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Exhibit 10.4
STOCK PURCHASE
AGREEMENT
THIS STOCK PURCHASE AGREEMENT
(this “ Agreement ”) is made as of November 1,
2002, by and between Cbeyond Communications, Inc., a Delaware
corporation (the “ Company ”), and Cisco Systems
Capital Corporation (“ Cisco ”). Capitalized
terms used but not otherwise defined herein have the meanings given
to them in Section 5 below.
A. The Company has entered
into a Stock Purchase Agreement by and among the Company and the
other parties (the “ Investors ”) listed on
Exhibit A thereto (the “ Investor Stock Purchase
Agreement ”), pursuant to which the Company is selling to
the Investors shares of its Series B Participating Preferred Stock
(the “ Series B Financing ”).
B. The Company, its
subsidiary Cbeyond Communications, LLC, and Cisco are parties to an
Amended and Restated Credit Agreement, dated as of March 31, 2002
(the “ Credit Agreement ”).
C. In connection with the
Series B Financing, Cisco has agreed to cancel certain debt
outstanding under the Credit Agreement in exchange for shares of
Series B Participating Preferred Stock of the Company.
D. The purpose of this
Agreement is to set forth certain of the terms on which the Company
will issue such shares of Series B Participating Preferred Stock to
Cisco and Cisco will cancel certain debt owed by the
Company.
NOW, THEREFORE, in
consideration of the mutual promises made herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
Section 1.
Authorization; Sale of Preferred Stock; Cancellation of
Indebtedness; Closing.
1.1 Authorization of the
Preferred Stock . The Company has authorized the issuance and
sale of 65,000,000 shares of the Company’s Series B
Participating Preferred Stock, par value $.01 per share, having the
rights and preferences set forth in its Second Restated Certificate
of Incorporation, as filed with the Secretary of State of the State
of Delaware on November 1, 2002 (the “ Certificate of
Incorporation ”). The Company’s Series B
Participating Preferred Stock is convertible into shares of the
Company’s Common Stock, par value $.01 per share (the “
Common Stock ”), as set forth in the Certificate of
Incorporation.
1.2 Purchase and Sale of
Preferred Stock; Cancellation of Indebtedness . Subject to the
terms and conditions set forth herein, for the consideration set
forth in the following sentence, the Company shall issue and sell
to Cisco and Cisco shall purchase from the Company shares of Series
B Participating Preferred Stock constituting five percent (5%) of
the capital stock of the Company on a fully-diluted basis as of the
Series B Stage 1 Closing (the “ Preferred Stock
”) which will result in the issuance by the Company to Cisco
of (i) at the Closing, 2,768,744 shares of Preferred Stock and (ii)
at the closing of the Rights Offering (as
such term is defined in the Investor
Stock Purchase Agreement), such further number of shares of
Preferred Stock necessary for the total amount of shares of
Preferred Stock issued to Cisco hereunder to equal five percent
(5%) of the capital stock of the Company on a fully-diluted basis
as of such time. At the Closing, Cisco shall forgive and cancel
$25,000,000 of Tranche C amounts outstanding and owed to Cisco by
the Company under the Credit Agreement.
1.3 Closing . The
closing (the “ Closing ”) shall take place at
the offices of Latham & Watkins in Reston, Virginia, on
November 1, 2002, or at such other time and place as the Company
and Cisco (the “ Closing Date ”). At the
Closing, the Company shall deliver to Cisco a stock certificate
evidencing the Preferred Stock to be issued to Cisco at the
Closing, registered in the name of Cisco, upon execution of this
Agreement.
Section 2. Conditions
to the Closing . The obligations of Cisco to purchase and
pay for the Preferred Stock at the Closing are subject to the
satisfaction as of the Closing of the following
conditions:
2.1 Adoption of
Certificate of Incorporation . The Certificate of Incorporation
shall have been amended and restated in substantially the form
attached as Exhibit B to the Investor Stock Purchase Agreement,
shall be in full force and effect under the laws of the State of
Delaware and shall not have been further amended or
modified.
2.2 Securities Law
Compliance . The Company shall have made all filings under all
applicable federal and state securities laws necessary to
consummate the issuance, in compliance with such laws, of the
Preferred Stock to be issued pursuant to this Agreement.
2.3 Compliance with
Applicable Laws . The purchase of Preferred Stock by Cisco
hereunder shall not be prohibited by any applicable law or
governmental rule or regulation and shall not otherwise subject
Cisco to any penalty, liability or, in Cisco’s reasonable
judgment, other onerous condition under or pursuant to any
applicable law or governmental rule or regulation, and the purchase
of the Preferred Stock by Cisco hereunder shall be permitted by the
laws, rules and regulations of the jurisdictions and governmental
authorities and agencies to which Cisco is subject.
2.4 Merger . A
Certificate of Merger for the merger of Cbeyond Investors, LLC with
and into the Company, with the Company as the surviving entity,
substantially in the form attached as Exhibit E to the Investor
Stock Purchase Agreement, shall have been filed with the Secretary
of State of the State of Delaware and the Merger shall become
effective prior to the Series B Stage 1 Closing.
2.5 Board of Directors
. The Company shall have taken all necessary corporate action such
that immediately following the Series B Stage 1 Closing, the
directors of the Company shall be those listed on Exhibit F to the
Investor Stock Purchase Agreement, and there shall be no vacancies
on the Board.
2.6 Proceedings . All
corporate and other proceedings taken or required to be taken by
the Company in connection with the transactions to occur at the
Series B Stage 1
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Closing shall be consummated at or prior
to the Series B Stage 1 Closing and all documents incident thereto
shall be satisfactory in form and substance to counsel to
Cisco.
2.7 Cisco Credit
Agreement . The Company, its subsidiary Cbeyond Communications,
LLC, and Cisco shall have executed and delivered an amendment to
the Credit Agreement, with terms and conditions reasonably
satisfactory to the Major Investors (as such term is defined in the
Investor Stock Purchase Agreement) and the Investors (as such term
is defined in the Investor Stock Purchase Agreement) named in that
certain Letter Agreement dated January 2001 addressed by such
Investors to Cisco Systems, Inc. shall have received a written
confirmation from Cisco that such Investors (as such term is
defined in the Investor Stock Purchase Agreement) have no
obligations thereunder.
2.8 Waiver . Any
condition specified in this Section 2 may be waived if such waiver
is consented to in writing by Cisco.
2.9 Deliveries . At
the Closing, the Company shall have executed and delivered to Cisco
the following documents:
(a) the Amended and Restated
Shareholders Agreement, dated November 1, 2002 amending and
restating that certain Unitholders Agreement, dated March 28, 2000,
as amended (the “ Shareholders Agreement
”);
(b) the Second Amended and
Restated Registration Rights Agreement, dated November 1, 2002 (the
“ Registration Rights Agreement ”);
(c) this
Agreement;
(d) an Officer’s
Certificate, dated the Closing Date, stating that the conditions
specified in Section 1.1 have been fully satisfied and the
conditions under Sections 1.2 and 1.3 have been fully satisfied to
the extent such conditions relate to the Company’s
obligations thereunder;
(e) certified copies of the
resolutions duly adopted by the Board, which resolutions shall not
have been rescinded or modified, authorizing the execution,
delivery and performance of this Agreement, the Shareholders
Agreement and the Registration Rights Agreement and each of the
other agreements contemplated hereby to which the Company is a
party or by which it is bound, the issuance and sale of the
Preferred Stock, the reservation for issuance upon conversion of
the Preferred Stock of that number of shares of Common Stock
issuable upon conversion of all shares of Preferred Stock and the
consummation of all other transactions to occur as of the Closing
as contemplated by this Agreement;
(f) certified copies of the
Certificate of Incorporation and the Bylaws, each as in effect on
the Closing Date;
(g) copies of all third party
and governmental consents, approvals and filings required in
connection with the consummation of the transactions to occur as of
the Closing
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hereunder (including all blue sky law
filings and waivers of all preemptive rights and rights of first
refusal); and
(h) such other documents
relating to the transactions contemplated by this Agreement as
counsel to Cisco may reasonably request.
Section 3. Contractual
Preemptive Rights.
3.1 Except for issuances (i)
of Preferred Stock as contemplated under this Agreement or of
Preferred Stock (as contemplated by, and as such term is defined
in, the Investor Stock Purchase Agreement) or of Common Stock upon
conversion of such Preferred Stock, (ii) of shares of Common Stock
issued or issuable to employees, directors, consultants and other
service providers of the Company or any Subsidiary directly or
pursuant to stock option plans, stock purchase plans or agreements
approved by the Board of Directors, (iii) in connection with the
acquisition of another company or business, (iv) pursuant to a
Public Offering, (v) of up to 3,000,000 shares of Common Stock
issued or issuable pursuant to any equipment leasing arrangement or
debt financing from Cisco or (vi) of up to 150,000 shares of Common
Stock issued or issuable pursuant to any equipment leasing
arrangement or debt financing from a bank or other similar
financial institution or shares of Common Stock issued in
connection with any acquisition of any interest in intellectual
property, so long as such issuance is approved by the Board of
Directors or as otherwise excluded from the anti-dilution
provisions of the Preferred Stock, if the Company authorizes the
issuance or sale of any shares of Common Stock or any securities
containing options or rights to acquire any shares of Common Stock
(other than as a dividend on the outstanding Common Stock), the
Company shall first offer to sell to each holder of Preferred Stock
or Underlying Common Stock a portion of such stock or securities
equal to the quotient obtained by dividing (1) the number of
shares of Common Stock (on an as converted basis) held by such
holder, by (2) the total number of shares of outstanding Common
Stock on a fully-diluted basis (including Underlying Common Stock
as defined herein and Underlying Common Stock as defined in the
Investor Stock Purchase Agreement). The Company shall deliver a
notice by certified mail (“ Notice ”) to the
holders of Preferred Stock and Underlying Common Stock stating (i)
its bona fide intention to offer such shares, (ii) the number of
shares to be offered, and (iii) the price and terms, if any, upon
which it proposes to offer such shares. Each such holder shall be
entitled to purchase such stock or securities at the most favorable
price and on the most favorable terms as such stock or securities
are to be offered to any other Persons; provided that if all
Persons entitled to purchase or receive such stock or securities
are required to also purchase other securities of the Company, the
holders exercising their rights pursuant to this Section shall also
be required to purchase the same strip of securities (on the same
terms and conditions) that such other Persons are required to
purchase. The purchase price for all stock and securities offered
to such holders hereunder shall be payable in cash.
3.2 In order to exercise its
purchase rights hereunder, each holder must within thirty (30) days
after receipt of Notice, deliver a written notice to the Company
describing such holder’s election hereunder. If all of the
securities offered to such holders are not fully subscribed, the
remaining stock and securities shall be reoffered by the Company to
the holders purchasing their full allotment upon the terms set
forth in this Section, except that such holders must exercise their
rights within five (5) business days after receipt of such reoffer.
If such
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holders in the aggregate elect to
purchase more than the number of remaining securities reoffered by
the Company, such securities shall be allocated among the holders
electing to purchase such securities pro rata based upon the number
of securities elected to be purchased.
3.3 Upon the expiration of
the offering periods described above, the Company shall be entitled
to sell any such stock or securities which such holders have not
elected to purchase during the 180 days following such expiration
at a price not less and on other terms and conditions not
materially more favorable to the purchasers thereof than those
offered to such holders. Any stock or securities offered or sold by
the Company after such 180-day period must be reoffered to such
holders pursuant to the terms of this Section.
3.4 The rights of the holders
of Preferred Stock and Underlying Common Stock under this Section
shall terminate upon the consummation of the first to occur of (x)
the consummation of a Public Offering or (y) a Sale of the
Company.
Section 4.
Representations and Warranties of the Company . As a
material inducement to Cisco to enter into this Agreement and
purchase the Preferred Stock hereunder, the Company hereby
represents and warrants that:
4.1 Organization,
Corporate Power and Licenses . Each of the Company and its
Subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its formation and is qualified to do business in
every jurisdiction in which its ownership of property or conduct of
business requires it to qualify, except where the failure to be so
qualified could not reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries. The Company and
each of its Subsidiaries possesses all requisite power and
authority and all material licenses, permits and authorizations
necessary to own and operate its properties, to carry on its
businesses as presently conducted or as presently proposed to be
conducted and to carry out the transactions contemplated by this
Agreement. The copies of the Company’s and each
Subsidiary’s charter documents, Bylaws or other
organizational documents which have been furnished to counsel to
Cisco to the extent requested reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and
complete.
4.2 Capital Stock and
Related Matters .
(a) As of the Series B Stage
1 Closing (but not including any sales of securities pursuant to
the Rights Offering) and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 65,000,000 shares
of preferred stock, all of which have been designated Series B
Participating Preferred Stock, 45,542,832 of which shares shall be
issued and outstanding as of the Series B Stage 1 Closing (but
prior to the closing of the Rights Offering) and (b) 255,000,000
shares of Common Stock, of which 433,797 shares shall be issued and
outstanding, 176,500,000 shares shall be reserved for issuance upon
conversion of the Preferred Stock issued in the Series B Stage 1
Closing and 9,373,252 shares shall be reserved for issuance upon
exercise of options issued pursuant to Permitted Stock Option Plans
and 2,918,744 shares shall be reserved for issuance upon exercise
of outstanding warrants. Except as set forth on the attached
“ Capitalization Schedule ,” as of the Series B
Stage 1 Closing, the Company shall not
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have outstanding any stock or
securities, nor any options, warrants or other rights to acquire
capital stock or securities of the Company or any phantom stock
plans or stock appreciation rights. As of the Series B Stage 1
Closing, all of the outstanding shares of the Company’s
capital stock listed on the Capitalization Schedule shall be
validly issued, fully paid and non-assessable.
(b) Except as set forth on
Schedule 4.2(b), there are no statutory or contractual stockholders
preemptive rights or rights of first refusal with respect to the
issuance of the Preferred Stock hereunder or the issuance of the
Common Stock upon conversion of any of the Preferred Stock. The
Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Preferred
Stock hereunder or the issuance of the Common Stock upon the
conversion of the Preferred Stock or the exercise of the options
granted under Permitted Stock Option Plans do not require
registration under the Securities Act or any applicable state
securities laws. There are no agreements between the
Company’s stockholders with respect to the voting or transfer
of the Company’s capital stock or with respect to any other
aspect of the Company’s affairs, except for this Agreement
and the Shareholders Agreement.
4.3 Authorization; No
Breach . The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Shareholders
Agreement and all other agreements contemplated hereby to which the
Company is a party, and the filing of the Certificate of
Incorporation referred to in Section 2.1 above have been duly
authorized by the Company. This Agreement, the Registration Rights
Agreement, the Shareholders Agreement, the Certificate of
Incorporation, and all other agreements contemplated hereby to
which the Company is a party each constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery by the
Company of this Agreement, the Registration Rights Agreement, the
Shareholders Agreement and all other agreements contemplated hereby
to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby, the offering, sale
and issuance of the Preferred Stock hereunder, the issuance of the
Common Stock upon conversion of the Preferred Stock, the filing of
the Certificate of Incorporation referred to above and the
fulfillment of and compliance with the respective terms hereof and
thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any
lien, security interest, charge or encumbrance upon the
Company’s or any of its Subsidiaries’ capital stock or
assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency
pursuant to, the charter or Bylaws of the Company, or any law,
statute, rule or regulation to which the Company or any of its
Subsidiaries is subject, or any agreement, instrument, order,
judgment or decree to which the Company or any of its Subsidiaries
is subject.
4.4 Subsidiaries
.
(a) Except for the
Company’s interests or rights in the Subsidiaries listed on
Schedule 4.4 , the Company does not own or hold, and has
never owned or held, any shares of stock or
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any other securities or interests in or
any rights to acquire any shares of stock or any other security or
interest in any other Person. The Subsidiary Schedule
attached hereto sets forth as of the Closing a true and complete
list of all Subsidiaries, listing for each Subsidiary its name,
type of entity, the jurisdiction and date of its incorporation or
organization, its authorized capital stock, partnership capital or
equivalent ownership interests, the number and type of its issued
and outstanding shares of capital stock, partnership interests or
equivalent ownership interests and the current record and
beneficial ownership of such shares, partnership interests or
equivalent ownership interests. Other than the Subsidiaries, (i)
there are no other corporations, partnerships, joint ventures,
associations or other entities in which the Company or any
Subsidiary owns, of record or beneficially, any direct or indirect
equity or other interest or any right (contingent or otherwise) to
acquire the same and (ii) neither the Company nor any Subsidiary is
a member of (nor is any part of the Company’s business
conducted through) any partnership, nor is the Company or any
Subsidiary a participant in any joint venture or similar
arrangement. The Company’s business is conducted solely by
the Company and the Subsidiaries.
(b) There are no statutory or
contractual equityholders preemptive rights or rights of first
refusal with respect to the issuance of any equity securities or
interests of any Subsidiary.
4.5 Brokerage . There
are no claims for brokerage commissions, finders’ fees or
similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or
agreement binding upon the Company or any of its Subsidiaries. The
Company shall pay, and hold Cisco harmless against, any liability,
loss or expense (including reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any such
claim.
4.6 Governmental Consent,
etc . Except as set forth on the attached “ Consents
Schedule ,” no permit, consent, approval or authorization
of, or declaration to or filing with, any governmental authority is
required in connection with the execution, delivery and performance
by the Company or any of its Subsidiaries of this Agreement or the
other agreements contemplated hereby to which it is a party, or the
consummation by the Company or any of its Subsidiaries of any other
transactions contemplated hereby or thereby.
4.7 Disclosure .
Neither this Agreement nor any of the exhibits, schedules,
attachments, written statements, documents, certificates or other
written items supplied Cisco by or on behalf of the Company with
respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to
make each statement contained herein or therein not misleading.
There is no fact relating specifically to the Company and its
Subsidiaries (and not to market or industry conditions generally)
which the Company has not disclosed to Cisco in writing and of
which any of its officers, directors or executive employees is
aware and which would reasonably be expected to have a material
adverse effect upon the expected business, financial condition,
value, operations, assets, or business prospects of the Company and
its Subsidiaries taken as a whole.
4.8 Financial
Statements . The audited consolidated balance sheet of the
Company as of December 31, 2001, and the unaudited consolidated
balance sheet of the Company as of August 31, 2002 fairly present
the financial position of the Company on a consolidated basis as at
the date thereof, and the related statements of income (loss),
and
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statements of cash flow for the fiscal
periods ended on such dates fairly present the results of
operations of the Company for the respective periods indicated
(collectively, the “ Financial Statements ”).
The consolidated balance sheets, statement of income and statements
of cash flow have been prepared in accordance with generally
accepted accounting principles consistently applied. Except as set
forth on the Company’s Financial Statements, the Company does
not have any debt, obligation or liability (whether accrued,
absolute, contingent or liquidated), except liabilities incurred
and obligations under agreement entered into, in the ordinary
course of business, non of which (individually or in the aggregate)
would have a material adverse effect.
4.9 Compliance with
Law . Neither the Company nor any of its Subsidiaries is in
violation of any laws, ordinances, governmental rules
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