those terms in the Purchase
Agreement. This Note is subject to the following terms and conditions.
1. INTEREST.
(a) INTEREST RATE. Interest shall accrue on the unpaid principal
balance of this Note at the rate of thirteen percent (13%) per annum and shall
be due and payable on the earlier of the Maturity Date or Second Closing under
the Purchase Agreement.
(b) 30/360 BASIS. Except as otherwise provided in the immediately
following sentence, interest for each full calendar month during the term of
this Note will be calculated on the basis of a 360-day year consisting of 12
months of 30 days each. Interest for the full or partial calendar month will be
calculated on the basis of a 360-day year and the actual number of days elapsed.
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CUSIP No. 59163F 10 5 13D Page 39 of 59 Pages
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(c) DEFAULT INTEREST. From and after the Maturity Date, or such
earlier date as all sums owing on this Note become due and payable by
acceleration or otherwise, all sums owing on this Note shall bear interest until
paid in full or converted in accordance with Section 5 at a rate equal to two
percent (2%) per annum (based on a 360-day year and charged on the basis of
actual days elapsed) in excess of the interest rate otherwise accruing under
this Note.
2. MATURITY. Unless converted as provided in Section 5, this Note will
automatically mature and be due and payable on October 5, 2007 (the "MATURITY
DATE").
3. SECURITY INTEREST. Pursuant to a separate security agreement (the
"SECURITY AGREEMENT") of even date herewith between the Company and the Holders,
the obligations of the Company hereunder are secured by the Collateral (as
defined by the Security Agreement), and the Holders are entitled to the Proceeds
(as defined in the Security Agreement). In case of an Event of Default (as
defined in the Security Agreement), Liquidation Event (defined below) or upon
the Maturity Date, this Note shall automatically become due and payable in
accordance with Section 4(b) and the Holder shall have the rights set forth
herein and in the Security Agreement and the Purchase Agreement.
4. PAYMENT; PREPAYMENT.
(a) PAYMENTS. All payments shall be made in lawful money of the
United States of America at such place as the Holder hereof may from time to
time designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
(b) PAYMENT ON A LIQUIDATION EVENT, EVENT OF DEFAULT OR MATURITY.
Unless earlier converted in accordance with Section 5(b), upon the earlier to
occur of: (i) a Liquidation Event, (ii) the occurrence of an Event of Default,
or (iii) the Maturity Date, this Note shall become immediately due and payable
and, at the option of a Majority of the Holders, the Holder shall be entitled to
receive full payment of this Note before any payments are made to any
shareholders of the Company.
(c) PREPAYMENT. This Note may be prepaid at any time and any amounts
so prepaid by the Company shall be available to be redrawn by the Company in
accordance with the Purchase Agreement.
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CUSIP No. 59163F 10 5 13D Page 40 of 59 Pages
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5. CONVERSION.
(a) DEFINITIONS.
(i) "ARTICLES OF INCORPORATION" means the Company's Amended
and Restated Articles of Incorporation, as amended from time to time.
(ii) "LIQUIDATION EVENT" shall mean a liquidation,
dissolution, or winding-up of the Company or Change of Control Event (as defined
in the Articles of Incorporation).
(iii) "PREFERRED STOCK" means the Company's Series A
Convertible Preferred Stock.
(b) AUTOMATIC CONVERSION. Upon approval by the Company's
shareholders of the issuance of Preferred Stock upon conversion of this Note,
the principal amount then outstanding under this Note shall automatically
convert into shares of Preferred Stock and upon payment by Holder of the
remaining amount available under this Note in accordance with the Purchase
Agreement such amount shall also automatically convert into shares of Preferred
Stock. The number of shares of Preferred Stock to be issued upon conversion of
this Note shall be equal to the quotient obtained by dividing (i) the entire
principal amount outstanding on this Note at the Second Closing plus accrued but
unpaid interest on this Note by (ii) ten thousand dollars ($10,000).
(c) MECHANICS AND EFFECT OF CONVERSION. Fractional shares of
Preferred Stock may be issued upon conversion of this Note. Upon conversion of
this Note, the Holder shall surrender this Note, duly endorsed, at the principal
offices of the Company or any transfer agent of the Company. At its expense, the
Company will, as soon as practicable thereafter, issue and deliver to such
Holder, at such principal office, a certificate or certificates for the number
of shares (and any fractions thereof) of Preferred Stock to which such Holder is
entitled upon such conversion under the terms of this Note and pay to the Holder
any cash amounts payable as described herein. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
but unpaid interest being converted.
6. SUCCESSORS AND ASSIGNS. Subject to compliance with applicable federal
and state securities laws, this Note and all rights hereunder are transferable
in whole or in part by the Holder to any person or entity upon written notice to
the Company of the name and address of such transferee but only if the proposed
transferee is of sufficiently sound financial condition to satisfy the
obligations being transferred and only if such transfer or assignment and
delivery will not adversely affect the Company's ability to independently
enforce its rights against any such transferee. Within a reasonable time after
the Company's receipt of such written notice, the transfer shall be recorded on
the books of the Company upon the surrender of this Note, properly endorsed, to
the Company at its principal offices. In the event of a partial transfer, the
Company shall issue to the new holders one or more appropriate new notes. The
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CUSIP No. 59163F 10 5 13D Page 41 of 59 Pages
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Company may not assign its obligations hereunder without the prior written
consent of the Holder. Subject to the foregoing, this Note will bind and inure
to the parties and their respective successors and permitted assigns.
7. GOVERNING LAW. This Note and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Oregon,
without giving effect to principles of conflicts of law.
8. AMENDMENTS AND WAIVERS. Any term of this Note may be amended only with
the written consent of the Company and a Majority of the Holders in accordance
with a separate intercreditor agreement of even date herewith by and between the
Holders (the "INTERCREDITOR AGREEMENT"). Any amendment or waiver effected in
accordance with this Section 8 shall be binding upon the Company, the Holder and
each transferee of any Note.
9. ACTION TO COLLECT ON NOTE. If action is instituted to collect on this
Note, the Company will pay all costs and expenses, including reasonable
attorney's fees, incurred in connection with such action.
[SIGNATURE PAGE FOLLOWS]
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CUSIP No. 59163F 10 5 13D Page 42 of 59 Pages
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COMPANY:
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ Gary E. Henry
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Name: Gary E. Henry
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(print)
Title: Chief Executive Officer
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Address: 11200 Murray Scholls Place
Beaverton, OR 97007
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CUSIP No. 59163F 10 5 13D Page 43 of 59 Pages
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Exhibit D
METRO ONE TELECOMMUNICATIONS, INC.
REGISTRATION RIGHTS AGREEMENT
JUNE 5, 2007
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CUSIP No. 59163F 10 5 13D Page 44 of 59 Pages
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METRO ONE TELECOMMUNICATIONS, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made as of the
5th day of June, 2007, by and among Metro One Telecommunications, Inc., an
Oregon corporation (the "COMPANY") and the holders of Series A Convertible
Preferred Stock of the Company (the "PREFERRED STOCK") listed on EXHIBIT A
hereto (the "PURCHASERS").
RECITALS
WHEREAS, the Company and the Purchasers are entering into a Securities
Purchase Agreement (the "PURCHASE AGREEMENT") of even date herewith pursuant to
which the Company shall sell to the Purchasers and the Purchasers shall purchase
from the Company the Preferred Stock, the Warrants and the Notes (each as
defined in the Purchase Agreement).
WHEREAS, it is a condition to the Purchasers' obligations under the
Purchase Agreement that the Company and the Purchasers enter into this Agreement
in order to provide the Purchasers certain rights to register shares of the
common stock of the Company ("COMMON STOCK"), issuable upon conversion of the
Preferred Stock.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Company and the Purchasers hereby agree as follows:
AGREEMENT
The parties hereby agree as follows:
1 REGISTRATION RIGHTS. The Company and the Purchasers covenant and
agree as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "REGISTER," "REGISTERED," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the declaration or ordering of effectiveness
of such registration statement or document;
(b) The term "REGISTRABLE SECURITIES" means (i) the shares of
Common Stock issuable or issued upon conversion of the Preferred Stock, other
than shares for which registration rights have terminated pursuant to Section 1
hereof, (ii) any other shares of Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the securities listed in (i); PROVIDED, HOWEVER, that the
foregoing definition shall exclude in all cases any Registrable Securities sold
by a person in a transaction in which his or her rights under this Agreement are
not assigned. Notwithstanding the foregoing, Common Stock or other securities
shall only be treated as Registrable Securities if and so long as they have not
been (A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
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CUSIP No. 59163F 10 5 13D Page 45 of 59 Pages
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exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;
(c) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "HOLDER" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1 of this Agreement;
(e) The term "FORM S-3" means such form under the Securities
Act as in effect on the date hereof or any successor form under the Securities
Act that permits significant incorporation by reference of the Company's
subsequent public filings under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT");
(f) The term "FORM S-1" means such form under the Securities
Act as in effect on the date hereof or any successor form under the Securities
Act;
(g) The term "REGISTRATION EXPENSES" means all expenses
incurred by the Company in complying with Sections 1.2, 1.3 and 1.4 hereof,
including without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements not to exceed forty thousand dollars ($40,000.00) of a single
special counsel for the Holders in connection with each registration, blue sky
fees and expenses and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company); and
(h) The term "SEC" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 SHELF REGISTRATION.
(a) The Company shall prepare and, as soon as practicable but
in no event later than 30 calendar days after the Initial Closing (as defined in
the Purchase Agreement), file with the SEC a registration statement on Form S-3
that allows for an offering to be made on a continuous basis pursuant to Rule
415 under the Securities Act (the "SHELF REGISTRATION STATEMENT"), PROVIDED,
HOWEVER, that if the SEC determines that the Company is not eligible to register
the resale of any shares of Common Stock on Form S-3, the Shelf Registration
Statement shall be on Form S-1 and in such case shall be filed no later than 60
days after determination by the SEC that Form S-3 is not available. The Shelf
Registration Statement shall cover the resale by the Holders of all of the
Registrable Securities then outstanding as of the Second Closing (as defined in
the Purchase Agreement) that are eligible to be registered on their behalf on
the applicable form as of such date (the "ELIGIBLE SECURITIES"). If the Shelf
Registration Statement is not filed with the SEC within the 30 or 60 day period
required under the first sentence of this Section 1.2(a), the Company shall pay
liquidated damages to Holders in the manner set forth in Section 1.3(e) below.
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CUSIP No. 59163F 10 5 13D Page 46 of 59 Pages
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(b) The Company shall use its best efforts to have the Shelf
Registration Statement declared effective by the SEC as soon as practicable. The
Company's best efforts will include, but not be limited to, promptly responding
to all comments received from the staff of the SEC. If the Shelf Registration
Statement is not declared effective by the SEC either (i) within 90 days after
being first filed with the SEC (with a 30 day extension in the event of a full
review of the Shelf Registration Statement by the SEC), if filed on Form S-3 or
(ii) within 120 days after being first filed with the SEC, if filed on Form S-1
(such date, as applicable, the "REQUIRED EFFECTIVE DATE"), the Company shall pay
liquidated damages to Holders in the manner set forth in Section 1.3(e).
(c) In the event the number of shares available under the
Shelf Registration Statement filed pursuant to Section 1.2(a) is insufficient to
cover all of the Registrable Securities then outstanding, the Company shall
amend the Shelf Registration Statement or file a new registration statement, so
as to cover all of such Registrable Securities, in each case, as soon as
reasonably practicable after the necessity therefore arises. The Company shall
use commercially reasonable efforts to cause such amendment and/or new
registration statement to become effective as soon as practicable following the
filing thereof and to remain effective under the same terms and conditions as
the Shelf Registration Statement.
(d) The Company shall be required to maintain the
effectiveness of the Shelf Registration Statement until the earliest of (i) the
date on which all related Registrable Securities have been sold thereunder, or
(ii) the date on which the registration rights under this Agreement terminate
pursuant to Section 1.14.
(e) Notwithstanding the foregoing, the Company shall be
entitled to suspend effectiveness of the Shelf Registration Statement for up to
30 days upon the Company's furnishing to the Holders a certificate signed by the
Chairman of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such Shelf Registration Statement to continue to be
effective because the Company is engaged in any activity or transaction or
preparations or negotiations for any activity or transaction ("COMPANY
ACTIVITY") that the Company desires to keep confidential for business reasons,
and the Company determines in good faith that the public disclosure requirement
imposed on the Company pursuant to the Shelf Registration Statement would
require disclosure of the Company Activity.
(f) Notwithstanding Section 1.2(e) above, the Company may not
utilize the right to suspend the effectiveness of the Shelf Registration
Statement more than once in any twelve-month period, and the Holders shall be
reimbursed for all Registration Expenses incurred prior to the receipt of such
certificate.
1.3 DEMAND REGISTRATION.
(a) After the effective date of the Shelf Registration
Statement, if there is not in existence an effective registration statement (or
registration statements) allowing for the registration and sale of all
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CUSIP No. 59163F 10 5 13D Page 47 of 59 Pages
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Registrable Securities held by the Holders, and the Company shall receive a
written request from the Holders of at least twenty percent (20%) of the
Registrable Securities then outstanding and not eligible for such registration,
that the Company file a registration statement under the Securities Act covering
the registration of all or a portion of such Registrable Securities (a "DEMAND
REGISTRATION STATEMENT") on an appropriate form covering the sale of the
Registrable Securities requested to be registered, then the Company shall use
commercially reasonable efforts to effect as soon as practicable, and in any
event within 30 days of the receipt of such request, to file the Demand
Registration Statement and cause the Demand Registration Statement to become
effective within 60 days after filing. If the Demand Registration Statement is
not filed or does not become effective within the time periods specified in this
Section 1.3(a), the Company shall pay liquidated damages to Holders in the
manner set forth in Section 1.3(e)
(b) The Company shall not be required to file a Demand
Registration Statement during the six month period immediately following the
effective date of the Shelf Registration Statement and shall only be required to
file a Demand Registration Statement if the aggregate offering price is at least
$1,000,000. Within 10 business days of receiving such a written request, the
Company shall, give written notice of such demand to all other Holders who hold
piggyback registration rights under Section 1.4 that may be exercisable. If the
Holders initiating the registration request hereunder ("INITIATING HOLDERS")
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 1.3 and such information shall be included
in the notice to other Holders. The underwriter will be selected by a majority
in interest of the Initiating Holders and shall be reasonably acceptable to the
Company. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.3, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; PROVIDED, HOWEVER,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. If any Holders would thus be entitled to include
more securities than such Holder requested to be registered, the excess shall be
allocated among the other remaining requesting Holders in the manner described
in the immediately preceding sentence.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a Demand Registration Statement pursuant to this
Section 1.3, a certificate signed by the President of the Company stating that
the Company is engaged in any activity that, in the good faith judgment of the
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CUSIP No. 59163F 10 5 13D Page 48 of 59 Pages
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Board of Directors of the Company (the "BOARD"), is material and nonpublic and
would be required to be disclosed in the applicable Demand Registration
Statement and such disclosure would be seriously detrimental to the Company and
its shareholders, then the Company may direct that such request to register
Registrable Securities be delayed for a period of not more than 60 days after
receipt of the request of the Initiating Holders; PROVIDED, HOWEVER, that the
Company may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.3:
(i) After the Company has effected three (3) such
registrations on behalf of the Holders pursuant to this Section 1.3 and each
such registration has been declared or ordered effective, PROVIDED that the
Registrable Securities requested for inclusion in such registration were so
included; or
(ii) During the period starting with the date thirty
(30) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date ninety (90) days after the effective date of, a Company
initiated registration subject to Section 1.4 hereof.
(e) In the event that the Company fails to (i) file the Shelf
Registration Statement by the applicable times required under Section 1.2(a),
(ii) cause the Shelf Registration Statement to become effective as of the
applicable Required Effective Date set forth in Section 1.2(b), or (ii) cause
the filing and effectiveness of a Demand Registration Statement by the time
required under Section 1.3(a) (any such event a "REGISTRATION DEFAULT") then in
each such case the Company shall pay liquidated damages to the Holders (to be
distributed pro rata in proportion to the number of Registrable Securities held
by each such Holder and not yet registered under the Securities Act) in an
amount equal to 1.25% of the purchase price paid for the Preferred Stock, which
liquidated damages shall be payable for each 30-day period or pro rata for any
part thereof until such registration default is cured. The liquidated damages
payable under this Section 1.3(e), shall not in the aggregate exceed 20% of the
Preferred Stock purchase price paid to the Company.
1.4 COMPANY REGISTRATION. At any time after the Required Effective
Date that there is not in existence an effective registration statement covering
all of a Holder's Registrable Securities (a "PRECLUDED HOLDER"), if the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan or a transaction covered by Rule 145 under
the Securities Act, a registration in which the only stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered, or any registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each such Precluded Holder written notice of such
registration. Upon the written request of each Precluded Holder given within
fifteen (15) days after mailing of such notice by the Company in accordance with
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CUSIP No. 59163F 10 5 13D Page 49 of 59 Pages
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Section 2.4, the Company shall, subject to the provisions of Section 1.6, cause
to be registered under the Securities Act all of the Registrable Securities that
each such Precluded Holder has requested to be registered; PROVIDED, HOWEVER,
that in connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall not be required under this Section
1.4 to include any of the Precluded Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine will not jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
(sold other than by the Company) that the underwriters determine is compatible
with the success of the offering, then the Company shall be required to include
in the offering only that number of such securities, including Registrable
Securities, which the underwriters determine will not jeopardize the success of
the offering (the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling stockholders).
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC via its Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR") a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, in the case of registrations
pursuant to Section 1.3, keep such registration statement effective until the
distribution is completed, but not more than one hundred twenty (120) days,
PROVIDED that such 120-day period shall be extended for a period of time equal
to the period the Holder refrains from selling any Registrable Securities
included in such registration statement due to circumstances described in
Section 1.5(f).
(b) Prepare and file with the SEC via EDGAR such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Respond as promptly as reasonably possible to any comments
received from the SEC with respect to such registration statement or any
amendment thereto and, as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the SEC relating to
such registration statement.
(d) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, and any amendments and
supplements to such prospectus in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them that are
included in such registration.
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CUSIP No. 59163F 10 5 13D Page 50 of 59 Pages
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(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, PROVIDED that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdiction, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by
such registration statement (and each underwriter in the case of an underwritten
offering), promptly after it shall receive notice or obtain knowledge thereof,
of the issuance of any stop order by the SEC suspending the effectiveness of
such registration statement or the initiation or threatening of any proceeding
for that purpose or any proceeding against the Company under Section 8A of the
Securities Act in connection with such registration statement, and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(h) Notify each Holder of Registrable Securities covered by
such registration statement (and each underwriter in the case of an underwritten
offering) at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and, following
such notification, promptly deliver to each Holder and each such underwriter
that number of copies of all amendments or supplements referred in paragraphs
(b) and (d) of this Section 1.5 as may be necessary so that, as thereafter
delivered to the purchaser of such Registrable Securities, such prospectus shall
not include and untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(i) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
1.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to timely effect the registration of such Holder's
Registrable Securities.
1.7 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with the Shelf Registration Statement and all issuances off the Shelf
Registration Statement (pursuant to SECTION 1.2) and any Demand Registration
Statement and all issuances off any Demand Registration Statement (pursuant to
SECTION 1.3) shall be borne by the Company.
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1.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, as a result of any breach by the Company of its
obligations under Section 1.5(g) or insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 1.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to any Holder,
underwriter or controlling person for any such loss, claim, damage, liability,
or action to the extent that it arises out of a Violation which is based solely
upon information regarding such Holder, underwriter or controlling person
furnished in writing to the Company by such Holder, underwriter or controlling
person expressly for use in connection with such registration by such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of any Violation, in each case to the
extent (and only to the extent) that such Violation is based solely upon
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information regarding such Holder furnished in writing to the Company by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this subsection 1.9(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld or delayed; PROVIDED, FURTHER that such consent shall not be deemed to
have been unreasonably withheld or delayed if any settlement (i) does not
include as an unconditional term thereof, the giving by the plaintiff or
claimant to the Holder of a release from all liability in respect of such loss,
claim, damage, liability or action or (ii) includes an admission of guilt on
behalf of the Holder; PROVIDED, FURTHER that in no event shall any indemnity
under this subsection 1.9(b) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
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 that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; PROVIDED, that in no event shall any contribution by a Holder
under this Subsection 1.9(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
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information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control for the parties to such agreement.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.11 ASSIGNMENT OF REGISTRATION AND INFORMATION RIGHTS. The rights
to cause the Company to register Registrable Securities pursuant to this Section
1 may be assigned (but only with all related obligations) by a Holder to
transferee or assignee of Registrable Securities that (a) is a subsidiary,
parent, general partner, limited partner, member or stockholder of a Holder OR
(b) acquires at least 125,000 shares of Registrable Securities (as adjusted for
stock splits and combinations); PROVIDED the Company is, within 10 days after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and PROVIDED, FURTHER, that such
transferee shall agree in writing to be subject to all applicable restrictions
set forth in this Agreement. In each case, such rights may only be transferred
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CUSIP No. 59163F 10 5 13D Page 54 of 59 Pages
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together with the underlying Registrable Securities in a transfer permitted by
the Securities Act and applicable state securities laws. Any such permitted
transferee or assignee shall be deemed a Holder hereunder.
1.12 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled
to exercise any right provided for in this Section 1 after such time as such
Holder (together with its affiliates) may sell all of its Registrable Securities
during a three-month period without registration, pursuant to Rule 144 or
another similar exemption under the Securities Act.
2 MISCELLANEOUS.
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties (including transferees of any series of preferred stock or any Common
Stock issued upon conversion thereof). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Holders of a majority of
the outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each party to the
Agreement, whether or not such party has signed such amendment or waiver, each
future holder of all such Registrable Securities, and the Company.
2.3 NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally, or by overnight courier, or sent by
telegram, or fax or e-mail with confirmation of receipt, or forty-eight (48)
hours after being deposited in the U.S. mail as certified or registered mail
with postage prepaid, and addressed to the party to be notified at such party's
address or fax number as set forth on EXHIBIT A hereto or as subsequently
modified by written notice, and if to the Company, with a copy to Heller Ehrman
LLP, 701 Fifth Avenue, Suite 6100, Seattle, Washington 98104-7098, Attn: Jeffry
Shelby, (fax: 206-389-6049), and if to the Purchasers, with a copy to Olshan
Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street,
New York, New York 10022, Attn: Steve Wolosky, (fax: 212-451-2222).
2.4 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
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CUSIP No. 59163F 10 5 13D Page 55 of 59 Pages
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2.5 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Oregon, without giving effect to principles of
conflicts of laws.
2.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.7 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.8 AGGREGATION OF STOCK. All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement. The
share numbers set forth in Sections 1 (determining minimum shareholding amounts
for certain rights) shall be proportionately adjusted for any stock split,
combination, or other recapitalization or the like.
2.9 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
hereof.
[SIGNATURE PAGE FOLLOWS]
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CUSIP No. 59163F 10 5 13D Page 56 of 59 Pages
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The parties have executed this Registration Rights Agreement as of the
date first above written.
COMPANY:
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ Gary E. Henry
----------------------------------
Name: Gary E. Henry
Title: Chief Executive Officer
Address: 11200 Murray Scholls Place
Beaverton, Oregon 97007
Fax: (503) 521-8443
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
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CUSIP No. 59163F 10 5 13D Page 57 of 59 Pages
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INVESTOR:
COLUMBIA VENTURES CORPORATION
By: /s/ Kenneth D. Peterson, Jr.
----------------------------------
Name: Kenneth D. Peterson, Jr.
Title: Chief Executive Officer
Address: 203 S. E. Park Plaza Drive
Suite 270
Vancouver, Washington 98684
Fax: (360) 816-1841
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
INVESTOR:
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CUSIP No. 59163F 10 5 13D Page 58 of 59 Pages
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EVEREST SPECIAL SITUATIONS FUND L.P.
By: Maoz Everest Fund Management Ltd.,
its General Partner
By: /s/ Elchanan Maoz
------------------------------
Name: Elchanan Maoz
Title: Chairman and Chief
Executive Officer
Address: Platinum House
21 Ha'arbaa Street
Tel Aviv 64739, Israel
Fax: 011-972-3-685-8557
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
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CUSIP No. 59163F 10 5 13D Page 59 of 59 Pages
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EXHIBIT A
PURCHASERS:
Columbia Ventures Corporation
Everest Special Situations Fund L.P.