-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, POlUfQJ/f2ywqmvGfyomLm9EnsPlDfN1RiL80E5nvFr8ekmHPmH5nPtHpjYOidSB q1K8cWbQ41vNmAvshWaFrA== 0000950147-01-501151.txt : 20010628 0000950147-01-501151.hdr.sgml : 20010628 ACCESSION NUMBER: 0000950147-01-501151 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010622 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL FIBERCOM INC CENTRAL INDEX KEY: 0000924632 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 860271282 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13278 FILM NUMBER: 1669226 BUSINESS ADDRESS: STREET 1: 3410 E UNIVERSITY STREET 2: SUITE 180 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6029411900 MAIL ADDRESS: STREET 1: 3410 E UNIVERSITY STREET 2: SUITE 180 CITY: PHOENIX STATE: AZ ZIP: 85034 8-K 1 e-7036.txt CURRENT REPORT DTD 06/22/2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 14, 2001 INTERNATIONAL FIBERCOM, INC. (Exact name of registrant as specified in its charter) Arizona (State or other jurisdiction of incorporation) 001-13278 86-0271282 (Commission File Number) (IRS Employer Identification Number) 3410 East University Drive, Suite 180, Phoenix Arizona 85034 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (602) 387-4000 Not Applicable (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS International FiberCom, Inc. filed a press release dated June 22, 2001 announcing that it has entered into an amended and restated credit agreement with its lenders in connection with its $100 million revolving line of credit. Under this new agreement, the company renegotiated certain financial ratios and required balances under the original credit agreement in order to bring it in compliance and to be consistent with its current and anticipated level of operations during the term of the facility, which runs through March 31, 2003. The interest rate increased 125 basis points under the amended facility. Additionally, the company completed the private placement of $10 million of Series D Convertible Preferred Stock to Crescent International Ltd., an investment company managed by GreenLight (Switzerland) SA, and warrants exercisable to purchase 509,554 shares of common stock at a price of $5.89 per share for a five-year term. The Series D Preferred is convertible into common stock at the lower of $5 per share or the average of the five lowest consecutive closing prices of the common stock for the 22 days preceding the conversion date. The Series D Preferred stockholders are entitled to vote on all matters to be voted upon by the holders of Common Stock. The Company may redeem the Series D Preferred Stock upon 30 days notice at a price of 130% of the original purchase price. No dividends are paid to the Series D Preferred stockholders unless the Company fails to deliver certificates for common shares upon conversion of the Series D Preferred shares. Crescent also agreed to purchase up to $10 million of common stock of the company in increments of between $200,000 and $2.5 million at the discretion of the company during the 18-month commitment period. The purchase price of the common stock under this commitment will be equal to the average of the three lowest consecutive closing prices during the 22 days preceding the sale. The company agreed to provide registration rights to Crescent in connection with the placement. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit No. Exhibit Description Filed Herewith - ----------- ------------------- -------------- 3.1 Statement Pursuant to Section 10-602 X 10.1 Stock Purchase Agreement by and between Crescent X International Ltd. and International FiberCom, Inc. dated as of June 18, 2001 10.2 Registration Rights Agreement dated June 18, 2001 X between International FiberCom, Inc. and Crescent International Ltd. 10.3 Incentive Warrant dated June 20, 2001 issued to X Crescent International Ltd. 10.4 Amended and Restated Credit Agreement dated as of X June 14, 2001 99.1 Press Release dated June 22, 2001 X 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: June 27, 2001 INTERNATIONAL FIBERCOM, INC. /s/ Joseph P. Kealy --------------------------------------- Joseph P. Kealy President and Chief Executive Officer 3 EX-3.1 2 ex3-1.txt STATEMENT PURSUANT TO ARS 10-602 Exhibit 3.1 STATEMENT PURSUANT TO SECTION 10-602 OF SERIES D CONVERTIBLE PREFERRED STOCK OF INTERNATIONAL FIBERCOM, INC., AN ARIZONA CORPORATION International FiberCom, Inc. (the "COMPANY"), a corporation organized and validly existing under the laws of the State of Arizona, does hereby submit this Statement Pursuant to Section 10-602 as follows: 1. NAME: The name of the Company is: International FiberCom, Inc. 2. THE TEXT OF THE RESOLUTION DETERMINING THE TERMS OF THE CLASS OR SERIES OF SHARES: Attached hereto as Exhibit A and by this reference incorporated herein. 3. DATE OF ADOPTION: The Resolution was adopted by all of the directors of the Company effective June 15, 2001. 4. STATEMENT OF DUE ADOPTION: The Resolution has been duly adopted by the Company's Board of Directors and has not been amended, modified, rescinded or superseded and remains in full force and effect. IN WITNESS WHEREOF, the Company has caused this Statement to be executed, delivered and filed to be effective as of the 15th day of June, 2001. -------------------------------------------- Name: Joseph P. Kealy Title: Chairman of the Board and President EXHIBIT A RESOLUTION OF THE BOARD OF DIRECTORS OF INTERNATIONAL FIBERCOM, INC. PURSUANT TO SECTION 10-602 OF THE ARIZONA REVISED STATUTES BE IT RESOLVED, pursuant to the authority granted and vested in the Board of Directors, a series of Preferred Stock be, and hereby is, created and shall have the distinctive serial designation of Series D Convertible Preferred Stock, without par value (the "SERIES D CONVERTIBLE PREFERRED STOCK"); FURTHER RESOLVED, that the number of shares of Series D Convertible Preferred Stock created hereby shall be 100,000; and FURTHER RESOLVED, that the terms and issuance and the powers, designation, preferences and relative participating, optional or other rights, and the qualifications, limitations or restrictions of the Company's Series D Convertible Preferred Stock shall be as follows: 2 SERIES D CONVERTIBLE PREFERRED STOCK 1. NUMBER OF SHARES AND DESIGNATION. 100,000 shares of the authorized, but undesignated Preferred Stock,without par value of the Company are hereby constituted as a series of the Preferred Stock designated as Series D Convertible Preferred Stock. The Series D Convertible Preferred Stock may be issued only to Crescent International Ltd., or an affiliate thereof. 2. DEFINITIONS. Capitalized terms used herein and not otherwise defined shall have the following meanings: "CLOSING BID PRICE" shall mean the per share closing bid price of the Common Stock as reported by Bloomberg L.P. "CLOSING TRADE PRICE" shall mean the per share closing trade price of the Common Stock as reported by Bloomberg L.P. "COMMON STOCK" shall mean the common stock, no par value per share, of the Company. "CONVERSION DATE" shall mean the date a conversion notice is delivered pursuant to Section 8. "CONVERSION PRICE" shall mean the lower of (i) the Fixed Conversion Price or (ii) the average of the lowest five consecutive Closing Trade Prices during the 22 Trading Day period immediately preceding the Conversion Date. "CONVERSION RATIO" shall have the meaning ascribed to such term in Section 8(a). "EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "FIXED CONVERSION PRICE" shall mean 130% of the average of the Closing Trade Prices for the 10 consecutive Trading Days immediately preceding the Issue Date. "FLOOR PRICE" shall mean $1.00. "ISSUE DATE" shall mean the date of issuance of the shares of Series D Convertible Preferred Stock. "LIQUIDATION PREFERENCE" shall have the meaning ascribed to such term in Section 6(a). "PRINCIPAL MARKET" shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange, the Electronic Bulletin Board or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock. "REDEMPTION DATE" shall mean the date which is 30 Trading Days from the date a Redemption Notice is delivered by the Company to the holders of Series D Convertible Preferred Stock pursuant to Section 7(a) hereof. "REDEMPTION NOTICE" shall have the meaning ascribed to such term in Section 7(a). "SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "TRADING DAY" shall mean any day during which the Principal Market shall be open for business. 3 3. RANK. The shares of Series D Convertible Preferred Stock shall, with respect to the distribution of assets on liquidation, dissolution or winding up of the Company, rank (i) senior and prior to the Common Stock and any other class or series of capital stock of the Company currently or hereafter issued, other than the Parity Securities (as defined below), (collectively, the "JUNIOR SECURITIES"), and (ii) on parity with (or junior to the extent that the terms thereof so provide) the Series A Convertible Preferred Stock, without par value of the Company, the Series B Convertible Preferred Stock, without par value of the Company, the Series C Convertible Preferred Stock, without par value of the Company and any other class or series of preferred stock of the Company hereafter issued, the terms of which specifically provide that shares of such class or series of preferred stock shall rank PARI PASSU with the Series D Convertible Preferred Stock (collectively, the "PARITY SECURITIES"). 4. VOTING RIGHTS. (a) Each outstanding share of Series D Convertible Preferred Stock shall entitle the holder thereof to vote, in person or by proxy or written consent, at a special or annual meeting of stockholders or in connection with any stockholder action taken in lieu of a meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock and voting together as a single class with the Common Stock (and with any other shares, if any, entitled to vote on such action). With respect to any such vote, each share of Series D Convertible Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series D Convertible Preferred Stock into shares of Common Stock pursuant to Section 8 hereof on the record date for determining the stockholders of the Company eligible to vote on any such matters or, if no record date is established, on the date such vote is taken or any written consent of the stockholders is solicited. (b) Notwithstanding anything herein to the contrary, so long as any shares of Series D Convertible Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the holders of a majority of the shares of the Series D Convertible Preferred Stock then outstanding, (i) alter or change adversely the absolute or relative powers, preferences or rights given to the Series D Convertible Preferred Stock, (ii) alter or amend this Certificate of Designations, (iii) authorize or create any class or series of stock ranking as to dividends or distribution of assets upon a liquidation or otherwise senior to the Series D Convertible Preferred Stock, (iv) amend its Certificate of Incorporation, bylaws or other charter documents so as to affect adversely any rights of any holders of Series D Convertible Preferred Stock, (v) increase the authorized number of shares of Series D Convertible Preferred Stock, (vi) issue or reissue any shares of Series A, B, or C Convertible Preferred Stock, or (vii) enter into any agreement with respect to the foregoing. 5. DIVIDENDS. In the event that there is a failure by the Company to deliver Common Stock certificates pursuant to Section 8(e)(v), then the Company shall pay to holders out of funds legally available therefor, before any dividend is paid on any Junior Securities, yearly dividends at a fixed rate of 5.0% per annum, payable in cash in quarterly installments on March 1, June 1, September 1, and December 1 of each calendar year, beginning on June 1, 2001. Such dividends, if due, shall be payable on all shares of Series D Convertible Preferred Stock, other than such shares which have previously and timely been converted or redeemed in accordance with the provisions of Section 8 hereof, and shall be due from the Issue Date until all such shares are converted or redeemed in accordance with the terms hereof. 6. LIQUIDATION. (a) LIQUIDATION AMOUNT. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, before any 4 distribution or payment shall be made to the holders of outstanding Junior Securities, including, but not limited to, the Common Stock, the holders of outstanding shares of Series D Convertible Preferred Stock shall be entitled to receive, out of the assets of the Company at the time legally available therefor, in exchange for their shares of Series D Convertible Preferred Stock an amount in cash equal to $100 per share of Series D Convertible Preferred Stock, as adjusted for stock splits, stock dividends, recapitalizations and other similar events (the "LIQUIDATION PREFERENCE"), plus an amount per share per annum in cash equal to 5.0% of the Liquidation Preference, accruing from the Issue Date until the date on which the Liquidation Preference for each share of Series D Convertible Preferred Stock has been paid in full, on a PARI PASSU basis with the rights of the holders of any Parity Securities. If, upon any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the assets of the Company available therefor shall be insufficient to permit the payment in full to the holders of outstanding shares of Series D Convertible Preferred Stock of the preferential liquidation amounts to which they are then entitled pursuant to the provisions of this clause (a), the entire assets of the Company thus distributable shall be distributed among the holders of outstanding shares of Series D Convertible Preferred Stock and any Parity Securities ratably, in proportion to the full amounts to which such holders would otherwise be entitled if such assets were sufficient to permit payment in full. (b) LIMITATION ON DISTRIBUTION. Upon any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, after the payment in full to the holders of outstanding shares of Series D Convertible Preferred Stock and any Parity Securities of the preferential liquidation amounts to which they are then entitled pursuant to the provisions of clause (a) above, the holders of outstanding shares of Series D Convertible Preferred Stock shall not be entitled to participate in any further distributions made to the holders of the Common Stock or any other class of Junior Securities. (c) APPROVAL OF CHANGE OF CONTROL. The sale of all or substantially all of the assets of the Company, the sale of a majority of the outstanding Common Stock (including, but not limited to, the sale of the outstanding Common Stock that effectuates a "going-private" transaction), or the merger of the Company with or into another corporation in which the Company is not the surviving entity, requires the consent of the holders of a majority of the issued and outstanding Series D Convertible Preferred Stock. Such consent shall not be withheld in the event that the Company offers to redeem, and redeems in immediately available funds, the shares of Series D Convertible Preferred Stock for an amount equal to 1.2 times the Liquidation Preference. (d) OTHER EVENTS. At the option of the Company, the sale of all or substantially all of the assets of the Company, the sale of a majority of the outstanding Common Stock (including, but not limited to, the sale of the outstanding Common Stock that effectuates a "going-private" transaction), or the merger of the Company with or into another corporation in which the Company is not the surviving entity, shall be deemed to be a dissolution, liquidation or winding up of the Company. 7. REDEMPTION. (a) REDEMPTION AMOUNT. At any time after the Issue Date, any or all of the outstanding shares of Series D Convertible Preferred Stock shall at the option of the Company and upon 30 Trading Days prior written notice by the Company (the "REDEMPTION NOTICE") to the holders of Series D Convertible Preferred Stock, be subject to redemption by the Company on the Redemption Date for a purchase price per share payable in cash in immediately available funds equal to $130 per share of Series D Convertible Preferred Stock (the "REDEMPTION AMOUNT"). If less than all of the shares of Series D Convertible Preferred Stock are redeemed, such 5 redemption shall be pro rata among the holders thereof. Notwithstanding the foregoing, the Company shall not be permitted to redeem shares of Series D Convertible Preferred Stock with respect to which the holders of such shares have previously given notice to the Company of such holders' intent to convert such shares of Series D Convertible Preferred Stock into shares of Common Stock in accordance with Section 8 hereof. (b) TERMINATION OF PREFERRED STOCK RIGHTS. From and after any Redemption Date, unless the Company shall default on such Redemption Date in paying the Redemption Amount to the holder, all rights of the holders of the shares of Series D Convertible Preferred Stock surrendered for redemption, except the right to receive the Redemption Amount and all accrued but unpaid dividends in respect of such shares, shall cease and terminate with respect to such shares of Series D Convertible Preferred Stock surrendered for redemption only. (c) DEFAULT BY COMPANY. If the Company shall default on any Redemption Date in paying the Redemption Amount to the holder, all rights of the holders of the shares of Series D Convertible Preferred Stock surrendered for redemption with respect to such shares shall be reinstated, including without limitation the right of such holders to convert shares of Series D Convertible Preferred Stock into shares of Common Stock pursuant to Section 8 hereof. Furthermore, if on the Redemption Date, any portion of the Redemption Amount shall not be paid by the Company, liquidated damages shall accrue on the unpaid portion of the Redemption Amount at the rate of 2% per month (which amount shall not constitute a penalty) until either (i) the Redemption Amount, plus all such liquidated damages is paid in full, or (ii) the date on which all shares of Series D Convertible Preferred Stock subject to redemption by the Company have been converted into shares of Common Stock pursuant to Section 8 hereof (including, without limitation, delivery of all certificates required by Section 8(e)). (d) OPTION OF HOLDER TO CONVERT. During the 28 Trading Day period following the date a holder of Series D Convertible Preferred Stock has received a Redemption Notice from the Company, such holder may convert its shares of Series D Convertible Preferred Stock into shares of Common Stock of the Company in accordance with the provisions of Section 8 hereof. (e) MECHANICS OF REDEMPTION. A Redemption Notice may be delivered to the holders of Series D Convertible Preferred Stock via facsimile, and upon receipt of such notice each holder shall deliver written acknowledgment thereof via facsimile to the Company. The redemption of the shares of Series D Convertible Preferred Stock upon any Redemption Date shall take place at the principal place of business of the Company. On such Redemption Date, the Company shall tender the Redemption Amount by wire transfer of immediately available funds to an account designated in writing by each holder. Upon receipt of the Redemption Amount each holder of the certificate or certificates representing the shares of Series D Convertible Preferred Stock being redeemed shall promptly deliver such certificate or certificates to the Company at its principal place of business. 8. CONVERSION. (a) CONVERSION BY THE HOLDER. Subject to the provision for adjustment set forth below and subject to paragraph (c) below, each share of the Series D Convertible Preferred Stock shall be convertible at the option of the holder thereof at any time after the Issue Date, into a number of shares of Common Stock equal to the then effective Conversion Ratio. As used herein, the "CONVERSION RATIO," determined as of any date, shall equal the number of shares of Common Stock into which one share of Series D Convertible Preferred Stock is convertible pursuant to this Section 8, which shall be determined by dividing $100 by the then effective Conversion Price. The Conversion Ratio shall be subject to adjustment as provided in Section 8(f). Notwithstanding anything in this Section 8(a) to the contrary, at the option of the Company, which option 6 must be exercised by the Company within one Trading Day of delivery of a conversion notice to the Company but no later than Noon New York time of the following Trading Day, and which option may not be exercised during any period which is 120 days after the date that the Company first exercises this option, the shares of Series D Convertible Preferred Stock shall not be convertible in the event that the average of the Closing Trade Prices during the 7 Trading Day period immediately preceding the date of a conversion notice delivered in accordance with the provisions of Section 8(e)(i) hereof is less than the Floor Price; PROVIDED, HOWEVER, that subsequent to the exercise by the Company of such option, the holder may deliver another conversion notice to the Company and in such event the Company shall not have the option to refuse conversion of the shares of Series D Convertible Preferred Stock if the average of the Closing Trade Prices during the 7 Trading Day period immediately preceding the Company's receipt of such subsequent conversion notice is greater than the Floor Price. (b) CONVERSION BY THE COMPANY. Subject to the provision for adjustment set forth in this Section 8 and subject to paragraph (c) below, each share of the Series D Convertible Preferred Stock shall be convertible at the option of the Company at any time after the Issue Date into a number of shares of Common Stock equal to the then effective Conversion Ratio, provided that: (i) the shares of Common Stock issuable upon such conversion may be sold by the holder (1) pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission or (2) without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act; (ii) the Closing Trade Prices for at least 15 of the 22 Trading Days immediately preceding the date on which a conversion notice is delivered pursuant to paragraph (e)(ii) of this Section 8 is equal to or greater than 280% of the Fixed Conversion Price; (iii) unless otherwise agreed to in writing by the holder, the number of shares of Common Stock issuable upon such conversion is less than or equal to twice the average daily trading volume of the Common Stock on the Principal Market for the 22 Trading Day period immediately preceding the date on which a conversion notice is delivered pursuant to paragraph (e)(ii) of this Section 8; and (iv) at least 22 Trading Days have elapsed since any prior exercise by the Company of its conversion rights pursuant to this paragraph (b). (c) LIMITATIONS ON CONVERSION. At no time may the holders of the Series D Convertible Preferred Stock or the Company exercise any conversion rights pursuant to this Section 8 such that the number of shares of Common Stock to be received pursuant to such exercise aggregated with all other shares of Common Stock owned by the Series D Convertible Preferred Stock holder beneficially or deemed beneficially owned (as such term is defined in Rule 13(d) under the Exchange Act) by the Series D Convertible Preferred Stock holder and its affiliates would result in any Series D Convertible Preferred Stock holder and its affiliates owning more than 9.9% of all such Common Stock as would be outstanding immediately after conversion on the applicable Conversion Date, as determined in accordance with Section 13(d) of the Exchange Act. (d) RESERVATION OF STOCK. The Company shall at all times reserve and keep available for issuance upon the conversion of Series D Convertible Preferred Stock, free from any preemptive rights or any other actual contingent purchase rights of persons other than the holders of Series D Convertible Preferred 7 Stock, such number of shares of its authorized but unissued shares of Common Stock as will from time to time be necessary to permit the conversion of all outstanding shares of Series D Convertible Preferred Stock, together with all accrued but unpaid dividends thereon, into shares of Common Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Series D Convertible Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, fully paid, nonassessable and freely tradeable. (e) MECHANICS OF CONVERSION. (i) CONVERSION BY THE HOLDER. Conversion of Series D Convertible Preferred Stock may be effected by any holder thereof by delivery of a written notice in a form agreed to by the Company and the holders of Series D Convertible Preferred Stock. Such conversion notice shall state that such holder elects to convert all or a specified portion of such Series D Convertible Preferred Stock in accordance with this Section 8 and shall specify the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued and the address or addresses to which such holder wishes such certificate(s) to be delivered. Any such conversion notice may be delivered to the Company via facsimile. Within one Trading Day of receipt of a conversion notice but no later than Noon New York time of the following Trading Day, the Company will deliver written acknowledgement thereof via facsimile to the holders of Series D Convertible Preferred Stock so electing to convert shares of Series D Convertible Preferred Stock, and the Company shall specify whether it chooses to exercise its option to refuse conversion pursuant to and subject to the provisions of Section 8(a). As promptly as practicable after the delivery of a conversion notice, the holder electing to convert shares of Series D Convertible Preferred Stock shall surrender to the Company at the principal place of business of the Company certificates representing Series D Convertible Preferred Stock to be converted. (ii) CONVERSION BY THE COMPANY. Subject to the provisions of paragraph (b) of this Section 8, conversion of Series D Convertible Preferred Stock may be effected by the Company by delivery of a written notice in a form agreed to by the Company and the holders of Series D Convertible Preferred Stock. Any such notice may be delivered to the holders of Series D Convertible Preferred Stock via facsimile, and upon receipt of such notice the holder will deliver written acknowledgement thereof via facsimile to the Company. As promptly as practicable after the delivery of a conversion notice, each holder of shares of Series D Convertible Preferred Stock shall surrender to the Company at the principal place of business of the Company certificates representing Series D Convertible Preferred Stock to be converted. (iii) TAXES. The Company shall pay any and all issue and transfer taxes that may be payable in respect of any issuance and/or delivery of shares of Common Stock upon the conversion of Series D Convertible Preferred Stock pursuant hereto. (iv) DELIVERY. As promptly as practicable, and in any event within three Trading Days after receipt of the conversion notice and the surrender of such certificates representing Series D Convertible Preferred Stock, the Company shall deliver or cause to be delivered to the address stated in the conversion notice, or to any other address designated in writing and provided to the Company by the holder of Series D Convertible Preferred Stock, (i) certificate(s) representing the number of validly issued, fully paid and nonassessable shares of Common Stock to which the holder of Series D Convertible Preferred Stock being converted shall be entitled and (ii) if less than all of the shares represented by the surrendered certificate(s) are being converted, a new certificate representing the number of shares of Series D Convertible Preferred Stock which remain outstanding upon such partial conversion. Subject to Section 8(e)(v) hereof, such conversion shall be deemed to have been made at 8 the close of business on the applicable Conversion Date so that the rights of the holder thereof as to Series D Convertible Preferred Stock being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the persons entitled to receive shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (v) FAILURE TO DELIVER CERTIFICATES. If the Company fails to deliver Common Stock certificate(s) to the holder in accordance with Section 8(e)(iv) on or prior to the tenth Trading Day after the applicable Conversion Date and provided that the certificates representing Series D Convertible Preferred Stock have been delivered (the "DELIVERY FAILURE DATE"), then: (a) Dividends as described in Section 5 will become payable and the Company shall, within seven Trading Days after the Delivery Failure Date, pay to each holder all such accrued but unpaid dividends on all of the shares of the Series D Convertible Preferred Stock, other than such shares which have been timely converted or redeemed in accordance with the provisions herein; (b) Upon notice provided by the holder to the Company by facsimile (the "FORCED REDEMPTION NOTICE") that it requires the Company to redeem shares of Series D Convertible Preferred Stock, the Company shall redeem such number of shares as requested by the holder in the Forced Redemption Notice, within seven Trading Days of such Forced Redemption Notice, by paying in immediately available funds the Forced Redemption Price (as defined below). The "FORCED REDEMPTION PRICE" shall be equal to the product of (x) the number of shares of Series D Convertible Preferred Stock being redeemed by such holder, (y) the average Closing Bid Price of the Company's Common Stock for the five Trading Days immediately preceding the Conversion Date and (z) the Conversion Ratio calculated on the Conversion Date. If the Company fails for any reason to pay the Forced Redemption Price within such time period, the Company shall pay liquidated damages on the Forced Redemption Price at a rate of 2% per month in immediately available funds to such holder, accruing from such due date until the Forced Redemption Price and any accrued liquidated damages thereon are paid in full; (c) In the event that the holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver to the satisfaction of a sale by such holder of the shares underlying the Series D Convertible Preferred Stock that the holder anticipated receiving upon such conversion on the Conversion Date (a "Conversion Buy-In"), the holder shall provide the Company written notice indicating the holder's calculation of the Buy-In Amount (as defined below) in respect of the Conversion Buy-In (the "Buy-In Notice"). Within seven Trading Days of the Buy-In Notice, the Company shall pay the Buy-In Amount (as such term is defined below) in immediately available funds. The term "Buy-In Amount" shall be equal to the amount by which (x) the holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock purchased for a Conversion Buy-In exceeds (y) the aggregate Conversion Price for the number of shares of Common Stock in the Conversion Buy-In for which such conversion was not timely honored. For illustration purposes only, if the holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Conversion Buy-In with respect to an attempted conversion of $10,000 aggregate Conversion Price for the number of shares of Common Stock in the Conversion Buy-In, the Company shall be required to pay the holder $1,000. If the Company fails for any reason to pay the Buy-In Amount within such time period, the Company shall pay liquidated damages on the Buy-In Amount at a rate of 2% per month in immediately available funds to such holder, accruing from the day following the date of the Buy-In Notice until the 9 Buy-In Amount and any accrued liquidated damages thereon are paid in full; and (d) Nothing herein shall limit a holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein including, without limitation, damages relating to any Conversion Buy-In, and such holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). (f) ADJUSTMENTS. (i) SUBDIVISION OR COMBINATION OF SHARES; STOCK DIVIDENDS. In the event of any change in the number of issued and outstanding shares of Common Stock of the Company by reason of any stock split, stock dividend, subdivision, or combination of shares, or any other change in the corporate or capital structure of the Company which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) shares of stock, other securities, money or property with respect to Common Stock (each such event, a "DILUTING EVENT"), then the Conversion Price and Fixed Conversion Price in effect on the effective date thereof shall be adjusted to that price determined by multiplying each of the Conversion Price and Fixed Conversion Price in effect immediately prior to such Diluting Event by a fraction (A) the numerator of which shall be the total number of outstanding shares of Common Stock of the Company immediately prior to such Diluting Event and (B) the denominator of which shall be the total number of outstanding shares of Common Stock of the Company immediately after such Diluting Event. Any adjustment made pursuant to this subparagraph (i) shall become effective immediately as of the effective date of such Diluting Event or, if the Company shall take a record of holders of its Common Stock for the purpose of such Diluting Event, as of such record date, whichever is earlier; PROVIDED, that if the Company shall set such a record date, and before the effective date of such Diluting Event, legally abandon its plan to effect such Diluting Event, then no adjustment in the Conversion Price or Fixed Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed. (ii) REORGANIZATION, RECLASSIFICATION, MERGER OR SALE. In the event the Company effects any recapitalization, reorganization, reclassification, consolidation, spin-off, distribution, conversion or exchange of shares, any merger or sale of all or substantially all of the Company's assets or any other change in the corporate or capital structure of the Company, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) shares of stock, other securities, money or property with respect to or in exchange for Common Stock (each such event, an "ORGANIC Change"), then the holders of shares of Series D Convertible Preferred Stock shall have the right to receive the kind and amount of shares of stock, other securities, money or property receivable upon such Organic Change, had the holder converted shares of Series D Convertible Preferred Stock immediately prior to such Organic Change or the record date therefor, and an appropriate provision for the foregoing shall be made by the Company as part of any such Organic Change. An adjustment made pursuant to this subparagraph (ii) shall become effective at the close of business on the day upon which such Organic Change becomes effective. The provisions of this subparagraph (ii) shall not apply to any event for which an adjustment is made pursuant to subparagraph (i) above, unless the holders of Common Stock are entitled to an adjustment pursuant to both subparagraph (i) and (ii), in which case an adjustment shall be made pursuant to both subparagraph (i) and (ii) with respect to outstanding shares of Series D Convertible Preferred Stock. 10 (g) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of shares of the Series D Convertible Preferred Stock. If any conversion of any shares of Series D Convertible Preferred Stock would create a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion shall be the next higher whole number of shares. 9. NOTICE OF ADJUSTMENT. Upon any adjustment of the Conversion Price and the Conversion Ratio then in effect pursuant to the provisions of Section 8, then, and in each such case, the Company shall promptly deliver to each of the holders of Series D Convertible Preferred Stock a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment, the method by which such adjustment was calculated and the Conversion Price and Conversion Ratio then in effect following such adjustment. Where appropriate, such notice to the holders of Series D Convertible Preferred Stock may be given in advance. 10. NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the third business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: if to the Company to its offices at 3410 E. University Drive, Suite 180, Phoenix, AZ 85034, Attention: Joseph P. Kealy, Facsimile: (602) 276-0567, and if to a holder of Series D Convertible Preferred Stock, to such holder at the address or facsimile number of such holder as listed in the stock record books of the Company, or to such other address as the Company or the holder, as the case may be, shall have designated upon ten day's prior written notice similarly given. IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized representative as of June 15, 2001. INTERNATIONAL FIBERCOM, INC. By: /s/ Joseph P. Kealy ---------------------------------------- Name: Joseph P. Kealy Title: Chairman of the Board and President EX-10.1 3 ex10-1.txt SECURITIES PURCHASE AGREEMENT DTD JUNE 18, 2001 Exhibit 10.1 STOCK PURCHASE AGREEMENT BY AND BETWEEN CRESCENT INTERNATIONAL LTD. AND INTERNATIONAL FIBERCOM, INC. DATED AS OF JUNE 18, 2001 TABLE OF CONTENTS Page ---- ARTICLE I CERTAIN DEFINITIONS.............................................2 Section 1.1. "Affiliate"...............................................2 Section 1.2. "Capital Shares"..........................................2 Section 1.3. "Certificate of Designation"..............................2 Section 1.4. "Closing".................................................2 Section 1.5. "Closing Date"............................................2 Section 1.6. "Closing Statement".......................................2 Section 1.7. "Closing Trade Price".....................................2 Section 1.8. "Commitment Period".......................................2 Section 1.9. "Commitment Shares".......................................2 Section 1.10. "Common Stock"............................................3 Section 1.11. "Condition Satisfaction Date".............................3 Section 1.12. "Conversion Shares".......................................3 Section 1.13. "Daily Trading Value".....................................3 Section 1.14. "Damages".................................................3 Section 1.15. "Effective Date"..........................................3 Section 1.16. "Exchange Act"............................................3 Section 1.17. "First Sale"..............................................3 Section 1.18. "Incentive Warrant".......................................3 Section 1.19. "Incentive Warrant Shares"................................3 Section 1.20. "Investment Amount".......................................3 Section 1.21. "Legend"..................................................4 Section 1.22. "Material Adverse Effect".................................4 Section 1.23. "Maximum Commitment Amount"...............................4 Section 1.24. "Maximum Sale Amount".....................................4 Section 1.25. "Minimum Sale Amount".....................................4 Section 1.26. "Minimum Time Interval"...................................4 Section 1.27. "NASD"....................................................4 Section 1.28. "Outstanding".............................................4 Section 1.29. "Person"..................................................4 Section 1.30. "Preferred Stock".........................................4 Section 1.31. "Principal Market"........................................4 -i- Page ---- Section 1.32. "Protective Warrant"......................................5 Section 1.33. "Protective Warrant Shares"...............................5 Section 1.34. "Purchase Price"..........................................5 Section 1.35. "Registrable Securities"..................................5 Section 1.36. "Registration Rights Agreement"...........................5 Section 1.37. "Registration Statement"..................................5 Section 1.38. "Regulation D"............................................5 Section 1.39. "Representative"..........................................5 Section 1.40. "Sale"....................................................5 Section 1.41. "Sale Date"...............................................6 Section 1.42. "Sale Fees"...............................................6 Section 1.43. "Sale Notice".............................................6 Section 1.44. "Sale Notice Date"........................................6 Section 1.45. "Sale Notice Period"......................................6 Section 1.46. "SEC".....................................................6 Section 1.47. "SEC Documents"...........................................6 Section 1.48. "Section 4(2)"............................................6 Section 1.49. "Securities Act"..........................................6 Section 1.50. "Short Sale"..............................................6 Section 1.51. "Strategic Investor"......................................6 Section 1.52. "Subscription Date".......................................6 Section 1.53. "Subscription Fee"........................................6 Section 1.54. "Subsequent Sale".........................................7 Section 1.55. "Subsequent Sale Shares"..................................7 Section 1.56. "Subsidiary"..............................................7 Section 1.57. "Trading Day".............................................7 Section 1.58. "Transfer Agent Instructions".............................7 Section 1.59. "Underwriter".............................................7 Section 1.60. "Warrants"................................................7 Section 1.61. "Warrant Shares"..........................................7 ARTICLE II SALE AND PURCHASE OF COMMON STOCK, WARRANTS AND PREFERRED STOCK; TERMINATION OF OBLIGATIONS.....................7 Section 2.1. Sales.....................................................7 Section 2.2. Twenty Percent Limitation.................................8 Section 2.3. Sale Notice...............................................8 -ii- Page ---- Section 2.4. Closings..................................................8 Section 2.5. Termination of Agreement and Investment Obligation........9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTOR......................9 Section 3.1. Intent...................................................10 Section 3.2. Sophisticated Investor...................................10 Section 3.3. Authority................................................10 Section 3.4. Not an Affiliate.........................................10 Section 3.5. Organization and Standing................................10 Section 3.6. Absence of Conflicts.....................................10 Section 3.7. Disclosure; Access to Information........................11 Section 3.8. Manner of Sale...........................................11 Section 3.9. Resale Restrictions......................................11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................11 Section 4.1. Organization of the Company..............................11 Section 4.2. Authority................................................12 Section 4.3. Corporate Documents......................................12 Section 4.4. Books and Records........................................12 Section 4.5. Capitalization...........................................12 Section 4.6. Registration and Listing of Common Stock.................13 Section 4.7. Financial Statements.....................................13 Section 4.8. SEC Documents............................................13 Section 4.9. Exemption from Registration; Valid Issuances; New Issuances............................................14 Section 4.10. No General Solicitation or Advertising...................14 Section 4.11. No Conflicts.............................................14 Section 4.12. No Material Adverse Change...............................15 Section 4.13. No Undisclosed Liabilities...............................15 Section 4.14. No Undisclosed Events or Circumstances...................15 Section 4.15. No Integrated Offering...................................16 Section 4.16. Litigation and Other Proceedings.........................16 Section 4.17. No Misleading or Untrue Communication....................16 Section 4.18. Material Non-Public Information..........................16 ARTICLE V COVENANTS OF THE INVESTOR......................................16 Section 5.1. Compliance...............................................16 Section 5.2. Short Sale...............................................16 -iii- Page ---- ARTICLE VI COVENANTS OF THE COMPANY.......................................17 Section 6.1. Registration Rights......................................17 Section 6.2. Reservation of Common Stock..............................17 Section 6.3. Listing of Common Stock..................................17 Section 6.4. Exchange Act Registration................................17 Section 6.5. Legends..................................................17 Section 6.6. Corporate Existence......................................18 Section 6.7. Additional SEC Documents.................................18 Section 6.8. Notice of Certain Events Affecting Registration; Suspension of Right to Make a Subsequent Sale............18 Section 6.9. Consolidation; Merger....................................18 Section 6.10. Issuance of Shares.......................................19 Section 6.11. Legal Opinions...........................................19 Section 6.12. No Similar Arrangement; Right of First Refusal...........19 Section 6.13. Public Announcements.....................................20 Section 6.14. Series A, Series B, and Series C Preferred Stock.........20 Section 6.15. Delivery of Share Certificates...........................20 ARTICLE VII CONDITIONS TO DELIVERY OF SALE NOTICES AND CONDITIONS TO CLOSING.....................................................21 Section 7.1. Conditions Precedent to the Obligation of the Company to Issue and Sell Preferred Stock and Common Stock.............................................21 Section 7.2. Conditions Precedent to the Right of the Company to Deliver a Sale Notice and the Obligation of the Investor to Purchase Preferred Stock and Common Stock.............................................21 Section 7.3. Due Diligence Review; Non-Disclosure of Non-Public Information...................................24 ARTICLE VIII LEGENDS........................................................25 Section 8.1. Legends..................................................25 Section 8.2. No Other Legend or Stock Transfer Restrictions...........26 Section 8.3. Investor's Compliance....................................26 ARTICLE IX INDEMNIFICATION; ARBITRATION...................................27 Section 9.1. Indemnification..........................................27 Section 9.2. Method of Asserting Indemnification Claims...............27 Section 9.3. Arbitration..............................................30 ARTICLE X MISCELLANEOUS..................................................31 Section 10.1. Fees and Transaction Costs...............................31 Section 10.2. Reporting Entity for the Common Stock....................32 Section 10.3. Brokerage................................................32 -iv- Page ---- Section 10.4. Conversion Notice........................................32 Section 10.5. Notices..................................................32 Section 10.6. Assignment...............................................33 Section 10.7. Amendment; No Waiver.....................................34 Section 10.8. Annexes and Exhibits; Entire Agreement...................34 Section 10.9. Survival.................................................34 Section 10.10. Severability.............................................34 Section 10.11. Title and Subtitles......................................34 Section 10.12. Counterparts.............................................34 Section 10.13. Choice of Law............................................34 Section 10.14. Other Expenses...........................................34 -v- STOCK PURCHASE AGREEMENT BY AND BETWEEN CRESCENT INTERNATIONAL LTD. AND INTERNATIONAL FIBERCOM, INC. DATED AS OF JUNE 18, 2001 This STOCK PURCHASE AGREEMENT is entered into as of the 18th day of June, 2001 (this "AGREEMENT"), by and between Crescent International Ltd. (the "INVESTOR"), an entity organized and existing under the laws of Bermuda, and International FiberCom, Inc., a corporation organized and existing under the laws of the State of Arizona (the "COMPANY"). WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase, up to $20,000,000 worth of securities, including (i) shares of Common Stock (as defined below) and (ii) shares of Preferred Stock (as defined below); WHEREAS, pursuant to the terms of and in partial consideration for the Investor entering into this Agreement, the Company is required to issue to the Investor an Incentive Warrant (as defined below), exercisable from time to time within five years following the date of issuance, for the purchase of a number of shares of Common Stock at a price to be determined as described in such Incentive Warrant; WHEREAS, pursuant to the terms of and in partial consideration for the Investor entering into this Agreement, the Company may be required to issue Protective Warrants (as defined below) to the Investor, each of which may become exercisable from time to time, for the purchase of a number of shares of Common Stock at a price to be determined as described in each such Protective Warrant; and WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) ("SECTION 4(2)") and Regulation D ("REGULATION D") of the U.S. Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "SECURITIES ACT"), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder. NOW, THEREFORE, in consideration of the premises, representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1. "AFFILIATE" shall mean any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under direct or indirect common control with any other Person. For the purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the term "controls" and "controlled" have meanings correlative to the foregoing. Section 1.2. "CAPITAL SHARES" shall mean the Common Stock, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) or assets (upon liquidation of the Company). Section 1.3. "CERTIFICATE OF DESIGNATION" shall mean the Statement pursuant to Section 10-602 of the Arizona Corporation Law, filed by the Company with the Arizona State Corporation Commission prior to the Closing Date of the First Sale. Section 1.4. "CLOSING" shall mean one of the closings of a purchase and sale of the Preferred Stock or the Common Stock and the issuance of the Warrants pursuant to Section 2.1 of this Agreement. Section 1.5. "CLOSING DATE" shall mean with respect to a Closing the second Trading Day following the Sale Date related to such Closing, provided all conditions to such Closing have been satisfied on or before such Trading Day. Section 1.6. "CLOSING STATEMENT" shall mean the closing statement in the form of EXHIBIT A attached hereto, executed by the Company and the Investor on the Subscription Date and on each Sale Date, setting forth the actions taken by the Company and the Investor on the Subscription Date and on such Sale Date, as applicable, and setting forth the actions to be taken by the Company and the Investor on the applicable Closing Date, and the amounts due on such Closing Date to the payee entities set forth on Schedule 10.1 hereto. Section 1.7. "CLOSING TRADE PRICE" shall mean, with respect to Common Stock, the per share closing trade price for such Common Stock as reported by Bloomberg L.P. in accordance with Section 10.2 of this Agreement. Section 1.8. "COMMITMENT PERIOD" shall mean the period commencing on the Subscription Date and expiring on the earlier to occur of (i) the date on which the Investor shall have purchased Commitment Shares and Preferred Stock pursuant to this Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, (ii) the date this Agreement is terminated pursuant to Section 2.5 hereof, or (iii) the date occurring 18 months from the Subscription Date. Section 1.9. "COMMITMENT SHARES" shall mean the Conversion Shares and the Subsequent Sale Shares, collectively. Section 1.10. "COMMON STOCK" shall mean the Company's common stock, no par value per share. Section 1.11. "CONDITION SATISFACTION DATE" shall have the meaning set forth in Section 7.2 of this Agreement. Section 1.12. "CONVERSION SHARES" shall mean all shares of Common Stock into which shares of Preferred Stock are or may be converted. Section 1.13. "DAILY TRADING VALUE" shall mean, on any Trading Day, the Closing Trade Price multiplied by the trading volume of the Common Stock. Section 1.14. "DAMAGES" shall mean any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, any and all investigative, legal and other expenses reasonably incurred in connection with, and any and all amounts paid in defense or settlement of, any action, suit or -2- proceeding between any indemnified party and any indemnifying party or between any indemnified party and any third party, or otherwise, or any claim asserted). Section 1.15. "EFFECTIVE DATE" with respect to each Sale of Registrable Securities or Preferred Stock shall mean the earlier to occur of: (i) the applicable date on which the SEC has declared effective a Registration Statement registering resale of Registrable Securities as set forth in the Registration Rights Agreement and (ii) the date on which such Registrable Securities first become eligible for resale pursuant to Rule 144 of the Securities Act. Section 1.16. "EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. Section 1.17. "FIRST SALE" shall have the meaning set forth in Section 2.1(a) of this Agreement. Section 1.18. "INCENTIVE WARRANT" shall mean the Incentive Warrant in the form of Exhibit B hereto issued pursuant to Section 2.1(d) of this Agreement, together with any new or replacement warrant issued in accordance with the terms of the Incentive Warrant. Section 1.19. "INCENTIVE WARRANT SHARES" shall mean all shares of Common Stock issued or issuable pursuant to exercise of the Incentive Warrant. Section 1.20. "INVESTMENT AMOUNT" shall mean the dollar amount to be invested by the Investor to purchase (i) Preferred Stock pursuant to Section 2.1(a) hereof or (ii) Subsequent Sale Shares with respect to any Sale Date as notified by the Company to the Investor in accordance with Section 2.3 hereof. With respect to any Subsequent Sale, the Investment Amount (A) shall not exceed the lesser of (i) twice the average of the Daily Trading Values during the 22 Trading Day period immediately preceding the applicable Sale Notice Date and (ii) the Maximum Sale Amount, and (B) shall not be less than the Minimum Sale Amount; provided, however, that if the Closing Trade Price on each Trading Day during any Sale Notice Period is less than $1.00 or the Investment Amount as calculated pursuant to clause (A) above would be less than the Minimum Sale Amount, the Investment Amount shall be $25,000. Section 1.21. "LEGEND" shall have the meaning specified in Section 8.1 of this Agreement. Section 1.22. "MATERIAL ADVERSE EFFECT" shall mean any effect on the business, operations, properties, prospects, or financial condition of the Company that is material and adverse to the Company or to the Company and such other entities controlling or controlled by the Company, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise interfere with the ability of the Company to enter into and perform its obligations under any of (i) this Agreement, (ii) the Registration Rights Agreement and (iii) the Warrants. Section 1.23. "MAXIMUM COMMITMENT AMOUNT" shall mean $20,000,000. Section 1.24. "MAXIMUM SALE AMOUNT" shall mean $2,500,000, unless a higher amount is agreed to by the Investor; provided, however, that the aggregate amount of all Sales shall not exceed the Maximum Commitment Amount. Section 1.25. "MINIMUM SALE AMOUNT" shall mean $200,000, unless a lesser amount is agreed to by the Investor. Section 1.26. "MINIMUM TIME INTERVAL" shall mean (i) 22 Trading Days from the Effective Date relating the First Sale, (ii) if the previous Sale related to the sale of unregistered Common Stock, 22 Trading Days from the Effective Date relating to such Sale or (iii) if the previous Sale related to the sale of registered Common Stock, 22 Trading Days from the previous Sale Date. Section 1.27. "NASD" shall mean the National Association of Securities Dealers, Inc. -3- Section 1.28. "OUTSTANDING" when used with reference to Common Stock or Capital Shares (collectively the "SHARES"), shall mean, at any date as of which the number of such Shares is to be determined, all issued and outstanding Shares, and shall include all such Shares issuable in respect of outstanding scrip or any certificates representing fractional interests in such Shares; provided, however, that "Outstanding" shall not refer to any such Shares then directly or indirectly owned or held by or for the account of the Company. Section 1.29. "PERSON" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. Section 1.30. "PREFERRED STOCK" shall mean the Company's series D convertible preferred stock, $0.01 par value per share. Section 1.31. "PRINCIPAL MARKET" shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange, the Electronic Bulletin Board or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock. Section 1.32. "PROTECTIVE WARRANT" or "PROTECTIVE WARRANTS" shall mean any and all Protective Warrant(s) in the form of Exhibit C hereto issued pursuant to Section 2.1(c) of this Agreement. Section 1.33. "PROTECTIVE WARRANT SHARES" shall mean all shares of Common Stock issued or issuable pursuant to exercise of the Protective Warrants. Section 1.34. "PURCHASE PRICE" shall mean (i) with respect to the First Sale, $100 per share of Preferred Stock, and (ii) with respect to a Subsequent Sale, the average of the lowest three consecutive Closing Trade Prices during the 22 Trading Day period immediately preceding the applicable Sale Date and (iii) with respect to an Effective Date, the average of the lowest three consecutive Closing Trade Prices during the 22 Trading Day period immediately preceding such Effective Date. Section 1.35. "REGISTRABLE SECURITIES" shall mean (i) the Commitment Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (w) the applicable Registration Statement has been declared effective by the SEC and all such Registrable Securities have been disposed of pursuant to the applicable Registration Statement, (x) all such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act ("RULE 144") are met, (y) such time as all such Registrable Securities have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend or (z) in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Investor, all such Registrable Securities may be sold by the Investor without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act. Section 1.36. "REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights agreement by and between the Company and the Investor, in the form of Exhibit D hereto. Section 1.37. "REGISTRATION STATEMENT" or "Registration Statements" shall have the meaning set forth in the Registration Rights Agreement. Section 1.38. "REGULATION D" shall have the meaning set forth in the recitals of this Agreement. Section 1.39. "REPRESENTATIVE" of a party shall mean any officer, director, employee, agent, counsel, accountant, financial advisor, consultant or other representative of such party. Section 1.40. "SALE" shall mean the First Sale, together with any and all Subsequent Sales. -4- Section 1.41. "SALE DATE" shall mean with respect to the First Sale, the Subscription Date, and with respect to Subsequent Sales, the Trading Day on which a Sale Notice Period expires. Section 1.42. "SALE FEES" shall have the meaning specified in Section 10.1(b) hereof. Section 1.43. "SALE NOTICE" shall mean a written notice to the Investor in the form of Exhibit E hereto, setting forth, INTER ALIA, the intended Closing Date, the Investment Amount and the number of shares of Common Stock that the Company intends to require the Investor to purchase pursuant to the terms of this Agreement. Section 1.44. "SALE NOTICE DATE" shall mean the Trading Day during the Commitment Period upon which a Sale Notice to sell Common Stock to the Investor is deemed delivered pursuant to Section 2.3(b) hereof. Section 1.45. "SALE NOTICE PERIOD" shall mean a period beginning on a Sale Notice Date and ending 7 Trading Days after a Sale Notice Date. Section 1.46. "SEC" shall mean the U.S. Securities and Exchange Commission. Section 1.47. "SEC DOCUMENTS" shall mean the Company's latest Form 10-K as of the time in question, all Forms 10-Q and 8-K filed thereafter, and the Proxy Statement for its latest fiscal year as of the time in question until such time the Company no longer has an obligation to maintain the effectiveness of a Registration Statement as set forth in the Registration Rights Agreement. Section 1.48. "SECTION 4(2)" shall have the meaning set forth in the recitals of this Agreement. Section 1.49. "SECURITIES ACT" shall have the meaning set forth in the recitals of this agreement. Section 1.50. "SHORT SALE" shall have the meaning specified in Rule 3b-3 of the Exchange Act. "STRATEGIC INVESTOR" shall mean any Person (i) that intends to participate in the corporate governance of the Company or in the conduct of its business or (ii) as to whom the Company's Board of Directors has made a determination in good faith that such Person will develop a material strategic relationship with the Company, including without limitation an acquisition of another entity or assets, in connection with and related to the Company's present or future business. Section 1.51. "SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed and delivered by the parties hereto. Section 1.52. "SUBSCRIPTION FEE" shall have the meaning set forth in Section 10.1(a) hereof. Section 1.53. "SUBSEQUENT SALE" shall have the meaning set forth in Section 2.1(b) of this Agreement. Section 1.54. "SUBSEQUENT SALE SHARES" shall have the meaning set forth in Section 2.1(b) of this Agreement. Section 1.55. "SUBSIDIARY" shall mean any Person in which the Company, directly or indirectly through Subsidiaries or otherwise, beneficially owns more than 50% of either the equity interests in, or the voting control of, such Person. Section 1.56. "TRADING DAY" shall mean any day during which the Principal Market shall be open for business. Section 1.57. "TRANSFER AGENT INSTRUCTIONS" shall have the meaning set forth in Section 2.4(a) of this Agreement. -5- Section 1.58. "UNDERWRITER" shall mean any underwriter participating in any disposition of the Registrable Securities on behalf of the Investor pursuant to a Registration Statement. Section 1.59. "WARRANTS" shall mean the Protective Warrants and Incentive Warrant. Section 1.60. "WARRANT SHARES" shall mean the Protective Warrant Shares and the Incentive Warrant Shares. ARTICLE II SALE AND PURCHASE OF COMMON STOCK, WARRANTS AND PREFERRED STOCK; TERMINATION OF OBLIGATIONS Section 2.1. SALES. (a) FIRST SALE. In accordance with the terms and conditions set forth herein (including without limitation the provisions of Article VII hereof), the Sale Date of the First Sale shall occur on the Subscription Date. On the Closing Date relating to the First Sale, the Company shall issue and sell and, if so issued and sold, the Investor shall purchase 100,000 shares of Preferred Stock at a Purchase Price of $100 per share for an Investment Amount of $10,000,000 (such transaction is referred to herein as the "FIRST SALE"). (b) SUBSEQUENT SALES. If the Company elects to exercise a Subsequent Sale, in accordance with the terms and conditions set forth herein (including, without limitation, the provisions of Article VII hereof), on any Sale Notice Date the Company shall exercise a Subsequent Sale by the delivery of a Sale Notice. On the Closing Date relating to each Subsequent Sale, the Company shall issue and sell and the Investor shall purchase such number of shares of Common Stock that are determined by dividing the Investment Amount stated in the applicable Sale Notice by the applicable Purchase Price (each such transaction is referred to herein as a "SUBSEQUENT SALE," and all such shares are referred to herein as the "SUBSEQUENT SALE SHARES"). (c) PROTECTIVE WARRANTS. In partial consideration for the Investor entering into this Agreement if the Company elects to exercise its right with respect to any Sale to require the Investor to purchase shares of Common Stock that, at the time of the Closing Date, have not been previously registered and are not covered by a Registration Statement that has been filed with and declared effective by the SEC, on each Closing Date relating to each such Sale, the Company shall issue and deliver to the Investor a Protective Warrant with an exercise price of $0.01 for each share of Common Stock, for the purchase of such number of shares of Common Stock as described in such Protective Warrant. (d) INCENTIVE WARRANT. In partial consideration for the Investor entering into this Agreement, on the Closing Date of the First Sale, the Company shall issue and deliver to the Investor the Incentive Warrant for the purchase of such number of shares of Common Stock and with an exercise price as described in such Incentive Warrant. Section 2.2. TWENTY PERCENT LIMITATION. Unless the Company obtains the requisite approval of its shareholders in accordance with the corporate laws of Arizona and the applicable rules of the Principal Market, no more than 19.9% of the Outstanding shares of Common Stock may be issued and sold pursuant to Sales, the Warrants and upon conversion of the Preferred Stock; PROVIDED, that with respect to the issuance of more than 19.9% of the Outstanding shares of Common Stock pursuant to the Warrants, the Investor has the right to require the Company to seek such shareholder approval and upon the written request of the Investor the Company shall as soon as practicable after such request prepare and file with the SEC a proxy statement to be distributed to shareholders of the Company for the purpose of soliciting proxies for use at an annual or special meeting of shareholders of the Company at which such shareholder approval is sought, and in which proxy statement the Company will recommend to its shareholders the foregoing approval. -6- Section 2.3. SALE NOTICE. (a) TIMING. At any time during the Commitment Period, the Company may deliver a Sale Notice to the Investor, subject to the conditions set forth in Section 7.2. (b) DATE OF DELIVERY OF SALE NOTICE. A Sale Notice shall be deemed delivered on (i) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon New York time on a Trading Day or at any time on a day which is not a Trading Day. No Sale Notice will be deemed delivered, on a day that is not a Trading Day. Section 2.4. CLOSINGS. SUBSCRIPTION DATE. On the Subscription Date (i) the Company and the Investor shall execute the Registration Rights Agreement and (ii) the Company shall execute and deliver irrevocable instructions to the transfer agent, in the form of Exhibit F attached hereto (the "TRANSFER AGENT INSTRUCTIONS"), to prepare and deliver to the Investor, following each Sale or conversion of the Preferred Stock, a share certificate in the name of the Investor and in the amount of the applicable Commitment Shares, the transfer agent shall confirm and accept such instructions, and a copy of such instructions shall be delivered to the Investor's legal counsel. In addition, on or prior to the Subscription Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. CLOSING DATE. On each Closing Date (i) the Company shall issue and deliver to the Investor a Protective Warrant, if required by Section 2.1(c) hereof, (ii) with respect to the First Sale, the Company shall issue and deliver to the Investor the Incentive Warrant, (iii) the Company shall instruct the transfer agent to prepare and deliver to the Investor a share certificate in the name of the Investor and in the amount of the applicable Common Stock, in accordance with the Transfer Agent Instructions, and the Company shall take all other actions necessary to ensure the prompt delivery of such share certificate to the Investor, (iv) with respect to the First Sale, the Company shall prepare and deliver to the Investor a share certificate in the name of the Investor and in the amount of the shares of Preferred Stock, (v) the Investor shall deliver to the Company and the Company shall execute a Closing Statement, and (vi) the Investor shall deliver to the Company the Investment Amount specified in the Closing Statement, less applicable fees and costs determined in accordance with Section 10.1, by wire transfer of immediately available funds to the account designated in writing in the Sale Notice. In addition, on or prior to each Closing Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. Section 2.5. TERMINATION OF AGREEMENT AND INVESTMENT OBLIGATION. The Company shall have the right to terminate this Agreement at any time upon 30 days' written notice to the Investor. The Investor shall have the right to immediately terminate this Agreement (including with respect to any Sale, notice of which has been given but the applicable Closing Date has not yet occurred) in accordance with Section 6.12 or in the event that: (i) any Registration Statement has not been declared effective by the SEC within the applicable time periods set forth in Section 1.1 of the Registration Rights Agreement, PROVIDED, that the Investor shall not be permitted to terminate this Agreement pursuant to this clause (i) if the Company has, as solely determined by the Investor, used its best efforts to obtain the effectiveness of such Registration Statement, (ii) there shall occur any stop order or suspension of the effectiveness of any Registration Statement for an aggregate of 30 Trading Days during the Commitment Period, or (iii) the Company shall at any time fail to comply with the requirements of Section 6.2, 6.3, 6.4, 6.5, 6.6, 6.8 or 6.9. ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTOR The Investor represents and warrants to the Company that: -7- Section 3.1. INTENT. The Investor is entering into this Agreement for its own account, and the Investor has no view to the distribution of the Registrable Securities, Preferred Stock, or Warrants and has no present arrangement (whether or not legally binding) at any time to sell, assign, transfer, pledge, encumber, hypothecate or otherwise dispose of the Registrable Securities, Preferred Stock or Warrants to or through any person or entity; provided, however, that by making the representations herein, the Investor does not agree to hold the Registrable Securities, Preferred Stock or Warrants for any minimum or other specific term and reserves the right to dispose of the Registrable Securities, Preferred Stock or Warrants at any time pursuant to the Registration Statement and in accordance with federal and state securities laws applicable to such disposition. Section 3.2. SOPHISTICATED INVESTOR. The Investor is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D), and the Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Common Stock and the Preferred Stock. The Investor acknowledges that an investment in the Common Stock and the Preferred Stock is speculative and involves a high degree of risk. Section 3.3. AUTHORITY. Each of this Agreement and the Registration Rights Agreement has been duly authorized by all necessary corporate action and no further consent or authorization of the Investor, or its Board of Directors or stockholders is required. Each of this Agreement and the Registration Rights Agreement was validly executed and delivered by the Investor and each is a valid and binding agreement of the Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 3.4. NOT AN AFFILIATE. The Investor is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company. Section 3.5. ORGANIZATION AND STANDING. The Investor is duly organized, validly existing, and in good standing under the laws of Bermuda. Section 3.6. ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation of the transactions contemplated thereby, and compliance with the requirements thereof, will not to the Investor's knowledge (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Investor, (b) violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investor or any of its assets is bound, (c) conflict with or constitute a material default thereunder, (d) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by the Investor to any third party, or (e) require the approval of any third-party (that has not been obtained) pursuant to any material contract to which the Investor is subject or to which any of its assets, operations or management may be subject. Section 3.7. DISCLOSURE; ACCESS TO INFORMATION. The Investor has received or had access to all documents, records, books and other information pertaining to Investor's investment in the Company that have been requested by Investor. The Investor has received and reviewed copies of the SEC Documents. Neither the receipt by the Investor of such information, nor the access of the Investor to such information shall modify, amend or affect the Investor's right to rely upon the representations and warranties made by the Company pursuant to Article IV of this Agreement. Section 3.8. MANNER OF SALE. At no time was Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising. Section 3.9. RESALE RESTRICTIONS. Investor acknowledges that any Registrable Securities, Preferred Stock and Warrants to be acquired by Investor have not been registered under the federal securities laws or any applicable state securities laws in reliance upon exemptions available for non-public or limited offerings. Investor understands that it must bear the economic risk of the investment in the Registrable Securities, Preferred Stock and Warrants because the Registrable Securities, Preferred Stock and Warrants have not been so registered and therefore are subject to restrictions upon transfer such that they may not be sold or otherwise transferred unless registered under the applicable securities laws or an exemption from such registration is available. The Investor will not reoffer, sell, assign, transfer, pledge, encumber, -8- hypothecate or otherwise dispose of any Registrable Securities, Preferred Stock or the Warrants in the absence of an effective registration statement, qualification or authorization relating thereto under federal and applicable state securities laws or an opinion of qualified counsel satisfactory to the Company to the effect that the proposed transaction in the Registrable Securities, Preferred Stock or the Warrants will neither constitute or result in any violation of the federal or state securities laws. Subject to Section 8.1 of this Agreement, any certificate or other document that may be issued representing any shares of Registrable Securities, Preferred Stock or the Warrants may be endorsed with a legend to this effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to the Investor on the Subscription Date that, and will represent and warrant to the Investor on each Effective Date and each Closing Date that: Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Except as set forth in the SEC Documents and except as set forth on SCHEDULE 4.1 attached hereto, the Company does not own more than 50% of the outstanding capital stock of or control any other Person. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Warrants and to issue the Commitment Shares, the Preferred Stock, the Warrants and the Warrant Shares; (ii) the execution and delivery of this Agreement and the Registration Rights Agreement, and the execution, issuance and delivery of the Warrants, by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required; and (iii) each of this Agreement and the Registration Rights Agreement has been duly executed and delivered, and the Warrants have been duly executed, issued and delivered, by the Company and constitute valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 4.3. CORPORATE DOCUMENTS. The Company has furnished or made available to the Investor true and correct copies of the Company's Articles of Incorporation, as amended and in effect on the date hereof (the "ARTICLES"), and the Company's By-Laws, as amended and in effect on the date hereof (the "BY-LAWS"). Section 4.4. BOOKS AND RECORDS. The minute books and other similar records of the Company and its subsidiaries as made available to Investor prior to the execution of this Agreement contain a true and complete record, in all material respects, of all action taken at all meetings and by all written consents in lieu of meetings of the stockholders, the boards of directors and committees of the boards of directors of the Company and the subsidiaries. The stock transfer ledgers and other similar records of the Company and the subsidiaries as made available to Investor prior to the execution of this Agreement accurately reflect all record transfers prior to the execution of this Agreement in the capital stock of the Company and the subsidiaries. Neither the Company nor any subsidiary has any of its books or records recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Company or a subsidiary. Section 4.5. CAPITALIZATION. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, of which 36,162,542 shares are issued and outstanding, and 10,000,000 shares of preferred stock designated as -9- Series A, Series B, and Series C, of which none are issued and outstanding. All shares of the Company's preferred stock designated as Series A, Series B, and Series C have been retired by the Company. Except for (i) options to purchase not more than 8,046,819 shares of Common Stock with purchase prices between $0.94 and $19.94 per share; and (ii) warrants to purchase not more than 150,000 shares of Common Stock with a purchase prices of $7.50 per share and, except as set forth on Schedule 4.5 attached hereto, there are no options, warrants, preemptive rights for, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. Except as set forth on Schedule 4.5 attached hereto, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of Common Stock or Preferred Stock pursuant to this Agreement. All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. Section 4.6. REGISTRATION AND LISTING OF COMMON STOCK. The Company has registered its Common Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance with all reporting requirements of the Exchange Act, and the Company has maintained all requirements for the continued listing or quotation of its Common Stock, and such Common Stock is currently listed or quoted on the Principal Market. As of the date hereof, the Principal Market is the Nasdaq National Market. Section 4.7. FINANCIAL STATEMENTS. Prior to the execution of this Agreement, the Company has delivered to the Investor true and complete copies of the following financial statements: (a) the audited balance sheets of the Company and its consolidated subsidiaries as of December 31, 2000, and the related audited consolidated statements of operations, stockholders' equity and cash flows for each of the fiscal years then ended, together with a true and correct copy of the report on such audited information by BDO Seidman LLP, and all letters from such accountants with respect to the results of such audits; and (b) the unaudited balance sheets of the Company and its consolidated subsidiaries as of March 31, 2001, and the related unaudited consolidated statements of operations and stockholders' equity for the portion of the fiscal year then ended. The financial statements of the Company delivered to the Investor have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Section 4.8. SEC DOCUMENTS. The Company has timely filed all SEC Documents and has delivered or made available to the Investor true and complete copies of the SEC Documents (including, without limitation, audited financial statements, proxy information and solicitation materials). The Company has not provided to the Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied as to form and substance in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior to the date hereof). The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared -10- in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may include summary notes and may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Section 4.9. EXEMPTION FROM REGISTRATION; VALID ISSUANCES; NEW ISSUANCES. The sale and issuance of the Warrants, the Warrant Shares, the Preferred Stock and the Commitment Shares in accordance with the terms and on the basis of the representations and warranties set forth in this Agreement, may and will be properly issued pursuant to Section 4(2), Regulation D and/or any applicable state law. When issued and paid for as provided herein and in the Warrants, the Warrant Shares, the Commitment Shares and the Preferred Stock will be duly and validly issued, fully paid, and nonassessable. Except as set forth on Schedule 4.9 attached hereto, neither the sales of the Commitment Shares, the Preferred Stock, the Warrants, or the Warrant Shares pursuant to, nor the Company's performance of its obligations under, this Agreement, the Registration Rights Agreement or the Warrants will (i) result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Commitment Shares, the Preferred Stock, the Warrant Shares, or any of the assets of the Company, or (ii) entitle the holders of Outstanding Capital Shares or holders of preferred stock of the Company to preemptive or other rights to subscribe to or acquire the Capital Shares, such preferred stock or other securities of the Company. The Commitment Shares, the Preferred Stock, and the Warrant Shares will not subject the Investor to personal liability by reason of the ownership thereof. The Commitment Shares, the Preferred Stock and Warrant Shares have been duly authorized by the Company, but have not been issued (whether or not subsequently repurchased by the Company) to any Person, and when issued to the Investor in accordance with this Agreement and the Warrants will not have been issued (whether or not subsequently repurchased by the Company) to any Person other than the Investor. Section 4.10. NO GENERAL SOLICITATION OR ADVERTISING. In regard to the transactions contemplated hereby, neither the Company nor any of its Affiliates nor any distributor or any person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to any of the Commitment Shares, the Preferred Stock, the Warrants, or the Warrant Shares, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Common Stock under the Securities Act. Section 4.11. NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including without limitation the issuance of the Commitment Shares, the Preferred Stock, the Warrants and the Warrant Shares do not and will not (i) result in a violation of the Articles or By-Laws or (ii) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, or (iii) result in a violation of any federal, state, local or foreign law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations, or any rule, regulation, order, judgment or decree of any self-regulatory organization having authority over the matters contemplated hereby, applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing; provided, however, that for purposes of the Company's representations and warranties as to violations of foreign law, rule or regulation referenced in clause (iii), such representations and warranties are made only to the best of the Company's knowledge insofar as the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby are or may be affected by the status of the Investor under or pursuant to any such foreign law, rule or regulation. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental or self-regulatory entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under any federal, state or local law, rule or regulation, order, judgment or decree (including federal and state securities laws and regulations), or any rule, regulation, order, judgment or decree of any self-regulatory organization having authority over the matters contemplated hereby, to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for -11- it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Commitment Shares, the Preferred Stock, the Warrants, or the Warrant Shares in accordance with the terms hereof (other than any SEC, NASD or state securities filings that may be required to be made by the Company subsequent to any Closing, any registration statement that may be filed pursuant hereto, and any shareholder approval required by the rules applicable to companies whose common stock trades on the Nasdaq National Market); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investor herein. Section 4.12. NO MATERIAL ADVERSE CHANGE. Since December 31, 2000 and except as set forth on SCHEDULE 4.12 attached hereto, no event has occurred that would have a Material Adverse Effect on the Company. Section 4.13. NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 4.13 hereto, the Company has no liabilities or obligations that are material, individually or in the aggregate, other than those incurred in the ordinary course of the Company's businesses since December 31, 2000 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company. Section 4.14. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31, 2000, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, prospects, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly disclosed or announced. Section 4.15. NO INTEGRATED OFFERING. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Commitment Shares, the Preferred Stock, the Warrants or the Warrant Shares under the Securities Act. Section 4.16. LITIGATION AND OTHER PROCEEDINGS. To the knowledge of the Company after due inquiry, except as set forth in the SEC Documents, there are no lawsuits or proceedings pending or threatened against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which have had or might have a Material Adverse Effect. Except as set forth in the SEC Documents, no judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which has resulted in or might result in a Material Adverse Effect. Section 4.17. NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any Person representing the Company, and, to the knowledge of the Company, any other Person selling or offering to sell the Commitment Shares, the Preferred Stock, the Warrants or the Warrant Shares in connection with the transactions contemplated by this Agreement, have not made, at any time, any oral communication in connection with the offer or sale of the same which contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. Section 4.18. MATERIAL NON-PUBLIC INFORMATION. The Company is not in possession of, nor has the Company or its agents disclosed to the Investor, any material non-public information that (i) if disclosed, would, or could reasonably be expected to have, an effect on the price of the Common Stock or (ii) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed. ARTICLE V COVENANTS OF THE INVESTOR Section 5.1. COMPLIANCE. The Investor's trading activities with respect to shares of the Company's Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Company's Common Stock is listed. -12- Section 5.2. SHORT SALE. Neither the Investor nor any of its Affiliates will directly or indirectly engage in any Short Sale of the Commitment Shares or the Warrant Shares during the Commitment Period. ARTICLE VI COVENANTS OF THE COMPANY Section 6.1. REGISTRATION RIGHTS. The Company shall cause the Registration Rights Agreement to remain in full force and effect, and the Company shall comply in all respects with the terms thereof. Section 6.2. RESERVATION OF COMMON STOCK. As of the date hereof, the Company has available and the Company shall reserve and keep available at all times, free of preemptive rights, shares of Common Stock for the purpose of enabling the Company to satisfy any obligation to issue the Commitment Shares and the Warrant Shares, such amount of shares of Common Stock to be reserved shall be calculated based upon the Floor Price (as such term is defined in the Certificate of Designation) of the Preferred Stock, and the Exercise Price of the Incentive Warrant and the maximum number of Protective Warrant Shares issuable pursuant to the Protective Warrants. The number of shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered. Section 6.3. LISTING OF COMMON STOCK. During the Commitment Period and for so long as the Investor holds or owns any Registrable Securities, Preferred Stock or Warrants, the Company shall exercise best efforts to maintain the listing or quotation of the Common Stock on a Principal Market, and as soon as practicable (but in any event prior to the Closing Date for any Sale) will cause the Commitment Shares and the Warrant Shares to be listed on the Principal Market. The Company further shall, if the Company applies to have the Common Stock traded on any other Principal Market, include in such application the Commitment Shares and the Warrant Shares, and shall take such other action as is necessary or desirable in the opinion of the Investor to cause the Common Stock to be listed on such other Principal Market as promptly as possible. The Company shall use commercially reasonable efforts to continue the listing and trading of its Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the NASD and the Principal Market. Section 6.4. EXCHANGE ACT REGISTRATION. The Company shall comply with all applicable requirements set forth in the Registration Rights Agreement, including without limitation its obligation to file each Registration Statement with the SEC within the applicable time periods set forth in the Registration Rights Agreement. After each Registration Statement becomes effective, the Company shall cause the Common Stock covered by such Registration Statement to continue to be registered under Section 12(g) or 12(b) of the Exchange Act, will comply in all respects with its reporting and filing obligations under the Exchange Act, and will not take any action or file any document (whether or not permitted by the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act. Section 6.5. LEGENDS. The certificates evidencing the Warrants, the Commitment Shares, the Preferred Stock, and the Warrant Shares shall be free of legends, except as provided for in Article VIII. Section 6.6. CORPORATE EXISTENCE. During the Commitment Period and for so long as the Investor holds or owns any Registrable Securities, Preferred Stock or Warrants, the Company shall take all steps necessary to preserve and continue the corporate existence of the Company or its successors by merger or consolidation. Section 6.7. ADDITIONAL SEC DOCUMENTS. Until all Registrable Securities issued or issuable to the Investor pursuant to this Agreement may be sold by the Investor without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act, the Company shall, as and when the originals thereof are submitted to the SEC for filing, notify the Investor in writing of any SEC Documents furnished or submitted to the SEC, and upon the request of the Investor the Company shall deliver to the Investor, as and when the originals thereof are submitted to the SEC for filing, copies of all SEC Documents so furnished or submitted to the SEC. -13- Section 6.8. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A SUBSEQUENT Sale. The Company shall immediately notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) the declaration by the SEC of the effectiveness of a Registration Statement; and (vi) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to the Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Sale Notice during the continuation of any of the foregoing events, except for (v) above. Section 6.9. CONSOLIDATION; MERGER. During the Commitment Period and for so long as the Investor holds or owns any Registrable Securities, Preferred Stock or Warrants, the Company shall not, at any time after the date hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all of the assets of the Company to, another entity unless the resulting successor or acquiring entity (if not the Company) executes a written instrument acknowledging and assuming the obligation to issue to the Investor, upon any Sale, upon conversion of the Preferred Stock or upon the exercise of any Warrant, in lieu of each share of Common Stock theretofore issuable upon such Sale, upon such conversion of the Preferred Stock, or upon exercise of any such Warrant, other securities, money or property receivable upon such merger, consolidation or transfer had the Sale, conversion of the Preferred Stock or exercise of such Warrant occurred immediately prior to such merger, consolidation or transfer. Section 6.10. ISSUANCE OF SHARES. The issuance and sale of the Preferred Stock and the Subsequent Sale Shares, the issuance of the Warrants, the issuance of the Warrant Shares pursuant to exercise of the Warrants and the issuance of the Conversion Shares upon conversion of the Preferred Stock, shall be made in accordance with the provisions and requirements of Regulation D and any applicable state law. Issuance of the Warrant Shares pursuant to exercise of the Warrants through a cashless exercise shall be made in accordance with the provisions and requirements of Section 3(a)(9) under the Securities Act and any applicable state law. Section 6.11. LEGAL OPINIONS. The Company's independent counsel shall deliver to the Investor on the Closing Date relating to the First Sale an opinion in the form of Exhibit G, except for paragraph 7 thereof. The Company's independent counsel shall deliver to the Investor, within 2 Trading Days of the effective date of each Registration Statement, an opinion in the form of Exhibit G hereto, including paragraph 7 thereof. Section 6.12. NO SIMILAR ARRANGEMENT; RIGHT OF FIRST REFUSAL. The Company shall refrain from entering into any other agreements, arrangements or understandings granting to the Company the right to sell shares of its securities to one or more investors, other than a Strategic Investor and other than the Investor, in placements exempt from registration under the Securities Act until 60 calendar days after this Agreement is terminated pursuant to Section 2.5 hereof or the earlier expiration of the Commitment Period (the "EXCLUSIVITY PERIOD"). If the Company, for the purpose of obtaining any additional financing, wishes to sell shares of its securities in placements exempt from registration under the Securities Act during the Exclusivity Period (a "THIRD PARTY SALE") to a party other than a Strategic Investor and other than the Investor (the "THIRD PARTY"), the Company shall first offer (the "OFFER") to the Investor, in writing, the right to purchase such shares (the "OFFERED SHARES") at the bona fide price offered by the Third Party (the "OFFER PRICE"). The Offer shall grant the Investor the right during the 5 Trading Days immediately following the date of the Offer to elect to purchase any or all of the Offered Shares. The Company, in connection with such a Third Party Sale, -14- shall refrain from circumventing or attempting to circumvent the Investor's right of first refusal by way of making such a Third Party Sale to any of its Affiliates without first making an Offer to the Investor. If the Investor so exercises its right to purchase any or all of the Offered Shares, the purchase will be treated as a Subsequent Sale except that the purchase price for the Offered Shares shall be the Offer Price. The closing and method of payment shall be as provided for in Sections 2.3 and 2.4 hereof and the Closing Date shall be 7 Trading Days after the Investor exercises such right. If the Investor fails to exercise its right to purchase any or all of the Offered Shares, then during the 60 calendar days immediately following the expiration of such right, the Company shall be free to sell any or all of the Offered Shares to a purchaser for a purchase price not lower than the Offer Price payable on terms and conditions that are not more favorable to such purchaser than those contained in the Offer. In the event that the Company effects a Third Party Sale, the Investor may immediately terminate this Agreement. Notwithstanding anything in this Section 6.12 to the contrary, the restriction contained in this Section 6.12 shall not apply to: (i) securities issued by the Company pursuant to agreements entered into by the Company in connection with acquisitions of businesses related to the business of the Company at the time of such acquisition (whether such acquisitions are structured as mergers, stock purchases, asset purchases or as other forms of acquisitions), or (ii) securities issued by the Company to its employees, consultants, or its officers or directors pursuant to any stock option plan of the Company, stock purchase plan of the Company, or stock bonus plan of the Company. Section 6.13. PUBLIC ANNOUNCEMENTS. The Company, its Representatives and legal advisors, and the Investor will not issue or make any reports, statements or releases to the public or to any third party with respect to this Agreement or the transactions contemplated hereby without the consent of both the Company and the Investor, which consent shall not be unreasonably withheld or delayed. The Company, its Representatives and legal advisers, and the Investor also will obtain the other party's prior approval of any press release to be issued announcing the consummation of the transactions contemplated by this Agreement or in any way referring to the other party or affiliates of the other party. If either party is unable to obtain the approval of its public report, statement, or press or other release from the other party and such report, statement, or press or other release is, in the opinion of legal counsel to such party, required by applicable law or by any rule or regulation of the Principal Market in order to discharge such party's disclosure obligations, then such party may make or issue the legally required report, statement, or press or other release and promptly furnish the other party with a copy thereof. Section 6.14. SERIES A, SERIES B, AND SERIES C PREFERRED STOCK. The Company shall not reissue any shares of the Company's preferred stock designated as Series A, Series B and Series C. With respect to any shares of the Company's preferred stock designated as Series A, Series B, or Series C which have been authorized but have never been issued by the Company, the Company shall not issue such shares. Section 6.15. DELIVERY OF SHARE CERTIFICATES. The Company shall use its best efforts to cause its transfer agent to dispatch, using a nationally recognized and reputable overnight courier, (i) share certificates representing all Conversion Shares issuable upon a conversion of Preferred Stock within three (3) Trading Days following the Conversion Date (as defined in the Certificate of Designation) relating to such conversion, (ii) share certificates representing shares of Common Stock issued pursuant to a Subsequent Sale within three (3) Trading Days following the Closing Date relating to such Subsequent Sale, and (iii) share certificates representing Warrant Shares issuable pursuant to an exercise of the Incentive Warrant or the Protective Warrant within (3) Trading Days following the Exercise Date (as defined in the Incentive Warrant or the Protective Warrant, as applicable) relating to such exercise, all in accordance with the provisions of the Transfer Agent Instructions (except that the provisions in the Transfer Agent Instructions which permit the transfer agent to dispatch such share certificates after a longer period has elapsed shall not apply with respect to the obligations of the Company hereunder). ARTICLE VII CONDITIONS TO DELIVERY OF SALE NOTICES AND CONDITIONS TO CLOSING Section 7.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL PREFERRED STOCK AND COMMON STOCK. The obligation hereunder of the Company to issue and sell the Preferred Stock or Common Stock, as applicable, to the Investor incident to each Closing is subject to the satisfaction, at or before each such Closing, of each of the conditions set forth below. -15- (a) ACCURACY OF THE INVESTOR'S REPRESENTATION AND WARRANTIES. The representations and warranties of the Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each such Closing as though made at each such time. (b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing. Section 7.2. CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A SALE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE PREFERRED STOCK AND COMMON STOCK. The right of the Company to deliver a Sale Notice, in the event of a Subsequent Sale, and the obligation of the Investor hereunder to acquire and pay for the Preferred Stock or Common Stock, as applicable, incident to a Closing is subject to the satisfaction, on (i) the Subscription Date, (ii) the applicable Sale Notice Date and (iii) the applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the following conditions; provided, however, that with respect to the Subscription Date and the Closing relating to the First Sale only, the Investor waives the conditions set forth in paragraphs (a), (b) and (k) of this Section 7.2: (a) FILING OF REGISTRATION STATEMENTS WITH THE SEC. In accordance with the provisions set forth in the Registration Rights Agreement, the Company shall have filed with the SEC Registration Statements covering the resale of Registrable Securities relating to all prior Sales. (b) EFFECTIVE REGISTRATION STATEMENTS. (1) The Company shall have notified the Investor in accordance with Section 6.8 hereof that all prior Registration Statements covering Registrable Securities relating to the First Sale and any Subsequent Sales have been declared effective by the SEC. (2) In accordance with the Registration Rights Agreement, all such Registration Statements shall remain effective on each Condition Satisfaction Date. (3) Neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to a Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of a Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and the Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action). (4) No other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist. (c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct as of each Condition Satisfaction Date as though made at each such time (except for representations and warranties specifically made as of a particular date). (d) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement, the Registration Rights Agreement and the Warrants to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date. (e) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits the transactions contemplated by this Agreement or otherwise has a Material Adverse Effect, and no actions, suits or proceedings shall be in progress, pending or threatened by any Person, that seek to enjoin or prohibit the transactions contemplated by this Agreement or otherwise could reasonably be expected to have a Material Adverse Effect. For purposes of this paragraph (e), no proceeding shall be deemed pending or threatened unless one of the parties has received written or oral notification thereof prior to the applicable Closing Date. (f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or the NASD, and the Common Stock shall have been approved for listing or quotation on and shall not have -16- been delisted from the Principal Market. The issuance of shares of Common Stock with respect to the applicable Closing shall not violate the shareholder approval requirements of the Principal Market. (g) LEGAL OPINION. On each Closing Date relating to each Subsequent Sale, the Company shall have caused to be delivered to the Investor, an opinion of the Company's independent counsel in the form of Exhibit K hereto, addressed to the Investor. (h) DUE DILIGENCE. No dispute between the Company and the Investor shall exist pursuant to Section 7.3 as to the adequacy of the disclosure contained in the Registration Statement. (i) TEN PERCENT LIMITATION. On each Closing Date, the number of Commitment Shares then to be purchased by the Investor shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock and Registrable Securities then owned by the Investor beneficially or deemed beneficially owned by the Investor, as determined in accordance with the definition of beneficial ownership in Rule 13d-3 promulgated under the Exchange Act, would result in the Investor owning no more than 9.9% of all of such Common Stock as would be outstanding on such Closing Date, as determined in accordance with Section 13(d) of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section, in the event that the amount of Common Stock outstanding as determined in accordance with Section 13(d) of the Exchange Act and the regulations promulgated thereunder is greater on a Closing Date than on the Sale Notice Date associated with such Closing Date, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining whether the Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement and, if any, Warrant Shares would own more than 9.9% of the Common Stock following such Closing Date. (j) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing any Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen Trading Days following the Trading Day on which such notice is deemed delivered). (k) MINIMUM TIME INTERVAL. The Minimum Time Interval shall have elapsed. (l) SHAREHOLDER VOTE. The issuance of Commitment Shares, with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market. Each Sale Notice shall provide the Investor with the following information as of the applicable Sale Notice Date: (i) the total number of shares of Outstanding Common Stock, (ii) the number of Subsequent Sale Shares issuable with respect to the applicable Closing, (iii) the number of Protective Warrant Shares issuable, if any, with respect to the applicable Closing, (iv) the number of shares of Commitment Shares issued pursuant to previous Sales, (v) the number of Incentive Warrant Shares issued, (vi) the number of Protective Warrant Shares previously issued pursuant to previous Sales, and (vii) the number of Conversion Shares previously issued and issuable upon conversion of the Preferred Stock. If the issuance by the Company of a number of shares of Commitment Shares equal to the sum of the amounts stated in clauses (ii) through (vii), inclusive, hereof would result in a violation by the Company of the shareholder approval requirements of the Principal Market, the applicable Sale Notice shall be deemed null and void. (m) CERTIFICATE OF DESIGNATION. The Company, prior to the Closing Date relating to the First Sale only, shall have duly filed the Certificate of Designation with, and the Certificate of Designation shall have been approved by, the State of Arizona Corporation Commission. (n) OTHER. On each Condition Satisfaction Date, the Investor shall have received and been reasonably satisfied with such other certificates and documents as shall have been reasonably requested by the Investor in order for the Investor to confirm the Company's satisfaction of the conditions set forth in this Section 7.2., including, without limitation, a certificate in substantially the form and substance of Exhibit H hereto, executed in either case by an executive officer of the Company -17- and to the effect that all the conditions to such Closing shall have been satisfied as at the date of each such certificate. (o) CERTAIN EVENTS. The Company shall not be permitted to deliver a Sale Notice during any period in which the events described in Section 6.8, except for clause (v) thereof, continue to occur. Section 7.3. DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION. (a) The Company shall make available for inspection and review by the Investor, advisors to and representatives of the Investor (who may or may not be affiliated with the Investor and who are reasonably acceptable to the Company), and any Underwriter, any Registration Statement or amendment or supplement thereto or any blue sky, NASD or other filing, all financial and other records, all SEC Documents and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company's officers, directors and employees to supply all such information reasonably requested by the Investor or any such representative, advisor or Underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of such Registration Statement for the sole purpose of enabling the Investor and such representatives, advisors and Underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement. (b) None of the Company, its officers, directors, employees and agents shall in any event disclose non-public information to the Investor, advisors to or representatives of the Investor unless prior to disclosure of such information the Company identifies such information as being non-public information and provides the Investor, such advisors and representatives with the opportunity to accept or refuse to accept such non-public information for review. As a condition to disclosing any non-public information hereunder, the Company may require the Investor and the Investor's advisors and representatives to enter into a confidentiality agreement in form reasonably satisfactory to the Company and the Investor. (c) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts; provided, however, that notwithstanding anything herein to the contrary, the Company shall, as hereinabove provided, immediately notify the advisors and representatives of the Investor and any Underwriters of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the applicable Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 7.3 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms and conditions of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that such Registration Statement contains an untrue statement of a material fact or omits a material fact required to be stated in such Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. -18- ARTICLE VIII LEGENDS Section 8.1. LEGENDS. Each of the Warrants, the Preferred Stock and, unless otherwise provided below, each certificate representing Registrable Securities will bear the following legend (the "LEGEND"): "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED AS OF JUNE 18, 2001, BETWEEN INTERNATIONAL FIBERCOM, INC. AND CRESCENT INTERNATIONAL LTD. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM INTERNATIONAL FIBERCOM, INC.'S EXECUTIVE OFFICES." On the Subscription Date the Company shall issue to the transfer agent for its Common Stock (and to any substitute or replacement transfer agent for its Common Stock upon the Company's appointment of any such substitute or replacement transfer agent) Transfer Agent Instructions, with a copy to the Investor. Other than as required as a result of change in law, such instructions shall be irrevocable by the Company from and after the date hereof or from and after the issuance thereof to any such substitute or replacement transfer agent, as the case may be, except as otherwise expressly provided in the Registration Rights Agreement. It is the intent and purpose of such instructions, as provided therein, to require the transfer agent for the Common Stock from time to time upon transfer of Registrable Securities by the Investor to issue certificates evidencing such Registrable Securities free of the Legend during the following periods and under the following circumstances and without consultation by the transfer agent with the Company or its counsel and without the need for any further advice or instruction or documentation to the transfer agent by or from the Company or its counsel or the Investor, and the Company agrees that it will, and will cause its counsel to, provide the transfer agent with any and all documentation requested or required by the transfer agent, the Investor or their respective counsel, including without limitation the documentation and confirmations referenced in the Transfer Agent Instructions: (a) At any time after the applicable Effective Date, upon surrender of one or more certificates evidencing Registrable Securities that bear the Legend, to the extent accompanied by a notice requesting the issuance of new certificates free of the Legend to replace those surrendered; provided that (i) the applicable Registration Statement shall then be effective and (ii) if reasonably requested by the transfer agent the Investor confirms to the transfer agent that the Investor has transferred the Registrable Securities pursuant to such Registration Statement and has complied with the prospectus delivery requirement; or -19- (b) At any time upon any surrender of one or more certificates evidencing Registrable Securities that bear the Legend, to the extent accompanied by a notice requesting the issuance of new certificates free of the Legend to replace those surrendered and containing representations that the Investor is permitted to dispose of such Registrable Securities without limitation as to amount or manner of sale pursuant to Rule 144(k) under the Securities Act. Section 8.2. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than the one specified in Section 8.1 has been or shall be placed on the share certificates representing the Registrable Securities and the Preferred Stock, and no instructions or "stop transfer orders," so called, "stock transfer restrictions," or other restrictions have been or shall be given to the Company's transfer agent with respect thereto other than as expressly set forth in this Article VIII. Section 8.3. INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall affect in any way the Investor's obligations to comply with all applicable securities laws. ARTICLE IX INDEMNIFICATION; ARBITRATION Section 9.1. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless the Investor, its partners, Affiliates, officers, directors, employees, and duly authorized agents, and each Person or entity, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with its controlling persons from and against any Damages, joint or several, and any action in respect thereof to which the Investor, its partners, Affiliates, officers, directors, employees, and duly authorized agents, and any such controlling person becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Company contained in this Agreement, as such Damages are incurred, unless such Damages result primarily from the Investor's gross negligence, recklessness or bad faith in performing its obligations under this Agreement; provided, however, that the maximum aggregate liability of the Company shall be limited to the amount actually invested by the Investor under this Agreement, and provided, further, that in no event shall this provision be deemed to limit any rights to indemnification arising under the Registration Rights Agreement. (b) The Investor agrees to indemnify and hold harmless the Company, its Affiliates, officers, directors, employees, and duly authorized agents from and against any Damages, joint or several, and any action in respect thereof to which the Company, its Affiliates, officers, directors, employees, and duly authorized agents becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Investor contained in this Agreement, as such Damages are incurred, unless such Damages result primarily from the Company's gross negligence, recklessness or bad faith in performing its obligations under this Agreement; provided, however, that the maximum aggregate liability of the Investor shall be limited to the amount by which the total price at which the Registrable Securities held by the Investor were sold to the public exceeds the amount actually paid by the Investor under this Agreement for such Registrable Securities sold to the public, and provided, further, that in no event shall this provision be deemed to limit any rights to indemnification arising under the Registration Rights Agreement. Section 9.2. METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any Indemnified Party (as defined below) under Section 9.1 shall be asserted and resolved as follows: -20- (a) In the event any claim or demand in respect of which any person claiming indemnification under any provision of Section 9.1 (an "INDEMNIFIED PARTY") might seek indemnity under Section 9.1 is asserted against or sought to be collected from such Indemnified Party by a person other than the Company, the Investor or any Affiliate of the Company (a "THIRD PARTY CLAIM"), the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim for indemnification that is being asserted under any provision of Section 9.1 against any person (the "INDEMNIFYING PARTY"), together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to defend has been irreparably prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within the period ending 30 calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party under Section 9.1 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim. (i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.2(a), then the Indemnifying Party shall have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full pursuant to Section 9.1). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except as provided in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 9.1 with respect to such Third Party Claim. (ii) If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.2(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in -21- a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party Claim, and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation. (iii)If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party with respect to the Third Party Claim under Section 9.1 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the Damages in the amount specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the period of 30 calendar days immediately following the Dispute Period, such dispute shall be resolved by arbitration in accordance with Section 9.3. (b) In the event any Indemnified Party should have a claim under Section 9.1 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under Section 9.1 specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that the Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such Indemnity Notice, the Damages in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the period of 30 calendar days immediately following the Dispute Period, such dispute shall be resolved by arbitration in accordance with Section 9.3. -22- Section 9.3. ARBITRATION. Any controversy, claim or dispute arising out of or in connection with this Agreement, the Registration Rights Agreement or the Warrants, including any question regarding its existence, validity, interpretation, breach, or termination, shall be referred to and finally resolved in accordance with the International Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitral tribunal may be entered by any court having jurisdiction thereof or having jurisdiction over any party or any party's assets. (a) The tribunal shall consist of three arbitrators, two of whom shall be appointed by the respective parties and the third, who shall be the chairperson of the tribunal, by the two party-appointed arbitrators within 30 days of the last of their appointments. Save that, if either party should fail to appoint an arbitrator within 30 days of receiving written notice of the appointment of an arbitrator by the other party, the second arbitrator shall, at the written request of the party which has already made an appointment, be appointed forthwith by the American Arbitration Association. Likewise, if the party-appointed arbitrators fail to make an agreed appointment for the chairperson within 30 days of the last of their appointments, the chairperson shall, at the written request of either party, be appointed forthwith by the American Arbitration Association. The place of arbitration shall be New York, New York. This arbitration clause and the conduct of the arbitral proceedings shall be governed by the Federal Arbitration Act, 9 U.S.C.A. sec. 1 et seq. The language of the arbitration shall be English. Nothing in these dispute resolution provisions shall be construed as preventing either party from seeking conservatory or similar interim relief in any court of competent jurisdiction. To the extent practicable, the arbitral tribunal shall render its award no more than 60 calendar days from the date that the three member tribunal is constituted. The arbitral tribunal shall not lose jurisdiction over the matter based on a failure to render an award within this time period. ARTICLE X MISCELLANEOUS Section 10.1. FEES AND TRANSACTION COSTS. In connection with the execution of this agreement the following Sale Fees, Investor Legal Fees, and Due Diligence Costs (as defined below) are payable by the Company to the payee entities listed in Schedule 10.1. The Investor is authorized by the Company to deduct such amounts from any sums due to the Company on the applicable Closing Date. (a) SUBSCRIPTION FEE. On the first Closing Date, the Company shall pay to the Investor the subscription fee in the amount set forth in Schedule 10.1 (the "SUBSCRIPTION FEE"). (b) SALE FEES. On each Closing Date, the Company shall pay to the Investor an amount calculated in accordance with Schedule 10.1 (the "SALE FEE"). (c) TRANSACTION COSTS. The fees, expenses and disbursements of the Investor's counsel (the "INVESTOR LEGAL FEES") shall be paid as follows: (i) the Investor shall pay the initial $10,000 of Investor Legal Fees and (ii) the Company shall pay all Investor Legal Fees in excess of $10,000. The Company shall pay the Investor due diligence costs in connection with the consummation of this Agreement and the transactions contemplated hereby (the "DUE DILIGENCE COSTS") up to a maximum amount of $10,000. The Company shall pay to the Investor the Company's share of the Investor Legal Fees and Due Diligence Costs on the Subscription Date, to the extent such share of the Investor Legal Fees and Due Diligence Costs can be determined on the Subscription Date. The Company shall pay its share of the remaining Investor Legal Fees and Due Diligence Costs to the Investor not later than 10 days -23- after receipt of notice from the Investor that such amount is due. The Company agrees to pay its own expenses incident to the performance of its obligations hereunder. Section 10.2. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied upon for the determination of the Closing Trade Price or trading volume of the Common Stock on the Principal Market on any given Trading Day for the purposes of this Agreement shall be the Bloomberg L.P. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity. Section 10.3. BROKERAGE. Except as disclosed in Section 10.1, each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker which would impose a legal obligation to pay any fee or commission. The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or finder's fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby. Section 10.4. CONVERSION NOTICE. Any conversion of the Preferred Stock shall be effected in accordance with the Certificate of Designation and (i) any conversion notice delivered thereunder by the Investor to the Company shall be in the form of Exhibit I hereto, and (ii) any conversion notice delivered thereunder by the Company to the Investor shall be in the form of Exhibit J hereto. Section 10.5. NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile at the address or number designated below (if delivered on a Trading Day during normal business hours where such notice is to be received), or the first Trading Day following such delivery (if delivered other than on a Trading Day during normal business hours where such notice is to be received) or (b) on the third Trading Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: International FiberCom, Inc. 3410 E. University Drive Suite 180 Phoenix, AZ 85034 Attention: Joseph P. Kealy Telephone: (602) 387-4000 Facsimile: (602) 276-0567 with a copy (which shall not constitute notice) to: Quarles & Brady Streich Lang LLP Renaissance One Building 2 North Central Avenue Phoenix, AZ 85004-2391 Attention: Christian J. Hoffman III, Esq. Telephone: (602) 229-5200 Facsimile: (602) 229-5690 -24- if to the Investor: Crescent International Ltd. c/o GreenLight (Switzerland) SA 84, av Louis-Casai 1216 Geneva, Cointrin Switzerland Attention: Mel Craw/Maxi Brezzi Telephone: +41 22 791 71 69 Facsimile: +41 22 929 53 94 with a copy (which shall not constitute notice) to: Clifford Chance Rogers & Wells LLP 200 Park Avenue New York, NY 10166 Attention: Earl S. Zimmerman, Esq. Telephone: (212) 878-8000 Facsimile: (212) 878-8375 Either party hereto from time to time may change its address or facsimile number for notices under this Section by giving at least ten (10) calendar days' prior written notice of such changed address or facsimile number to the other party hereto. Section 10.6. ASSIGNMENT. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person. Notwithstanding the foregoing, the Investor's interest in this Agreement may be assigned at any time, in whole or in part, to any Affiliate of the Investor upon the prior written consent of the Company, which consent shall not to be unreasonably withheld provided, however, that any such assignment or transfer shall relieve the Investor of its duties under this Agreement only upon performance thereof by any such assignee or transferee. Section 10.7. AMENDMENT; NO WAIVER. No party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth in this Agreement. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by both parties hereto. The failure of the either party to insist on strict compliance with this Agreement, or to exercise any right or remedy under this Agreement, shall not constitute a waiver of any rights provided under this Agreement, nor estop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising such a right or remedy in the future. Section 10.8. ANNEXES AND EXHIBITS; ENTIRE AGREEMENT. All annexes and exhibits to this Agreement are incorporated herein by reference and shall constitute part of this Agreement. This Agreement, the Warrants and the Registration Rights Agreement set forth the entire agreement and understanding of the parties relating to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, relating to the subject matter hereof. Section 10.9. SURVIVAL. The provisions of Articles VI, VIII, IX and X, and of Section 7.3, shall survive the termination of this Agreement. Section 10.10. SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party. -25- Section 10.11. TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement. Section 10.12. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. Section 10.13. CHOICE OF LAW. This Agreement shall be construed under the laws of the State of New York. Section 10.14. OTHER EXPENSES. In the event that a dispute between the parties is not determined by a Board of Arbitration, the non-prevailing party in any action, suit or proceeding shall bear all investigative, legal and other expenses reasonably incurred in connection with, and any and all amounts paid in defense or settlement of such action, suit or proceeding. -26- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. CRESCENT INTERNATIONAL LTD. By: _______________________________ Name: Title: INTERNATIONAL FIBERCOM, INC. By: _______________________________ Name: Title: EX-10.2 4 ex10-2.txt REGISTRATION RIGHTS AGREEMENT DTD JUNE 18, 2001 Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 18, 2001, is made and entered into by and between International FiberCom, Inc., an Arizona corporation (the "COMPANY"), and Crescent International Ltd., an entity organized and existing under the laws of Bermuda (the "INVESTOR"). WHEREAS, the Company and the Investor have entered into that certain Stock Purchase Agreement, dated as of June 18, 2001 (the "STOCK PURCHASE AGREEMENT"), pursuant to which the Company will issue, from time to time, to the Investor and the Investor shall purchase up to $20,000,000 worth of securities of the Company including (i) common stock, no par value per share, of the Company (the "COMMON STOCK") and (ii) 100,000 shares of series D convertible preferred stock, par value $0.01 per share, of the Company (the "PREFERRED STOCK"); WHEREAS, pursuant to the terms of and in partial consideration for the Investor entering into the Stock Purchase Agreement, the Company is required to issue to the Investor an incentive warrant, exercisable from time to time within five years following the date of issuance (the "INCENTIVE WARRANT") for the purchase of a number of shares of Common Stock at a price to be determined as described in such Incentive Warrant; WHEREAS, pursuant to the terms of and in partial consideration for the Investor entering into the Stock Purchase Agreement, the Company may be required to issue protective warrants to the Investor, each of which may become exercisable from time to time as described in such warrants and in the Stock Purchase Agreement (collectively, the "PROTECTIVE WARRANTS" and together with the Incentive Warrant and any new or replacement warrants issued in accordance with the terms of the Protective Warrants and the Incentive Warrant, the "Warrants") for the purchase of a number of shares of Common Stock at a price to be determined as described in each such Protective Warrant; WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor's agreement to enter into the Stock Purchase Agreement, the Company has agreed to provide the Investor with certain registration rights as described herein; NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, in the Warrants, and in the Stock Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows (capitalized terms used herein and not defined herein shall have the respective meanings ascribed to them in the Stock Purchase Agreement): ARTICLE I REGISTRATION RIGHTS SECTION 1.1. REGISTRATION STATEMENTS. a. FILING OF REGISTRATION STATEMENTS. The Company shall register for resale all Commitment Shares issued or issuable to the Investor pursuant to the Stock Purchase Agreement and all Warrant Shares issued or issuable upon full exercise of the Warrants. Subject to the terms and conditions of this Agreement, the Company shall effect such registration in the manner provided below: (i) FIRST REGISTRATION STATEMENT. On or before the end of the 20 calendar day period immediately following the First Sale, the Company shall file with the SEC a registration statement (the "FIRST REGISTRATION STATEMENT") on Form S-3 if such form is then available to the Company and, if not, on such form promulgated by the SEC for which the Company qualifies, that counsel for the Company shall deem appropriate and which form shall be available for the sale of all Conversion Shares, and the Incentive Warrant Shares, in accordance with the intended method of distribution of such securities. The aggregate number of shares of Common Stock to be registered under the First Registration Statement shall be 5,500,000; (ii) SUBSEQUENT REGISTRATION STATEMENTS. (1) If the Company shall, pursuant to any Subsequent Sale, require the Investor to purchase shares of Common Stock not previously registered and not covered by an effective Registration Statement filed with the SEC which is not a Failed Registration Statement (as hereinafter defined) (an "UNREGISTERED SALE"), then on or before the end of a 20 calendar day period immediately following each Closing Date relating to each such Subsequent Sale, the Company shall file with the SEC a registration statement (each a "SUBSEQUENT REGISTRATION STATEMENT," and together with the First Registration Statement and any other registration statement covering Registrable Securities or otherwise required to be filed by the Company with the SEC as provided in this Agreement, the "REGISTRATION STATEMENTS" or each, a "REGISTRATION STATEMENT") on Form S-3 if such form is then available to the Company and, if not, on such form promulgated by the SEC for which the Company qualifies, that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Subsequent Sale Shares purchased by the Investor and any Conversion Shares and Warrant Shares that have not been previously registered, in accordance with the intended method of distribution of such securities. The aggregate number of shares to be registered under each Subsequent Registration Statement shall be equal to (w) the number of Subsequent Sale Shares purchased by the Investor on the applicable Closing Date, plus (x) a number of Protective Warrant Shares equal to the number of Subsequent Sale Shares purchased by the Investor on the applicable Closing Date plus (y) any Conversion Shares not previously registered plus (z) any Warrant Shares not previously registered; (2) Prior to any Subsequent Sale which is not an Unregistered Sale, the Company shall file with the SEC a Registration Statement on Form S-3 if such form is then available to the Company and, if not, on such form promulgated by the SEC for which the Company qualifies, that counsel for 2 the Company shall deem appropriate and which form shall be available for the sale of the shares of Common Stock to be purchased by the Investor and any Warrant Shares which have not previously been registered, in accordance with the intended method of distribution of such securities. The aggregate number of shares to be registered under such Registration Statement shall be determined by the Company. b. EFFECTIVENESS OF THE REGISTRATION STATEMENTS. The following conditions for effectiveness shall apply to the Registration Statements required to be filed by the Company with the SEC pursuant to paragraph (a) above, without limiting the Company's obligation to file such Registration Statements. The Company shall use its best efforts: (i) to have the First Registration Statement declared effective by the SEC in no event later than 90 calendar days after the Closing Date relating to the First Sale, and (ii) to have each Subsequent Registration Statement declared effective by the SEC in no event later than 60 calendar days after the Closing Date relating to each Unregistered Sale, and in any event prior to any further Subsequent Sales. Upon the written request of the Company, the foregoing 90 and 60 calendar day periods will each be extended for one additional period of 15 calendar days; any further extensions will be subject to the mutual agreement of the Company and the Investor. The Company shall ensure that each Registration Statement and any amendments thereto remain in effect until the later of (1) a period ending 1 day following the date of expiration of the Incentive Warrant Exercise Period (as such term is defined in the Incentive Warrant) if the Incentive Warrant has not been exercised in full and if such Registration Statement covers the Warrant Shares issuable under such Incentive Warrant, and (2) the date the Registrable Securities covered by such Registration Statement and issued or issuable to the Investor pursuant to the Stock Purchase Agreement may be sold by the Investor without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act or have otherwise been sold; PROVIDED that such period shall be extended one day for each day after the applicable Effective Date that any Registration Statement covering Registrable Securities is not effective during the period such Registration Statement is required to be effective pursuant to this Agreement. c. FAILURE TO OBTAIN OR MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENTS. (i) In the event the Company fails for any reason to obtain the effectiveness of any Registration Statement within the time periods set forth in Section 1.1(b) (a "TARDY REGISTRATION STATEMENT") or in the event that the Company fails for any reason to maintain the effectiveness of any Registration Statement (or the underlying prospectus) covering Registrable Securities for the time period set forth in Section 1.1(b) (an "INEFFECTIVE REGISTRATION STATEMENT" together with a Tardy Registration Statement, a "FAILED REGISTRATION STATEMENT") or upon the occurrence of any event of the kind described in Section 2.1(g)(iv) hereof (unless the Registrable Securities covered by such Registration Statement shall have become freely tradable pursuant to Rule 144(k) of the Securities Act or have been otherwise sold), then, in either event an amount equal to two percent (2.0%) of the aggregate Purchase Price of all of the Registrable Securities covered by any such Failed Registration Statement then held by the Investor for each calendar month and for each portion of a calendar month, PRO RATA, (the "FAILED REGISTRATION STATEMENT FEE") during any period of such ineffectiveness or, in the case of the occurrence of an event of the kind described in Section 2.1(g)(iv) hereof, until the Investor shall have received copies of the supplemental or amended prospectus contemplated by Section 2.1(g)(iv) hereof (an "INEFFECTIVE PERIOD"), shall become due and payable to Investor. 3 (ii) If Failed Registration Statement Fees accrue with respect to any Ineffective Registration Statement, payment of such Failed Registration Statement Fees shall be made on the first Trading Day after the earlier to occur of (1) the expiration of the applicable Ineffective Period and (2) the last day of each calendar month during an Ineffective Period. d. RESTRICTED PERIOD. While in possession of material non-public information received from the Company (a "RESTRICTED PERIOD"), the Investor shall not dispose of any Registrable Securities until such information is disclosed to the public; provided that, the liquidated damages described in Section 1.1(c) hereof shall not apply until and unless such Restricted Period exceeds 30 days during any such 360 day period and; provided further that, if such Restricted Period exceeds 120 days, the liquidated damages described in Section 1.1(c) hereof shall be increased to three percent (3.0%) until such Restricted Period shall have elapsed. e. FAILURE TO REGISTER SUFFICIENT NUMBER OF SHARES. If the number of Protective Warrant Shares included in the First Registration Statement or each Subsequent Registration Statement is less than the total number of Protective Warrant Shares issuable upon exercise at the Exercise Price (as such term is defined in each Protective Warrant) (such deficit in the number of shares is referred to herein as the "DEFICIT SHARES"), then (i) the Company shall immediately amend such Registration Statement (or file a new Registration Statement) to cover the Deficit Shares (such amended or new Registration Statement is referred to herein as a "DEFICIT SHARES REGISTRATION STATEMENT") and (ii) the Company shall pay to the Investor in immediately available funds into an account designated by the Investor an amount equal to 2.0% of the product of (x) the number of Deficit Shares multiplied by (y) the Closing Trade Price of the Common Stock on the applicable Effective Date, for each calendar month and for each portion of a calendar month, pro rata, during the period from the Effective Date of the applicable Registration Statement to the Effective Date of the applicable Deficit Shares Registration Statement. f. LIQUIDATED DAMAGES. The Company and the Investor hereby acknowledge and agree that the sums payable under subsections 1.1(c), 1.1(d) and 1.1(e) hereof shall constitute liquidated damages and not penalties. The parties further acknowledge that (i) the amount of loss or damages likely to be incurred is incapable or is difficult to estimate precisely, (ii) the amounts specified in such subsections bear a reasonable proportion and are not plainly or grossly disproportionate to the probable loss likely to be incurred in connection with any failure by the Company to obtain or maintain the effectiveness of a Registration Statement, (iii) one of the reasons for the Company and the Investor reaching an agreement as to such amounts was the uncertainty and cost of litigation regarding the question of actual damages, and (iv) the Company and the Investor are sophisticated business parties and have been represented by sophisticated and able legal and financial counsel and negotiated this Agreement at arm's length. ARTICLE II REGISTRATION PROCEDURES SECTION 2.1. FILINGS; INFORMATION. The Company will effect the registration of the Registrable Securities in accordance with the intended methods of disposition thereof as furnished to the Company by any proposed seller of such Registrable Securities prior to the filing of a Registration Statement therefor. Without limiting the foregoing, the Company in each such case will do the following as expeditiously as possible, but in no event later than the deadline, if any, prescribed therefor in this Agreement: 4 a. The Company shall (i) prepare and file with the SEC the Registration Statement(s) covering the shares as described in subsection 1.1(a) above; (ii) use its best efforts to cause such filed Registration Statement(s) to become and remain effective (pursuant to Rule 415 under the Securities Act or otherwise) for the period prescribed by Section 1.1(b); (iii) prepare and file with the SEC such amendments and supplements to each Registration Statement and the prospectus used in connection therewith as may be necessary to keep each Registration Statement effective for the time period prescribed by Section 1.1(b); and (iv) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement during such period in accordance with the intended methods of disposition by the Investor set forth in each Registration Statement. b. The Company shall file all necessary amendments to each Registration Statement in order to effectuate the purpose of this Agreement, the Stock Purchase Agreement, and the Warrants. c. Five Trading Days prior to filing each Registration Statement or prospectus, or any amendment or supplement thereto (excluding amendments deemed to result from the filing of documents incorporated by reference therein), the Company shall deliver to the Investor and one firm of counsel representing the Investor, in accordance with the notice provisions of Section 4.8, copies of such Registration Statement as proposed to be filed, together with exhibits thereto, which documents will be subject to review and comment by the Investor and such counsel, and thereafter deliver to the Investor and such counsel, in accordance with the notice provisions of Section 4.8, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such Registration Statement (including each preliminary prospectus) and such other documents or information as the Investor or counsel may reasonably request in order to facilitate the disposition of the Registrable Securities. d. The Company shall deliver, in accordance with the notice provisions of Section 4.8, to each broker as directed by the Investor such number of conformed copies of such Registration Statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to the Registrable Securities, and such other documents, as may be reasonably requested to facilitate the disposition of the Registrable Securities. e. After the filing of each Registration Statement, the Company shall promptly notify the Investor of any stop order issued or threatened by the SEC in connection therewith and take all commercially reasonable actions required to prevent the entry of such stop order or to remove it if entered. f. The Company shall use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as the Investor may reasonably (in light of its intended plan of distribution) request, and (ii) cause the Registrable Securities to be registered with or approved by such other governmental agencies 5 or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable the Investor to consummate the disposition of the Registrable Securities; PROVIDED, HOWEVER, that the Company will not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (f), subject itself to taxation in any such jurisdiction, or consent or subject itself to general service of process in any such jurisdiction. g. The Company shall immediately notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement or amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) the declaration by the SEC of the effectiveness of a Registration Statement; and (vi) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company promptly shall make available to the Investor any such supplement or amendment to the related prospectus. h. The Company shall enter into customary agreements and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities (whereupon the Investor, at its option, may require that any or all of the representations, warranties and covenants of the Company also be made to and for the benefit of the Investor). i. The Company shall make available to the Investor (and will deliver to Investor's counsel), subject to restrictions imposed by the United States government or any agency or instrumentality thereof, copies of all correspondence between the SEC and the Company, concerning any Registration Statement, and also will make available for inspection by the Investor and any attorney, accountant or other professional retained by the Investor (collectively, the "INSPECTORS"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers and employees to supply all information reasonably requested by any Inspectors in connection with any Registration Statement. Records that the Company determines, in good faith, to 6 be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; PROVIDED, however, that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors' obligation not to disclose such Records; and, PROVIDED, FURTHER, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records that counsel has advised the Inspectors that the Inspectors are compelled to disclose. The Investor agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Investor after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and, if material non-public information, the Investor shall not while in possession of such information engage in market transactions in the securities of the Company or its Affiliates unless and until such information is made generally available to the public. The Investor further agrees that upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it will give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. j. To the extent required by law or reasonably necessary to effect a sale of Registrable Securities in accordance with prevailing business practices at the time of any sale of Registrable Securities pursuant to a Registration Statement, the Company shall deliver to the Investor a signed counterpart, addressed to the Investor, of (1) an opinion or opinions of counsel to the Company and (2) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions of comfort letters, as the case may be, as the Investor therefor reasonably requests. k. The Company otherwise shall comply with all applicable rules and regulations of the SEC, including, without limitation, compliance with applicable reporting requirements under the Exchange Act. l. The Company may require the Investor to furnish promptly in writing to the Company such information as may be legally required in connection with any registration including, without limitation, all such information as may be requested by the SEC or the National Association of Securities Dealers, Inc. (the "NASD"). The Investor agrees to provide such information requested in connection with any registration within ten Trading Days after receiving such written request and the Company shall not be responsible for any delays in obtaining or maintaining the effectiveness of a Registration Statement caused by the Investor's failure to timely provide such information. Each seller of Registrable Securities shall notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such seller to the Company or of the occurrence of any event, in either case as a result of which any prospectus relating to the Registrable Securities contains or would contain an untrue statement of a material fact regarding such seller or its 7 intended method of disposition of such Registrable Securities or omits to state any material fact regarding such seller or such seller's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and promptly furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such seller or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. SECTION 2.2. REGISTRATION EXPENSES. a. In connection with each Registration Statement, the Company shall pay all registration expenses incurred in connection with the registration thereunder (the "REGISTRATION EXPENSES"), including, without limitation: (i) all registration, filing, securities exchange listing and fees required by NASD, (ii) all registration, filing, qualification and other fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities required hereby), (iii) all of the Company's word processing, duplicating, printing, messenger and delivery expenses, (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred by the Company in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and, subject to paragraph (b) below, the Investor and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any special audits or comfort letters or costs associated with the delivery by independent certified public accountants of such special audit(s) or comfort letter(s) requested pursuant to Section 2.1(j) hereof), (vii) the fees and expenses of any special experts retained by the Company in connection with such registration, (viii) premiums and other costs of policies of insurance purchased at the discretion of the Company against liabilities arising out of any public offering of the Registrable Securities being registered, and (ix) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting fees, discounts, transfer taxes or commissions, if any, attributable to the sale of Registrable Securities, which shall be payable by each holder of Registrable Securities pro rata on the basis of the number of Registrable Securities of each such holder that are included in a registration under this Agreement. b. The Company shall pay all reasonable fees and expenses of counsel for the Investor incurred in connection with the review, and assistance in preparation, of each Registration Statement up to $10,000 per Registration Statement, unless a greater amount is required due to the nature of the review performed by Investor's counsel or the extent of assistance provided by Investor's counsel (an estimate of such greater fees and expenses of such firm of counsel to the Investor shall be provided to the Company prior to the undertaking of such counsel's additional review or assistance). 8 ARTICLE III INDEMNIFICATION AND CONTRIBUTION SECTION 3.1. INDEMNIFICATION The Company agrees to indemnify and hold harmless the Investor, its partners, Affiliates, officers, directors, employees and duly authorized agents, and each Person or entity, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the partners, Affiliates, officers, directors, employees and duly authorized agents of such controlling Person or entity (collectively, the "INVESTOR CONTROLLING PERSONS"), from and against any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, any and all reasonable attorneys' fees and disbursements and costs and expenses of investigating and defending any such claim and any and all amounts paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted) (collectively, "DAMAGES"), joint or several, and any action or proceeding in respect thereof to which the Investor, its partners, Affiliates, officers, directors, employees and duly authorized agents, and any Investor Controlling Person, becomes subject to under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, as and when incurred, insofar as such Damages (or actions or proceedings in respect thereof) (i) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, or in any preliminary prospectus, final prospectus, summary prospectus, documents filed under the Exchange Act and deemed to be incorporated by reference into any Registration Statement, application or other document executed by or on behalf of the Company or based on written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Registrable Securities under the securities or blue sky laws thereof or filed with the SEC, amendment or supplement relating to the Registrable Securities or (ii) arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse the Investor, its partners, Affiliates, officers, directors, employees and duly authorized agents, and each such Investor Controlling Person, for any legal and other expenses reasonably incurred by the Investor, its partners, Affiliates, officers, directors, employees and duly authorized agents, or any such Investor Controlling Person, as incurred, in investigating or defending or preparing to defend against any such Damages or actions or proceedings; PROVIDED, HOWEVER, that the Company shall not be liable to the extent that any such Damages arise out of the Investor's failure to send or give a copy of the final prospectus or supplement at or prior to the written confirmation of the sale of Registrable Securities to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus or supplement, and PROVIDED that the Investor had been obligated under applicable law to deliver such final prospectus or supplement to such person; PROVIDED, FURTHER, that the Company shall not be liable to the extent that any such Damages arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, or any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Investor or any other person who participates as a seller or as an underwriter in the offering or sale of such securities, in either case, in any questionnaire or other request by the Company, or otherwise specifically stating that it is for use in the preparation thereof, and PROVIDED that such written information furnished to the Company by 9 the Investor, or any other person who participates as a seller or as an underwriter in the offering or sale of such securities, is not materially altered by the Company. The Investor agrees to indemnify and hold harmless the Company, its Affiliates, officers, directors, employees, and duly authorized agents from and against any Damages, joint or several, and any action in respect thereof to which the Company, its Affiliates, officers, directors, employees, and duly authorized agents becomes subject to under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, as and when incurred, insofar as such Damages (or actions or proceedings in respect thereof) arise out of an untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement, or any preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Investor in any questionnaire or other request by the Company, or otherwise specifically stating that it is for use in the preparation thereof; PROVIDED, HOWEVER, that such written information furnished to the Company by the Investor is not materially altered by the Company. Notwithstanding the foregoing, the Investor shall in no event be required to indemnify the Company for any amount in excess of the amount by which the total price at which the Registrable Securities of the Investor were sold to the public (less underwriting discounts and commissions) exceeds the amount actually paid by the Investor under the Stock Purchase Agreement for such Registrable Securities sold to the public. a. All claims for indemnification shall be asserted and resolved as set forth in Section 9.2 of the Stock Purchase Agreement. SECTION 3.2. ARBITRATION. Any controversy, claim or dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach, or termination, shall be referred to and finally resolved in accordance with Section 9.3 of the Stock Purchase Agreement. SECTION 3.3. OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding paragraphs of this Article III (with appropriate modifications) shall be given by the Company with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Article III shall be in addition to any other rights to indemnification, contribution or other remedies which an Indemnified Party may have pursuant to law, equity, contract or otherwise. SECTION 3.4. CONTRIBUTION. If the indemnification and reimbursement obligations provided for in any section of this Article III is unavailable or insufficient to hold harmless the Indemnified Parties in respect of any Damages referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages as between the Company on the one hand and the Investor or seller on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of the Investor or seller in connection with such statements or omissions, as well as other equitable considerations. The relative fault of the Company on the one hand and of the Investor or seller on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 10 The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this Section 3.4 were determined by PRO RATA allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 3.4, the Investor or seller shall in no event be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of the Investor or seller were sold to the public (less underwriting discounts and commissions) exceeds the amount of any damages which the Investor or seller has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. ARTICLE IV MISCELLANEOUS SECTION 4.1. OUTSTANDING REGISTRATION RIGHTS. Except as set forth on SCHEDULE 4.1 hereto, the Company represents and warrants to the Investor that there is not in effect on the date hereof any agreement by the Company pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify such securities under the Securities Act or any securities or blue sky laws of any jurisdiction. The Company hereby covenants and agrees that until 270 calendar days after the Registration Statement has been declared effective by the SEC it will not, without the prior written consent of the Investor, enter into or amend any agreement by the Company pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify securities under the Securities Act or any securities or blue sky laws of any jurisdiction; provided, however, that the foregoing shall not apply to a Third Party (as such term is defined in the Stock Purchase Agreement) for which the Investor has elected not to exercise its right of first refusal pursuant to Section 6.12 of the Stock Purchase Agreement. SECTION 4.2. TERM. The registration rights provided to the holders of Registrable Securities hereunder shall terminate at such time as all Registrable Securities have been issued and have ceased to be Registrable Securities. Notwithstanding the foregoing, paragraphs (c) and (d) of Section 1.1, Article III, Section 4.8, and Section 4.9 shall survive the termination of this Agreement. SECTION 4.3. RULE 144. If the Company is required to file reports under the Exchange Act, the Company will file in a timely manner, information, documents and reports in compliance with the Securities Act and the Exchange Act and will, at its expense, promptly take such further action as holders of Registrable Securities reasonably may request to enable such holders of Registrable Securities to sell Registrable Securities without registration under the 11 Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act ("RULE 144"), as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If at any time the Company is not required to file such reports, it will, at its expense, forthwith upon the written request of any holder of Registrable Securities who intends to make a sale under Rule 144, make available adequate current public information with respect to the Company within the meaning of paragraph (c)(2) of Rule 144 or such other information as necessary to permit sales pursuant to Rule 144. Upon the request of the Investor, the Company will deliver to the Investor a written statement, signed by the Company's principal financial officer, as to whether it has complied with such requirements. This Section 4.3 shall terminate at the same time as the registration rights as provided in Section 4.2. SECTION 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the request of any holder of Registrable Securities, deliver to such holder a certificate, signed by the Company's principal financial officer, stating (a) the Company's name, address and telephone number (including area code), (b) the Company's Internal Revenue Service identification number, (c) the Company's SEC file number, (d) the number of shares of each class of stock outstanding as shown by the most recent report or statement published by the Company, and (e) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. SECTION 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be waived, provided that such waiver is set forth in a writing executed by both parties to this Agreement. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the holders of a majority of the then outstanding Registrable Securities. Notwithstanding the foregoing, the waiver of any provision hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. No course of dealing between or among any Person having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. SECTION 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Investor may assign its rights under this Agreement to any subsequent holder the Registrable Securities, provided that the Company shall have the right to require any holder of Registrable Securities to execute a counterpart of this Agreement and agree to be bound by the provisions of this Agreement as a condition to such holder's claim to any rights hereunder. This Agreement, together with the Stock Purchase Agreement, the Warrants and the exhibits and schedules to such agreements together set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 12 SECTION 4.7. SEVERABILITY. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless that provision held invalid shall substantially impair the benefits of the remaining portions of this Agreement. SECTION 4.8. NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and shall be (i) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (ii) delivered by reputable air courier service with charges prepaid, or (iii) transmitted by hand delivery, telegram or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the third business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses and facsimile numbers for such communications shall be: If to the Company: International FiberCom, Inc. 3410 E. University Drive Suite 180 Phoenix, AZ 85034 Attention: Joseph P. Kealy Telephone: (602) 387-4000 Facsimile: (602) 276-0567 with a copy (which shall not constitute notice) to: Quarles & Brady Streich Lang LLP Renaissance One Building 2 North Central Avenue Phoenix, AZ 85004-2391 Attention: Christian J. Hoffman III, Esq. Telephone: (602) 229-5200 Facsimile: (602) 229-5690 13 if to the Investor: Crescent International Ltd. c/o GreenLight (Switzerland) SA 84, av Louis-Casai 1216 Geneva, Cointrin Switzerland Attention: Mel Craw/Maxi Brezzi Telephone: +41 22 791 71 69 Facsimile: +41 22 929 53 94 with a copy (which shall not constitute notice) to: Clifford Chance Rogers & Wells LLP 200 Park Avenue New York, NY 10166 Attention: Earl S. Zimmerman, Esq. Telephone: (212) 878-8000 Facsimile: (212) 878-8375 Either party hereto may from time to time change its address or facsimile number for notices under this Section 4.8 by giving at least 10 days' prior written notice of such changed address or facsimile number to the other party hereto. SECTION 4.9. GOVERNING LAW. This Agreement shall be construed under the laws of the State of New York. SECTION 4.10. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect. SECTION 4.11. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument. SECTION 4.12. FURTHER ASSURANCES. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. SECTION 4.13. ABSENCE OF PRESUMPTION. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. SECTION 4.14. REMEDIES. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of any such provision may be inadequate compensation for any loss. 14 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. CRESCENT INTERNATIONAL LTD. By: ------------------------------------ Name: Title: INTERNATIONAL FIBERCOM, INC. By: ------------------------------------ Name: Title: 15 EX-10.3 5 ex10-3.txt INCENTIVE WARRANT DTD JUNE 20, 2001 Exhibit 10.3 INCENTIVE WARRANT THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED AS OF JUNE 18, 2001, BETWEEN INTERNATIONAL FIBERCOM, INC. AND CRESCENT INTERNATIONAL LTD. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM INTERNATIONAL FIBERCOM, INC.'S EXECUTIVE OFFICES. June 20, 2001 Warrant to Purchase up to 509,554 shares of Common Stock of International FiberCom, Inc. (hereinafter, the "INCENTIVE Warrant"). International FiberCom, Inc. an entity organized and existing under the laws of the State of Arizona (the "COMPANY"), hereby agrees that Crescent International Ltd. (the "INVESTOR") or any other Warrant Holder is entitled, on the terms and conditions set forth below, to purchase from the Company at any time during the Exercise Period (as defined below) up to 509,554 fully paid and nonassessable shares of Common Stock, no par value per share, of the Company (the "COMMON STOCK"), as the same may be adjusted from time to time pursuant to Section 6 hereof, at the Exercise Price (as defined below), as the same may be adjusted pursuant to Section 6 hereof. The resale of the shares of Common Stock or other securities issuable upon exercise or exchange of this Incentive Warrant is subject to the provisions of the Registration Rights Agreement (as defined below). SECTION 1. DEFINITIONS. "AGGREGATE EXERCISE PRICE" shall mean, with respect to any exercise (in whole or in part) of this Incentive Warrant the Exercise Price multiplied by the total number of shares of Common Stock for which this Incentive Warrant is being exercised. "AGREEMENT" shall mean the Stock Purchase Agreement, dated as of June 18, 2001, between the Company and the Investor. "EXERCISE DATE" shall mean, with respect to any exercise (in whole or in part) of this Incentive Warrant the date the Exercise Notice is sent by facsimile to the Company. "EXERCISE NOTICE" shall mean, with respect to any exercise (in whole or in part) of this Incentive Warrant the exercise form attached hereto as Exhibit A, duly executed by the Warrant Holder. "EXERCISE PERIOD" shall mean the period beginning 180 calendar days after the date hereof and continuing until the expiration of the five-year period thereafter; provided that such period shall be extended one day for each day after the date hereof, that the Registration Statement covering (i) Commitment Shares purchased by the Investor, (ii) the Protective Warrant Shares, if any, related to any Sales and (iii) the Incentive Warrant Shares purchasable through exercise of this Incentive Warrant, is not effective during the period such Registration Statement is required to be effective pursuant to the Registration Rights Agreement. "EXERCISE PRICE" as of the date hereof shall mean $5.8875 per share of Common Stock, subject to the adjustments provided for in Section 6 of this Incentive Warrant. "PER SHARE WARRANT VALUE" shall mean, with respect to any exercise (in whole or in part) of this Incentive Warrant the difference resulting from subtracting the Exercise Price from the Closing Trade Price of one share of Common Stock on the Trading Day immediately preceding the Exercise Date. "REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights agreement, dated June 18, 2001 between the Company and the Investor. "WARRANT HOLDER" shall mean the Investor or any assignee or transferee of all or any portion of this Incentive Warrant. Other capitalized terms used but not defined herein shall have their respective meanings set forth in the Agreement. SECTION 2. EXERCISE; CASHLESS EXERCISE. (a) METHOD OF EXERCISE. This Incentive Warrant may be exercised in whole or in part (but not as to a fractional share of Common Stock), at any time and from time to time during the Exercise Period, by the Warrant Holder by the delivery by facsimile of an executed and completed Exercise Notice to the Company and delivery to the Company within five Trading Days thereafter of this Incentive Warrant, the original Exercise Notice and the Aggregate Exercise Price. (b) PAYMENT OF AGGREGATE EXERCISE PRICE. Subject to paragraph (c) below, payment of the Aggregate Exercise Price shall be made by wire transfer of immediately available funds to an account designated by the Company. If the amount of the payment received by the Company is less than the Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency and shall make payment in that amount within 5 Trading Days of such notice. In the event the payment exceeds the Aggregate Exercise Price, the Company will refund the excess to the Warrant Holder within 3 Trading Days of both the receipt of such payment and the knowledge of such excess. (c) CASHLESS EXERCISE. As an alternative to payment of the Aggregate Exercise Price in accordance with Section 2(b) above, the Warrant Holder may elect to effect a cashless exercise, if permissable under this Section 3(c), by so indicating on the Exercise Notice and including a calculation of the number 2 of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "CASHLESS EXERCISE"). The Warrant Holder may elect to effect a Cashless Exercise upon the occurrence or continuation of any of the events described in Section 2.1(g) (ii), (iii), and (iv) of the Registration Rights Agreement (whether the Company has or has not notified the Warrant Holder of any such event) in respect of one or more Registration Statements (as defined in the Registration Rights Agreement) covering the shares of Common Stock issuable upon exercise of this Incentive Warrant, or upon the delisting of the Common Stock from the Principal Market. Additionally, the Warrant Holder may elect to effect a Cashless Exercise upon the occurrence, and continuation for a period exceeding 22 Trading Days from such occurrence, of any event described in Section 2.1(g)(vi) of the Registration Rights Agreement (whether the Company has or has not notified the Warrant Holder of any such event) in respect of one or more Registration Statements (as defined in the Registration Rights Agreement) covering the shares of Common Stock issuable upon exercise of this Incentive Warrant. In the event of a Cashless Exercise, the Warrant Holder shall surrender this Incentive Warrant for that number of shares of Common Stock determined by (i) multiplying the number of Incentive Warrant Shares for which this Incentive Warrant is being exercised by the Per Share Warrant Value and (ii) dividing the product by the Closing Trade Price of one share of the Common Stock on the Trading Day immediately preceding the Exercise Date. (d) REPLACEMENT WARRANT. In the event that the Incentive Warrant is not exercised in full, the number of Incentive Warrant Shares shall be reduced by the number of such Incentive Warrant Shares for which this Incentive Warrant is exercised, and the Company, at its expense, shall forthwith issue and deliver to the Warrant Holder a new Incentive Warrant of like tenor in the name of the Warrant Holder or as the Warrant Holder may request, reflecting such adjusted number of Incentive Warrant Shares. SECTION 3. TEN PERCENT LIMITATION. At no time may the Warrant Holder exercise this Incentive Warrant such that the number of Incentive Warrant Shares to be received pursuant to such exercise aggregated with all other shares of Common Stock then owned by the Warrant Holder beneficially or deemed beneficially owned (as such term is defined in Rule 13(d) under the Exchange Act) by the Warrant Holder and its affiliates would result in the Warrant Holder and its affiliates owning more than 9.9% of all of such Common Stock as would be outstanding on such Exercise Date, as determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. SECTION 4. DELIVERY OF STOCK CERTIFICATES. (a) Subject to the terms and conditions of this Incentive Warrant, as soon as practicable after the exercise of this Incentive Warrant in full or in part, and in any event within five (5) Trading Days after surrender of this Incentive Warrant to the Company at the address set forth in Section 11 hereof and payment of the Aggregate Exercise Price, the Company at its expense (including, without limitation, the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Warrant Holder, or as the Warrant Holder lawfully may direct, a certificate or certificates for the number of validly issued, fully paid and non-assessable Incentive Warrant Shares to which the Warrant Holder shall be entitled on such exercise, together with any other stock or other securities or property (including cash, where applicable) to which the Warrant Holder is entitled upon such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that any such delivery to a location outside of the United States also shall be made within five Trading Days after the exercise of this Incentive Warrant in full or in part. 3 (b) This Incentive Warrant may not be exercised as to fractional shares of Common Stock. In the event that the exercise of this Incentive Warrant, in full or in part, would result in the right to acquire any fractional share of Common Stock, then in such event such fractional share shall be considered a whole share of Common Stock and shall be added to the number of Incentive Warrant Shares issuable to the Investor upon exercise of this Incentive Warrant. SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) The Company shall take all necessary action and proceedings as may be required and permitted by applicable law, rule and regulation for the legal and valid issuance of this Incentive Warrant and the Incentive Warrant Shares to the Warrant Holder. (b) At all times during the Exercise Period, the Company shall take all steps reasonably necessary and within its control to insure that the Common Stock remains listed or quoted on the Principal Market. (c) The Incentive Warrant Shares, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable. (d) The Company has authorized and reserved for issuance to the Warrant Holder the requisite number of shares of Common Stock to be issued pursuant to this Incentive Warrant. The Company at all times shall reserve and keep available, solely for issuance and delivery as Incentive Warrant Shares hereunder, such shares of Common Stock as from time to time shall be issuable as Incentive Warrant Shares, and accordingly shall adjust the number of such shares of Common Stock promptly upon the occurrence of any of the events specified in Section 6 hereof. SECTION 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise Price and, accordingly, the number of Incentive Warrant Shares issuable upon exercise of the Incentive Warrant, shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) RECLASSIFICATION, CONSOLIDATION, MERGER; MANDATORY SHARE EXCHANGE; SALE TRANSFER OR LEASE OF ASSETS. If the Company, at any time while this Incentive Warrant is unexpired and not exercised in full, (i) reclassifies or changes its Outstanding Capital Shares (other than a change in par value, or from par value to no par value per share, or from no par value per share to par value or as a result of a subdivision or combination of outstanding securities issuable upon exercise of this Incentive Warrant) or (ii) consolidates, merges or effects a mandatory share exchange (x) with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and that does not result in any reclassification or change, other than a change in par value, or from par value to no par value per share, or from no par value per share to par value, or (y) as a result of a subdivision or combination of Outstanding Capital Shares issuable upon exercise of the Incentive Warrant) or (iii) sells, transfers or leases all or substantially all of its assets, then in any such event the 4 Company, or such successor or purchasing corporation, as the case may be, shall, without payment by the Warrant Holder of any additional consideration therefor, amend this Incentive Warrant or issue a new warrant providing that the Warrant Holder shall have rights not less favorable to the Warrant Holder than those then applicable to this Incentive Warrant and to receive upon exercise under such amendment of this Incentive Warrant or new warrant, in lieu of each share of Common Stock theretofore issuable upon exercise of this Incentive Warrant hereunder, the kind and amount of shares of stock, other securities, money or property receivable upon such reclassification, change, consolidation, merger, mandatory share exchange, lease, sale or transfer by the holder of one share of Common Stock issuable upon exercise of the Incentive Warrant had this Incentive Warrant been exercised immediately prior to such reclassification, change, consolidation, merger, mandatory share exchange or sale or transfer (without giving effect to the limitation on ownership set forth in Section 3 hereof), and an appropriate provision for the foregoing shall be made by the Company as part of any such event. Such amended Incentive Warrant or new warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The provisions of this Section 6(a) shall similarly apply to successive reclassifications, changes, consolidations, mergers, mandatory share exchanges, sales, transfers and leases. (b) SUBDIVISION OR COMBINATION OF SHARES; STOCK DIVIDENDS. If the Company, at any time while this Incentive Warrant is unexpired and not exercised in full, shall subdivide its Common Stock, combine its Common Stock, pay a dividend in its Capital Shares, or make any other distribution of its Capital Shares, then the Exercise Price shall be adjusted, as of the date the Company shall take a record of the holders of its Capital Shares for the purpose of effecting such subdivision, combination or dividend or other distribution (or if no such record is taken, as of the effective date of such subdivision, combination, dividend or other distribution), to that price determined by multiplying the Exercise Price in effect immediately prior to such subdivision, combination, dividend or other distribution by a fraction: (i) the numerator of which shall be the total number of Outstanding Capital Shares immediately prior to such subdivision, combination, dividend or other distribution, and (ii) the denominator of which shall be the total number of Outstanding Capital Shares immediately after such subdivision, combination, dividend or other distribution. The provisions of this Section 6(b) shall not apply under any of the circumstances for which an adjustment is made pursuant to Section 6(a). (c) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time while this Incentive Warrant is unexpired and not exercised in full, makes a distribution of its assets or evidences of indebtedness to the holders of its Capital Shares as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets, or any spin-off of any of the Company's lines of business, divisions or subsidiaries (other than under the circumstances provided for in the foregoing subsections (a) and (b)), then the Warrant Holder shall be entitled to receive upon such exercise of the Incentive Warrant in addition to the Incentive Warrant Shares receivable in connection therewith, and without payment of any consideration other than the Exercise Price, an amount in cash equal to the value of such distribution per 5 Capital Share multiplied by the number of Incentive Warrant Shares that, on the record date for such distribution, are issuable upon such exercise of the Incentive Warrant (without giving effect to the limitation on ownership set forth in Section 3 hereof), and an appropriate provision therefor shall be made by the Company as part of any such distribution. The value of a distribution that is paid in other than cash shall be determined in good faith by the Board of Directors of the Company. (d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Exercise Price pursuant to any provisions of this Section 6, the number of Incentive Warrant Shares issuable hereunder at the option of the Warrant Holder shall be calculated, to the nearest one hundredth of a whole share, multiplying the number of Incentive Warrant Shares issuable prior to an adjustment by a fraction: (i) the numerator of which shall be the Exercise Price before any adjustment pursuant to this Section 6; and (ii) the denominator of which shall be the Exercise Price after such adjustment. (e) OTHER ACTION AFFECTING CAPITAL SHARES. In the event after the date hereof the Company shall take any action affecting the number of Outstanding Capital Shares, other than an action specifically described in any of the foregoing subsections (a) through (c) hereof, inclusive (including, without limitation, a subdivision or combination of Common Stock, or the payment of a dividend in its Capital Shares or any other distribution), that in the reasonable opinion of the Warrant Holder would have a materially adverse effect upon the rights of the Warrant Holder at the time of exercise of the Incentive Warrant, the Exercise Price shall be adjusted in such manner and at such time as the Board of Directors on the advice of the Company's independent public accountants shall in good faith determine to be equitable in the circumstances. (f) NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time while the Incentive Warrant is unexpired and outstanding, take any action pursuant to subsections (a) through (e) of this Section 6 that may result in an adjustment of the Exercise Price, the Company shall notify the Warrant Holder of such action 10 days in advance of its effective date in order to afford to the Warrant Holder an opportunity to exercise the Incentive Warrant prior to such action becoming effective. (g) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of Incentive Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall promptly deliver by facsimile, with the original delivered by express courier service in accordance with Section 11 hereof, a certificate, which shall be signed by the Company's President or a Vice President and by its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company's Board of Directors made any determination hereunder), and the Exercise Price and number of Incentive Warrant Shares purchasable at that Exercise Price after giving effect to such adjustment. 6 SECTION 7. NO IMPAIRMENT. The Company will not, by amendment of its Articles or By-Laws 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 Incentive Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Incentive Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Incentive Warrant Shares on the exercise of this Incentive Warrant. SECTION 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Incentive Warrant and except as provided in Section 6 hereof, the Warrant Holder shall not be entitled to any rights as a stockholder of the Company with respect to the Incentive Warrant Shares, including (without limitation) the right to vote such shares, receive dividends or other distributions thereon or be notified of stockholder meetings. However, in the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company shall mail to each Warrant Holder, at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. SECTION 9. REPLACEMENT OF INCENTIVE WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Incentive Warrant and, in the case of any such loss, theft or destruction of the Incentive Warrant, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Incentive Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Incentive Warrant of like tenor. SECTION 10. RESTRICTED SECURITIES. (a) REGISTRATION OR EXEMPTION REQUIRED. This Incentive Warrant has been issued in a transaction exempt from the registration requirements of the Securities Act in reliance upon Section 4(2) of the Securities Act. This Incentive Warrant and the Incentive Warrant Shares issuable upon exercise of this Incentive Warrant may not be resold except pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act and applicable state laws. (b) LEGEND. Any replacement Incentive Warrants issued pursuant to Section 2 hereof and any Incentive Warrant Shares issued upon exercise hereof, shall bear the following legend: 7 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED AS OF JUNE 18, 2001, BETWEEN INTERNATIONAL FIBERCOM, INC. AND CRESCENT INTERNATIONAL LTD. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM INTERNATIONAL FIBERCOM, INC.'S EXECUTIVE OFFICES." Removal of such legend shall be in accordance with the legend removal provisions in the Agreement. (c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than the one specified in paragraph (b) of this Section 10 has been or shall be placed on the share certificates representing the Incentive Warrant Shares and no instructions or "STOP TRANSFER ORDERS," so called, "STOCK TRANSFER RESTRICTIONS" or other restrictions have been or shall be given to the Company's transfer agent with respect thereto other than as expressly set forth in this Section 10. (d) ASSIGNMENT. Assuming the conditions of Section 10(a) above regarding registration or exemption have been satisfied, the Warrant Holder may sell, transfer, assign, pledge or otherwise dispose of this Incentive Warrant, in whole or in part. The Warrant Holder shall deliver a written notice to the Company substantially in the form of the assignment form attached hereto as Exhibit B (the "ASSIGNMENT NOTICE") indicating the person or persons to whom this Incentive Warrant shall be assigned and the respective number of warrants to be assigned to each assignee. The Company shall effect the assignment within ten days of receipt of such Assignment Notice, and shall deliver to the assignee(s) designated by the Warrant Holder a Incentive Warrant or Incentive Warrants of like tenor and terms for the specified number of shares. (e) INVESTOR'S COMPLIANCE. Nothing in this Section 10 shall affect in any way the Investor's obligations under any agreement to comply with all applicable securities laws upon resale of the Common Stock. 8 SECTION 11. NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and shall be deemed duly given (i) upon delivery if hand delivered at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received), (ii) on the fifth business day after deposit into the mail, if deposited in the mail, registered or certified, return receipt requested, postage prepaid, addressed to the address designated below, (iii) upon delivery if delivered by reputable express courier service to the address designated below, or (iv) upon confirmation of transmission if transmitted by facsimile to the facsimile number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received). The addresses and facsimile numbers for such communications shall be: if to the Company: International FiberCom, Inc. 3410 E. University Drive Suite 180 Phoenix, AZ 85034 Attention: Joseph P. Kealy Telephone: (602) 387-4000 Facsimile: (602) 276-0567 with a copy (which shall not constitute notice) to: Quarles & Brady Streich Lang LLP Renaissance One Building 2 North Central Avenue Phoenix, AZ 85004-2391 Attention: Christian J. Hoffman III, Esq. Telephone: (602) 229-5200 Facsimile: (602) 229-5690 9 if to the Investor: Crescent International Ltd. c/o GreenLight (Switzerland) SA 84, av Louis-Casai P.O. Box 42 1216 Geneva, Cointrin Switzerland Attention: Mel Craw/Maxi Brezzi Telephone: +41 22 791 71 69 Facsimile: +41 22 929 53 94 with a copy (which shall not constitute notice) to: Clifford Chance Rogers & Wells LLP 200 Park Avenue New York, NY 10166 Attention: Earl S. Zimmerman, Esq. Telephone: (212) 878-8000 Facsimile: (212) 878-8375 Either party hereto may from time to time change its address or facsimile number for notices under this Section 11 by giving at least ten (10) days' prior written notice of such changed address or facsimile number to the other party hereto. SECTION 12. MISCELLANEOUS. This Incentive Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Incentive Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 10 IN WITNESS WHEREOF, this Incentive Warrant was duly executed by the undersigned, thereunto duly authorized, as of the date first set forth above. INTERNATIONAL FIBERCOM, INC. By: -------------------------------------- Name: Title: 11 EX-10.4 6 ex10-4.txt AMENDED AND RESTATED CREDIT AGREEMENT Exhibit 10.4 - -------------------------------------------------------------------------------- AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 14, 2001 among INTERNATIONAL FIBERCOM, INC. AND CERTAIN OF ITS SUBSIDIARIES, as Borrowers, THE LENDERS, and BANK ONE, ARIZONA, NA, as Administrative Agent BANC ONE CAPITAL MARKETS, INC. Arranger and Sole Book Manager - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS...................................................... 1 ARTICLE II THE CREDITS..................................................... 17 2.1 Commitment...................................................... 17 2.2 Required Payments; Termination.................................. 18 2.3 Ratable Loans; Types of Advances................................ 18 2.4 Swing Line Loans................................................ 18 2.4.1. Amount of Swing Line Loans............................. 18 2.4.2. Borrowing Notice....................................... 19 2.4.3. Making of Swing Line Loans............................. 19 2.4.4. Repayment of Swing Line Loans.......................... 19 2.5 Commitment Fee; Reductions in Aggregate Commitment.............. 20 2.6 Minimum Amount of Each Advance.................................. 20 2.7 Prepayments..................................................... 20 2.7.1. Optional Principal Payments............................ 20 2.7.2. Mandatory Prepayments.................................. 21 2.8 Method of Selecting Types and Interest Periods for New Advances. 21 2.9 Conversion and Continuation of Outstanding Advances............. 22 2.10 Changes in Interest Rate, etc................................... 22 2.11 Rates Applicable After Default.................................. 23 2.12 Method of Payment............................................... 23 2.13 Noteless Agreement; Evidence of Indebtedness.................... 23 2.14 Telephonic Notices.............................................. 24 2.15 Interest Payment Dates; Interest and Fee Basis.................. 24 2.16 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions ........................................ 25 2.17 Lending Installations........................................... 25 2.18 Non-Receipt of Funds by the Agent............................... 25 2.19 Facility LCs.................................................... 25 2.19.1. Issuance............................................... 25 2.19.2. Participations......................................... 26 2.19.3. Notice................................................. 26 2.19.4. LC Fees................................................ 26 2.19.5. Administration; Reimbursement by Lenders............... 27 2.19.6. Reimbursement by Borrowers............................. 27 2.19.7. Obligations Absolute................................... 28 2.19.8. Actions of LC Issuer................................... 28 2.19.9. Indemnification........................................ 28 2.19.10. Lenders' Indemnification............................... 29 2.19.11. Facility LC Collateral Account......................... 29 2.19.12. Rights as a Lender..................................... 30 2.20 Replacement of Lender........................................... 30 i ARTICLE III YIELD PROTECTION; TAXES........................................ 30 3.1 Yield Protection................................................ 30 3.2 Changes in Capital Adequacy Regulations......................... 31 3.3 Availability of Types of Advances............................... 32 3.4 Funding Indemnification......................................... 32 3.5 Taxes........................................................... 32 3.6 Lender Statements; Survival of Indemnity........................ 34 ARTICLE IV CONDITIONS PRECEDENT............................................ 34 4.1 Effectiveness................................................... 34 4.2 Each Credit Extension........................................... 34 ARTICLE V REPRESENTATIONS AND WARRANTIES................................... 35 5.1 Existence and Standing.......................................... 35 5.2 Authorization and Validity...................................... 35 5.3 No Conflict; Government Consent................................. 35 5.4 Financial Statements............................................ 36 5.5 Material Adverse Change......................................... 36 5.6 Taxes........................................................... 36 5.7 Litigation and Contingent Obligations........................... 36 5.8 Subsidiaries.................................................... 36 5.9 ERISA........................................................... 36 5.10 Accuracy of Information......................................... 37 5.11 Regulation U.................................................... 37 5.12 Material Agreements............................................. 37 5.13 Compliance With Laws............................................ 37 5.14 Ownership of Properties......................................... 37 5.15 Plan Assets; Prohibited Transactions............................ 37 5.16 Environmental Matters........................................... 38 5.17 Investment Company Act.......................................... 38 5.18 Public Utility Holding Company Act.............................. 38 5.19 Subordinated Indebtedness....................................... 38 5.20 Insurance....................................................... 38 ARTICLE VI COVENANTS....................................................... 38 6.1 Financial Reporting............................................. 38 6.2 Use of Proceeds................................................. 41 6.3 Notice of Default............................................... 41 6.4 Conduct of Business............................................. 41 6.5 Taxes........................................................... 41 6.6 Insurance; Insurance and Condemnation Proceeds.................. 41 6.7 Compliance with Laws............................................ 42 6.8 Maintenance of Properties....................................... 42 6.9 Inspection...................................................... 42 6.10 Dividends....................................................... 43 ii 6.11 Indebtedness.................................................... 43 6.12 Merger.......................................................... 44 6.13 Sale of Assets.................................................. 44 6.14 Investments and Acquisitions.................................... 44 6.15 Liens........................................................... 45 6.16 Capital Expenditures............................................ 45 6.17 Affiliates...................................................... 46 6.18 Subordinated Indebtedness....................................... 46 6.19 Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities .................................................. 46 6.20 Contingent Obligations.......................................... 46 6.21 Financial Contracts............................................. 46 6.22 Financial Covenants............................................. 46 6.22.1. Interest Coverage Ratio................................ 46 6.22.2. Fixed Charge Coverage Ratio............................ 46 6.22.3. Adjusted Leverage Ratio................................ 47 6.22.4. Minimum Net Worth...................................... 47 6.22.5. Losses................................................. 47 6.22.6. Calculation of Financial Covenants..................... 47 6.23 Subsidiaries.................................................... 48 6.24 Issuance of Stock............................................... 48 6.25 Future Liens on Real Property................................... 48 6.26 Notice of Redemption of Preferred Stock......................... 48 ARTICLE VII DEFAULTS....................................................... 49 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES................ 51 8.1 Acceleration; Facility LC Collateral Account.................... 51 8.2 Amendments...................................................... 52 8.3 Preservation of Rights.......................................... 53 ARTICLE IX GENERAL PROVISIONS.............................................. 53 9.1 Survival of Representations..................................... 53 9.2 Governmental Regulation......................................... 53 9.3 Headings........................................................ 54 9.4 Entire Agreement................................................ 54 9.5 Several Obligations; Benefits of this Agreement................. 54 9.6 Expenses; Indemnification....................................... 54 9.7 Numbers of Documents............................................ 55 9.8 Accounting...................................................... 55 9.9 Severability of Provisions...................................... 55 9.10 Nonliability of Lenders......................................... 55 9.11 Confidentiality................................................. 56 9.12 Performance of Obligations...................................... 56 9.13 Joint and Several Liability of the Borrowers.................... 57 9.13.1. Joint and Several Obligations.......................... 57 9.13.2. Limitation on Obligations.............................. 57 9.13.3. Obligations Unconditional.............................. 58 9.14 No Novation..................................................... 59 iii ARTICLE X THE AGENT........................................................ 59 10.1 Appointment; Nature of Relationship............................. 59 10.2 Powers.......................................................... 59 10.3 General Immunity................................................ 60 10.4 No Responsibility for Loans, Recitals, etc...................... 60 10.5 Action on Instructions of Lenders............................... 60 10.6 Employment of Agents and Counsel................................ 60 10.7 Reliance on Documents; Counsel.................................. 61 10.8 Agent's Reimbursement and Indemnification....................... 61 10.9 Notice of Default............................................... 61 10.10 Rights as a Lender.............................................. 61 10.11 Lender Credit Decision.......................................... 61 10.12 Successor Agent................................................. 62 10.13 Agent's Fee..................................................... 62 10.14 Delegation to Affiliates........................................ 62 10.15 Execution of Collateral Documents............................... 63 10.16 Collateral Releases............................................. 63 10.17 Co-Agents, Syndication Agent, etc............................... 63 ARTICLE XI SETOFF; RATABLE PAYMENTS........................................ 63 11.1 Setoff.......................................................... 63 11.2 Ratable Payments................................................ 63 11.3 Application of Payments......................................... 63 11.4 Relations Among Lenders......................................... 65 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.............. 65 12.1 Successors and Assigns.......................................... 65 12.2 Participations.................................................. 65 12.2.1. Permitted Participants; Effect......................... 65 12.2.2. Voting Rights.......................................... 66 12.2.3. Benefit of Setoff...................................... 66 12.3 Assignments..................................................... 66 12.3.1. Permitted Assignments.................................. 66 12.3.2. Effect; Effective Date................................. 67 12.4 Dissemination of Information.................................... 67 12.5 Tax Treatment................................................... 67 ARTICLE XIII NOTICES....................................................... 67 13.1 Notices......................................................... 67 13.2 Change of Address............................................... 68 ARTICLE XIV COUNTERPARTS................................................... 68 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.... 68 15.1 CHOICE OF LAW................................................... 68 15.2 CONSENT TO JURISDICTION......................................... 68 15.3 WAIVER OF JURY TRIAL............................................ 69 iv EXHIBITS Exhibit A - Form of Joinder Agreement Exhibit B - Form of Compliance Certificate Exhibit C - Form of Assignment Agreement Exhibit D-1 - Form of Promissory Note Exhibit D-2 - Form of Swing Line Note Exhibit E - Form of Borrowing Base Certificate Exhibit F - Form of Work-in-Progress Report Exhibit G - Form of Backlog Report Exhibit H - Form of Monthly Cash Summary Exhibit I - Form of Accounts Receivable Aging Report SCHEDULES Pricing Schedule Commitment Schedule Schedule 4.1 - List of Closing Documents Schedule 5.5 - Material Adverse Change Schedule 5.7 - Litigation Schedule 5.8 - Subsidiaries Schedule 5.20 - Existing Insurance Policies Schedule 6.11 - Permitted Existing Indebtedness Schedule 6.14 - Permitted Existing Investments Schedule 6.15 - Permitted Existing Liens iv AMENDED AND RESTATED CREDIT AGREEMENT This Agreement, dated as of June 14, 2001 is among INTERNATIONAL FIBERCOM, INC., certain Subsidiaries of the Company, the Lenders, and Bank One, Arizona, NA, as LC Issuer and as Administrative Agent. The parties hereto agree as follows: The Borrowers and the Lenders desire to amend and restate the Original Agreement in its entirety. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Accounts Receivable Aging Report" means a written report substantially in the form of Exhibit I attached hereto. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Company or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Adjusted EBITDA" means Consolidated EBITDA plus, to the extent deducted from revenues to determine Consolidated EBITDA, (i) the loss incurred by the Wireless Technology Group after March 31, 2001 and prior to April 1, 2002, (ii) the write-off of the Equipment Distribution Group, (iii) pooling costs incurred by the Company related to acquisitions and (iv) any charges incurred in connection with the issuance by the Company of warrants for its common stock in an Equity Financing. "Adjusted Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Funded Indebtedness outstanding on such date to (ii) Adjusted EBITDA for the then most recently ended four fiscal quarters. "Advance" means a borrowing hereunder, (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. The term "Advance" shall include Swing Line Loans unless otherwise expressly provided. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced or increased from time to time pursuant to the terms hereof. The Aggregate Commitment as of the Effective Date is $100,000,000. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Fee Rate" means, at any time, the percentage rate per annum at which commitment fees are accruing on the unused portion of the Aggregate Commitment at such time, or the percentage rate per annum at which LC Fees are accruing on the undrawn amount of Facility LCs at such time, as applicable, in each case as set forth in the Pricing Schedule. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Appraised Value of Mortgaged Real Property" means the appraised value of the Mortgaged Real Property as determined by appraisals in form and substance satisfactory to the Agent obtained by the Agent at the Borrowers' expense. As of the Effective Date, the appraised value of the Mortgaged Real Property in Maricopa County, Arizona is $3,300,000, and the appraised value of the Mortgaged Real Property in Bergen County, New Jersey is $3,500,000. "Approved Lines of Business" means design, installation, maintenance, and training services for broadband fiber optic networks for the telecommunications and cable television industries, and the distribution and selling of telecommunications equipment. 2 "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Arranger and Sole Book Manager. "Article" means an article of this Agreement unless another document is specifically referenced. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance, disposition or other transfer by such Person of any of its Property (including a sale-leaseback transaction and the sale or other transfer of any of the Equity Interests of any Subsidiary of such Person). "Authorized Officer" means either of the principal financial officer or corporate controller of the Company, acting singly. "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Available Credit Amount" means, at any time, the Maximum Credit Amount then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Backlog Report" means a report substantially in the form of Exhibit G attached hereto. "Bank One" means Bank One, Arizona, NA, a national banking association having its principal office in Phoenix, Arizona, in its individual capacity, and its successors. "Blocked Cash" means, at any time, the amount of funds deposited in a non-interest bearing deposit account maintained by any Borrower with Bank One (or an Affiliate of Bank One) in which the Agent, for the benefit of the Holders of Secured Obligations, has a perfected security interest pursuant to a account control agreement among such Borrower, Bank One (or such Affiliate) and the Agent, in form and substance satisfactory to the Agent. "Borrower" means each of the Company and each Subsidiary of the Company that is a party hereto, whether as of the Effective Date or by execution and delivery of a Joinder Agreement thereafter, and in each case such Borrower's successors and assigns. "Borrowers" means all of the Borrowers. "Borrowing Base" means, as of any date of calculation, an amount, as set forth on the most current Borrowing Base Certificate delivered to the Agent, equal to the sum of (i) eighty-five (85%) of Eligible Receivables, PLUS (ii) fifty percent (50%) of Eligible Inventory, PLUS (iii) the product of (x) the Costs in Excess of Billings Advance Rate and (y) Eligible Costs in Excess of Billings, PLUS (iv) eighty percent (80%) of the Appraised Value of Mortgaged Real Property. "Borrowing Base Certificate" means a certificate, in substantially the form of EXHIBIT E attached hereto and made a part hereof, setting forth the Borrowing Base and the component calculations thereof. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.8. 3 "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Phoenix, Arizona for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Phoenix, Arizona for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capital Expenditures" means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with Agreement Accounting Principles, but excluding Permitted Acquisitions. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's at the time of investment therein, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; PROVIDED in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency, other than the demand for payment, regarding the payment of principal or interest. "Change in Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (i) (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Company or (ii) the majority of the board of directors of the Company fails to consist of Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral" means all property and interests in property now owned or hereafter acquired by the Company or any of its Subsidiaries in or upon which a security interest, lien or mortgage is granted to the Agent, for the benefit of the Holders of Secured Obligations, or to the Agent, for the benefit of the Lenders and the LC Issuer, whether under any Collateral Document or under any of the other Loan Documents. "Collateral Documents" means, collectively, all agreements, instruments and documents executed in connection with this Agreement that are intended to create or evidence Liens to secure the Secured Obligations, including, without 4 limitation, all security agreements, pledge agreements, mortgages, deeds of trust, powers, assignments and financing statements, whether heretofore, now, or hereafter executed by or on behalf of the Company or any of its Subsidiaries and delivered to the Agent or any of the Lenders, together with all agreements and documents referred to therein or contemplated thereby. "Collateral Shortfall Amount" is defined in Section 8.1. "Company" means International FiberCom, Inc., an Arizona corporation, and its successors and assigns. "Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans to, and participate in Facility LCs issued upon the application of, the Borrowers in an aggregate amount not exceeding the amount set forth in the Commitment Schedule or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2 or in any supplement hereto pursuant to Section 2.1(b), as such amount may be modified from time to time pursuant to the terms hereof. "Commitment Schedule" means the schedule attached hereto and identified as such. "Consolidated EBIT" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued and (iii) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Company and its Subsidiaries on a consolidated basis. "Consolidated EBITDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization and (v) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Company and its Subsidiaries on a consolidated basis. "Consolidated Funded Indebtedness" means at any time the aggregate dollar amount of Consolidated Indebtedness which has actually been funded and is outstanding at such time, whether or not such amount is due or payable at such time. "Consolidated Indebtedness" means at any time the Indebtedness of the Company and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Company and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Company and its Subsidiaries calculated on a consolidated basis for such period. 5 "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Company and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Rentals" means, with reference to any period, the Rentals of the Company and its Subsidiaries calculated on a consolidated basis for such period. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Continuing Director" means, as of any date of determination, any member of the board of directors of the Company who (a) was a member of such board of directors on the date hereof, or (b) was nominated for election or elected to such board of directors with the approval of the Continuing Directors who were members of such board at the time of such nomination or election. "Conversion/Continuation Notice" is defined in Section 2.9. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Costs in Excess of Billings Advance Rate" means (i) sixty-five percent (65%) from the Effective Date through December 31, 2001; (ii) sixty percent (60%) from January 1, 2002 through March 31, 2002; (iii) fifty-five percent (55%) from April 1, 2002 through June 30, 2002; (iv) fifty percent (50%) from July 1, 2002 through September 30, 2002; (v) forty-five percent (45%) from October 1, 2002 through December 31, 2002; and (vi) forty percent (40%) from and after January 1, 2003. "Credit Extension" means the making of an Advance or the issuance of a Facility LC hereunder. "Credit Extension Date" means the Borrowing Date for an Advance or the issuance date for a Facility LC. "Default" means an event described in Article VII. "Domestic Subsidiary" means a Subsidiary of the Company that is organized under the laws of the United States of America, any State thereof or the District of Columbia. "Effective Date" is defined in Section 4.1. 6 "Eligible Costs in Excess of Billings" means the Company's and its Subsidiaries' costs and estimated earnings in excess of billings, net of any billings in excess of costs, determined on a consolidated basis in accordance with Agreement Accounting Principles. "Eligible Inventory" means the book value of the Company's and its Subsidiaries' inventory, net of any related reserves (including, without limitation, any reserve or write-down of inventory of the Equipment Distribution Group in anticipation of disposition), determined on a consolidated basis in accordance with Agreement Accounting Principles. "Eligible Receivables" means the book value of the Company's and its Subsidiaries' trade accounts receivable, net of any related reserves (including, without limitation, any reserve or write-down of accounts receivable of the Equipment Distribution Group in anticipation of disposition), determined on a consolidated basis in accordance with Agreement Accounting Principles, but excluding any accounts receivable with respect to which the account debtor is the subject of a bankruptcy or similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "Equipment Distribution Group" means International FiberCom - EDG, Inc., formerly known as Southern Communications Products, Inc. and successor by merger to Diversitec, Inc. and United Tech, Inc. "Equity Financing" means one or more financing transactions in which the Company issues its common stock, or its preferred stock convertible into its common stock, to one or more investors, and may issue warrants for its common stock in connection therewith; PROVIDED that the terms of any such preferred stock shall either (i) contain no requirement for any dividend thereon or mandatory redemption thereof to be payable in cash or other Property of the Company (other than its common stock or additional shares of such preferred stock), except as a consequence of the Company's failure to deliver its common stock in connection with a conversion of such preferred stock, or (ii) be approved in writing by the Required Lenders. "Equity Interests" means corporate stock, regardless of class or designation, and all warrants, options, purchase rights, conversion or exchange rights, voting rights, calls or claims of any character with respect thereto. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. 7 "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Facility LC" is defined in Section 2.19.1. "Facility LC Application" is defined in Section 2.19.3. "Facility LC Collateral Account" is defined in Section 2.19.11. "Facility Termination Date" means March 31, 2003. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a 8 Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Phoenix, Arizona local time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Financial Contract" of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics or (ii) any Rate Management Transaction. "Financing" means the issuance or sale by the Company or any of its Subsidiaries of any Indebtedness or Equity Interests for capital formation purposes, but excluding the issuance or sale of (i) any Indebtedness permitted to be incurred pursuant to Section 6.11, other than clause (iv) thereof, (ii) Equity Interests issued by the Company to any officer, director or employee of the Company or any of its Subsidiaries pursuant to any incentive compensation plan or program, (iii) Equity Interests issued by any Subsidiary of the Company to the Company or any Wholly-Owned Subsidiary of the Company, (iv) Equity Interests issued by the Company as part of the Purchase Price of a Permitted Acquisition, and (v) Equity Interests issued by way of stock splits or stock dividends. "Fixed Charge Coverage Ratio" means, with reference to any period, the ratio of (i) Adjusted EBITDA plus Consolidated Rentals to (ii) Consolidated Interest Expense plus Consolidated Rentals plus consolidated tax expense of the Company and its Subsidiaries paid in cash during such period plus scheduled maturities of principal of Consolidated Funded Indebtedness payable during such period, in each case determined in accordance with Agreement Accounting Principles for such period. "Floating Rate" means, for any day, a rate per annum equal to (i) the Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Foreign Subsidiary" means a Subsidiary of the Company that is not organized under the laws of the United States of America, any State thereof or the District of Columbia. "Holders of Secured Obligations" shall mean the holders of the Secured Obligations from time to time and shall include their respective successors, transferees and assigns. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) 9 obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property (other than Equity Interests issued by such Person) arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations, including, without limitation, reimbursement obligations with respect to Letters of Credit (whether drawn or undrawn), and (viii) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person. "Indebtedness" shall not include customary liquidated damages provisions in agreements relating to the issuance of Equity Interests by the Company. "Interest Coverage Ratio" means, with reference to any period, the ratio of (i) Consolidated EBIT to (ii) Consolidated Interest Expense, in each case determined in accordance with Agreement Accounting Principles for such period. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by the applicable Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Joinder Agreement" means a Joinder Agreement in the form attached hereto as Exhibit A executed by each Borrower not a party to this Agreement as of the date of this Agreement. "LC Fee" is defined in Section 2.19.4. "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) in its capacity as issuer of Facility LCs hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.19.5. 10 "Lenders" means the lending institutions listed on the signature pages of this Agreement or any supplement hereto pursuant to Section 2.1(b) and their respective successors and assigns. Unless otherwise specified, the term "Lenders" includes Bank One in its capacity as Swing Line Lender. "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.17. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Funded Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Company's then most-recently ended four fiscal quarters. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means a Revolving Loan or a Swing Line Loan. "Loan Documents" means this Agreement, the Facility LC Applications, any Notes issued pursuant to Section 2.13 and the Collateral Documents. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Company and its Subsidiaries taken as a whole, (ii) the ability of the Borrowers taken as a whole to perform their respective obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent, the LC Issuer or the Lenders thereunder. "Material Indebtedness" is defined in Section 7.5. "Maximum Credit Amount" means, at any time, the lesser of (i) the Aggregate Commitment and (ii) the Borrowing Base at such time. "Modify" and "Modification" are defined in Section 2.19.1. "Moody's" means Moody's Investors Service, Inc. "Monthly Cash Summary" means a written summary substantially in the form of Exhibit H attached hereto. 11 "Mortgaged Real Property" means (a) that real property located in (i) Maricopa County, Arizona, in which a Lien has been granted to the Agent, for the benefit of the Holders of Secured Obligations, pursuant to that certain Deed of Trust, Security Agreement, Financing Statement and Assignment of Rents and Leases dated as of June 14, 2001 between the Company, as grantor, First American Title Insurance Company, as trustee, and the Agent, as beneficiary, and (ii) Bergen County, New Jersey, in which a Lien has been granted to the Agent, for the benefit of the Holders of Secured Obligations, pursuant to that certain Mortgage, Security Agreement, Financing Statement and Assignment of Rents and Leases dated as of June 14, 2001 between IFC Leasing, Inc., as mortgagor, and the Agent, as mortgagee, and (b) any other real property in which a Lien has been granted to the Agent, for the benefit of the Holders of Secured Obligations, pursuant to Section 6.25. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Company or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Cash Proceeds" means, with respect to any Asset Sale or Financing by any Person, (a) cash (freely convertible into U.S. dollars) received by such Person or any Subsidiary of such Person from such Asset Sale (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such Asset Sale) or Financing, after (i) provision for all income or other taxes measured by or resulting from such Asset Sale, (ii) payment of all reasonable brokerage commissions and other fees and expenses related to such Asset Sale or Financing, (iii) all amounts used to repay Indebtedness secured by a Lien on any asset disposed of in such Asset Sale or which is or may be required (by the express terms of the instrument governing such Indebtedness) to be repaid in connection with such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness) or Financing, and (iv) deduction of appropriate amounts to be provided by such Person or a Subsidiary of such Person as a reserve, in accordance with Agreement Accounting Principles, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by such Person or a Subsidiary of such Person after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale; and (b) cash payments in respect of any Indebtedness, Equity Interest or other consideration received by such Person or any Subsidiary of such Person from such Asset Sale upon receipt of such cash payments by such Person or such Subsidiary. "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" means any promissory note issued at the request of a Lender pursuant to Section 2.13 in the form of Exhibit D-1 or D-2. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrowers to the Lenders or to any Lender, the Agent, the LC Issuer or any indemnified party arising under the Loan Documents. 12 "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Original Agreement" means the Credit Agreement dated as of March 31, 2000, as amended, among the Borrowers, the Lenders from time to time parties thereto, Bank One, Arizona, NA, as Administrative Agent, Union Bank of California, N.A., as Syndication Agent, and Banc One Capital Markets, Inc., as Arranger and Sole Book Manager. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such time, plus (iii) an amount equal to its Pro Rata Share of the aggregate principal amount of Swing Line Loans outstanding at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means the fifth day of each month. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Acquisition" means any Acquisition made by the Company or any of its Subsidiaries, provided that (i) as of the date of the consummation of such Acquisition, no Default or Unmatured Default shall have occurred and be continuing or would result from such Acquisition, and the representations and warranties contained in Article V shall be true both before and after giving effect to such Acquisition except to the extent any such representation or warranty is stated to relate solely to an earlier date, (ii) such Acquisition is consummated on a non-hostile basis pursuant to a negotiated acquisition agreement approved by the board of directors or other applicable governing body of the seller or entity to be acquired, and no material challenge to such Acquisition (excluding the exercise of appraisal rights) shall be pending or threatened by any shareholder or director of the seller or entity to be acquired, (iii) the business to be acquired in such Acquisition is reasonably related to one or more of the fields of enterprise in which the Company and its Subsidiaries are engaged on the date hereof, (iv) as of the date of the consummation of such Acquisition, all material governmental and third party approvals required in connection therewith shall have been obtained and (v) the Purchase Price of such Acquisition shall be paid solely through the issuance of Equity Interests of the Company. 13 "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment. "Purchase Price" means the total consideration and other amounts payable in connection with any Acquisition, including, without limitation, any portion of the consideration payable in cash, the value of any Equity Interests of the Company or any Subsidiary issued as consideration for such Acquisition, all Indebtedness, liabilities and contingent obligations incurred or assumed in connection with such Acquisition and all transaction costs and expenses incurred in connection with such Acquisition. "Purchasers" is defined in Section 12.3.1. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into between any Borrower and any Lender or affiliate thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. 14 "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrowers then outstanding under Section 2.19 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs. "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any Operating Lease. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Reports" is defined in Section 9.6. "Required Lenders" means three or more Lenders in the aggregate having at least 51% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 51% of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Loan" means, with respect to a Lender, such Lender's loan made pursuant to its commitment to lend set forth in Section 2.1 or pursuant to Section 2.4.4 (or any conversion or continuation thereof). "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. 15 "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Secured Obligations" means, collectively, (i) the Obligations and (ii) all Rate Management Obligations owing to any Lender or any affiliate of any Lender. "Single Employer Plan" means a Plan maintained by the Company or any member of the Controlled Group for employees of the Company or any member of the Controlled Group. "Subordinated Indebtedness" of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Secured Obligations and all of the terms (including subordination terms) and conditions of which are reasonably satisfactory to the Required Lenders, as evidenced in writing. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Company. "Substantial Portion" means, with respect to the Property of the Company and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Company and its Subsidiaries as would be shown in the consolidated financial statements of the Company and its Subsidiaries as at the end of the four-fiscal quarter period ending immediately prior to the fiscal quarter in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Company and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Swing Line Borrowing Notice" is defined in Section 2.4.2. "Swing Line Lender" means Bank One or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement. "Swing Line Loan" means a Loan made available to any Borrower by the Swing Line Lender pursuant to Section 2.4. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance. 16 "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "Wireless Technology Group" means Aerocom, Inc. a Maryland corporation, and Anacom Systems Corporation, an Arizona corporation. "Work-in-Progress Report" means a written report substantially in the form of Exhibit F attached hereto. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1 COMMITMENT. (a) From and including the Effective Date and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to (i) make Loans to the Borrowers and (ii) participate in Facility LCs issued upon the request of the Borrowers, PROVIDED that, after giving effect to the making of each such Loan and the issuance of each such Facility LC, (i) such Lender's Outstanding Credit Exposure shall not exceed its maximum Commitment and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Maximum Credit Amount. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to extend credit hereunder shall expire on the Facility Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.19. (b) At any time no Default or Unmatured Default has occurred and is continuing, the Company may, by notice to the Agent, request that, on the terms and subject to the conditions contained in this Agreement, the Lenders and/or other financial institutions not then a party to this Agreement that are satisfactory to the Agent and the Company provide up to an aggregate amount of $50,000,000 in additional Commitments. Upon receipt of such notice, the Agent shall use all commercially reasonable efforts to arrange for the Lenders or other financial institutions to provide such additional Commitments; PROVIDED that the Agent will first offer each of the Lenders that then has a Commitment a 17 pro rata portion (based upon the Commitments at such time) of any such additional Commitments. Alternatively, any Lender may commit to provide the full amount of the requested additional Commitments and then offer portions of such additional Commitments to the other Lenders or other financial institutions, subject to the proviso in the immediately preceding sentence. Nothing contained in this paragraph or otherwise in this Agreement is intended to commit any Lender or the Agent to provide any portion of any such additional Commitments. If and to the extent that any Lenders and/or other financial institutions agree, in their sole discretion, to provide any such additional Commitments, (i) the Aggregate Commitment shall be increased by the amount of the additional Commitments agreed to be so provided, (ii) the Pro Rata Shares of the respective Lenders in respect of the Commitments shall be adjusted accordingly, (iii) at such time and in such manner as the Borrowers and the Agent shall agree (it being understood that the Borrowers and the Agent will use all commercially reasonable efforts to avoid the prepayment or assignment of any Eurodollar Advance on a day other than the last day of the Interest Period applicable thereto), the Lenders shall assign and assume outstanding Revolving Loans and participations in L/C Obligations so as to cause the amount of such Revolving Loans and participations in L/C Obligations held by each Lender to conform to the respective percentages of the applicable Commitments of the Lenders and (iv) the Borrowers shall execute and deliver supplements to this Agreement or any other Loan Documents and any additional Notes as the Agent may reasonably request. 2.2 REQUIRED PAYMENTS; TERMINATION. The Aggregate Outstanding Credit Exposure and all other unpaid Obligations shall be paid in full by the Borrowers on the Facility Termination Date. 2.3 RATABLE LOANS; TYPES OF ADVANCES. Each Advance hereunder (other than any Swing Line Loan) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the applicable Borrower in accordance with Sections 2.8 and 2.9, or Swing Line Loans selected by the applicable Borrower in accordance with Section 2.4. 2.4 SWING LINE LOANS. 2.4.1. AMOUNT OF SWING LINE LOANS. Upon the satisfaction of the conditions precedent set forth in Section 4.2 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.1 as well, from and including the date of this Agreement and prior to the Facility Termination Date, the Swing Line Lender in its sole discretion, on the terms and conditions set forth in this Agreement, may make Swing Line Loans to the Borrowers from time to time in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding, PROVIDED that the Aggregate Outstanding Credit Exposure shall not at any time exceed the Maximum Credit Amount, and PROVIDED FURTHER that at no time shall the sum of (i) the Swing Line Lender's Pro Rata Share of the Swing Line Loans, PLUS (ii) the outstanding Revolving Loans made by the Swing Line Lender, PLUS (iii) the Swing Line Lender's Pro Rata Share of the LC Obligations exceed the Swing Line Lender's maximum Commitment at such time. Subject to the terms of this 18 Agreement, the Borrowers may borrow, repay and reborrow Swing Line Loans at any time prior to the Facility Termination Date. 2.4.2. BORROWING NOTICE. The applicable Borrower shall deliver to the Agent and the Swing Line Lender irrevocable notice (a "Swing Line Borrowing Notice") not later than noon (Phoenix, Arizona local time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan, which shall be an amount not less than $100,000. The Swing Line Loans shall bear interest at the Floating Rate. The Borrowers may not request more than four Swing Line Loans during any calendar month. 2.4.3. MAKING OF SWING LINE LOANS. Promptly after receipt of a Swing Line Borrowing Notice, the Agent shall notify each Lender by fax, or other similar form of transmission, of the requested Swing Line Loan. Not later than 2:00 p.m. (Phoenix, Arizona local time) on the applicable Borrowing Date, the Swing Line Lender may make available the Swing Line Loan, in funds immediately available in Phoenix, Arizona, to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Swing Line Lender available to the applicable Borrower on the Borrowing Date at the Agent's aforesaid address. 2.4.4. REPAYMENT OF SWING LINE LOANS. Each Swing Line Loan shall be paid in full by the applicable Borrower on the Facility Termination Date. In addition, the Swing Line Lender may, at any time in its sole discretion with respect to any outstanding Swing Line Loan, require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender's Pro Rata Share of such Swing Line Loan, for the purpose of repaying such Swing Line Loan. Not later than noon (Phoenix, Arizona local time) on the date of any notice received pursuant to this Section 2.4.4, each Lender shall make available its required Revolving Loan, in funds immediately available in Phoenix, Arizona to the Agent at its address specified pursuant to Article XIII. Revolving Loans made pursuant to this Section 2.4.4 shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Loans in the manner provided in Section 2.9 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to its making any Swing Line Loan, that any applicable condition precedent set forth in Sections 4.1 or 4.2 had not then been satisfied, such Lender's obligation to make Revolving Loans pursuant to this Section 2.4.4 to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of any Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.4.4, the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the 19 foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.4.4, such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swing Line Lender, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. 2.5 COMMITMENT FEE; REDUCTIONS IN AGGREGATE COMMITMENT. The Borrowers jointly and severally agree to pay to the Agent for the account of each Lender according to its Pro Rata Share a commitment fee at a per annum rate equal to the Applicable Fee Rate on the average daily Available Aggregate Commitment from the last Payment Date on which the commitment fee was paid under the Original Agreement to and including the Facility Termination Date, payable on each Payment Date hereafter with respect to the fee accrued to but not including the first day of each month and on the Facility Termination Date, PROVIDED that Swing Line Loans shall not count as usage of any Lender's Commitment for the purpose of calculating the commitment fee due hereunder. The Company may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $5,000,000, upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, PROVIDED, HOWEVER, that the amount of the Aggregate Commitment may not be reduced below the Aggregate Outstanding Credit Exposure. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder. 2.6 MINIMUM AMOUNT OF EACH ADVANCE. Each Eurodollar Advance shall be in the minimum amount of $3,000,000 (and in multiples of $1,000,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $3,000,000 (and in multiples of $1,000,000 if in excess thereof), PROVIDED, HOWEVER, that any Floating Rate Advance may be in the amount of the Available Credit Amount. 2.7 PREPAYMENTS. 2.7.1. OPTIONAL PRINCIPAL PAYMENTS. The Borrowers may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $3,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Floating Rate Advances upon one Business Day's prior notice to the Agent. The Borrowers may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $100,000 and increments of $50,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Agent and the Swing Line Lender by 11:00 a.m. (Phoenix, Arizona local time) on the date of repayment. The Borrowers may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $3,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days' prior notice to the Agent. 20 2.7.2. MANDATORY PREPAYMENTS. (a) In the event of any Financing consisting of an issuance of Equity Interests occurring within six months after the Effective Date, upon the receipt by the Company or any Subsidiary of the Net Cash Proceeds thereof, the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to 50% of the aggregate Net Cash Proceeds of all such Financings in excess of $20,000,000. Simultaneously with each such prepayment, the Aggregate Commitment shall automatically be permanently reduced, ratably among the Lenders, in an amount equal to the amount of such prepayment. In the event of any Financing other than a Financing described in the first sentence of this Section 2.7.2(a), upon the receipt by the Company or any Subsidiary of the Net Cash Proceeds thereof, the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to 100% of such Net Cash Proceeds, if such Financing is an issuance of Equity Interests, or 50% of such Net Cash Proceeds, if such Financing is an issuance of Indebtedness. Simultaneously with such prepayment, the Aggregate Commitment shall automatically be permanently reduced, ratably among the Lenders, in an amount equal to 100% of such Net Cash Proceeds, if such Financing is an issuance of Equity Interests, or 50% of such Net Cash Proceeds, if such Financing is an issuance of Indebtedness. (b) In the event of any Asset Sale by the Company or any Domestic Subsidiary of the Company, other than Asset Sales permitted by Section 6.13(i), (ii), (iii) and (iv), upon receipt by the Company or such Domestic Subsidiary of the Net Cash Proceeds thereof, the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to the amount of such Net Cash Proceeds. Simultaneously with such prepayment, the Aggregate Commitment shall automatically be permanently reduced, ratably among the Lenders, in an amount equal to the amount of such mandatory prepayment. (c) If at any time and for any reason the amount of the Aggregate Outstanding Credit Exposure exceeds the Maximum Credit Amount, the Borrowers shall immediately make a mandatory prepayment of the Loans in an amount equal to such excess. Nothing in this Section 2.7.2 shall be construed to constitute the Lenders' consent to any transaction which is otherwise prohibited by the terms of this Agreement. 2.8 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR NEW ADVANCES. The applicable Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The applicable Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 9:00 a.m. (Phoenix, Arizona local time) on the Borrowing Date of each Floating Rate Advance (other than a Swing Line Loan) and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. 21 Not later than noon (Phoenix, Arizona local time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in Phoenix, Arizona to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the applicable Borrower at the Agent's aforesaid address. 2.9 CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES. Floating Rate Advances (other than Swing Line Loans) shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the applicable Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.6, the applicable Borrower may elect from time to time to convert all or any part of a Floating Rate Advance (other than a Swing Line Loan) into a Eurodollar Advance. The applicable Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Phoenix, Arizona local time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.10 CHANGES IN INTEREST RATE, ETC. Each Floating Rate Advance (other than a Swing Line Loan) shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the applicable Borrower's selections under Sections 2.8 and 2.9 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 22 2.11 RATES APPLICABLE AFTER DEFAULT. Notwithstanding anything to the contrary contained in Section 2.8 or 2.9, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrowers (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrowers (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 3% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 3% per annum and (iii) the LC Fee shall be increased by 3% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above shall be applicable to all Credit Extensions without any election or action on the part of the Agent or any Lender. 2.12 METHOD OF PAYMENT. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrowers, by noon (local time) on the date when due and shall (except with respect to repayments of Swing Line Loans, in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of any Borrower maintained with Bank One for each payment of principal, interest, Reimbursement Obligations and fees as it becomes due hereunder. Each reference to the Agent in this Section 2.12 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrowers to the LC Issuer pursuant to Section 2.19.6. 2.13 NOTELESS AGREEMENT; EVIDENCE OF INDEBTEDNESS. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder, (c) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, and (d) the amount of any sum received by the Agent hereunder from the Borrowers and each Lender's share thereof. 23 (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; PROVIDED, HOWEVER, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by a promissory note or, in the case of the Swing Line Lender, promissory notes representing its Revolving Loans and Swing Line Loans, respectively, substantially in the form of Exhibit D-1 or D-2, as applicable (each a "Note"). In such event, each Borrower shall prepare, execute and deliver to such Lender such Note or Notes payable to the order of such Lender. Thereafter, the Loans evidenced by each such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.14 TELEPHONIC NOTICES. The Borrowers hereby authorize the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrowers, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. Each Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.15 INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest accrued on each Floating Rate Advance to but not including the first day of each month shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, and at maturity, whether due to acceleration or otherwise. Interest accrued on each Eurodollar Advance to but not including the first day of each month shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, and at maturity, whether by acceleration or otherwise. Interest, commitment fees, LC Fees and fronting fees with respect to Facility LCs shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 24 2.16 NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly after notice from the LC Issuer, the Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.17 LENDING INSTALLATIONS. Each Lender may book its Loans and its participation in any LC Obligations and the LC Issuer may book the Facility LCs at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Agent and the Borrowers in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made. 2.18 NON-RECEIPT OF FUNDS BY THE AGENT. Unless any Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of a Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or such Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by such Borrower, the interest rate applicable to the relevant Loan. 2.19 FACILITY LCS. 2.19.1. ISSUANCE. The LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and commercial letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the applicable Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $10,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Maximum Credit Amount. No Facility LC shall have an expiry date later than the earlier of 25 (x) the fifth Business Day prior to the Facility Termination Date and (y) one year after its issuance. Each Facility LC may, upon the request of the applicable Borrower, include a provision whereby such Facility LC shall be renewed automatically for additional consecutive periods of 12 months or less (but not beyond the date that is five Business Days prior to the Facility Termination Date) unless the LC Issuer notifies the beneficiary thereof at least 30 days prior to the then-applicable expiry date that such Facility LC will not be renewed. 2.19.2. PARTICIPATIONS. Upon the issuance or Modification by the LC Issuer of a Facility LC in accordance with this Section 2.19, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. 2.19.3. NOTICE. Subject to Section 2.19.1, the applicable Borrower shall give the LC Issuer notice prior to 10:00 a.m. (Phoenix, Arizona local time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Agent, and the Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the applicable Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. 2.19.4. LC FEES. The Borrowers jointly and severally agree to pay to the Agent, for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, with respect to each Facility LC, a letter of credit fee at the Applicable Fee Rate on the average daily undrawn stated amount under such Facility LC, such fee to be payable in arrears on each Payment Date with respect to the fee accrued to but not including the first day of each month and on the Facility Termination Date (the "LC Fee"). The Borrowers also jointly and severally agree to pay to the LC Issuer for its own account with respect to each Facility LC, (x) a fronting fee at the rate of 0.25% per annum on the average daily undrawn stated amount of such Facility LC, such fee to be payable in arrears on each Payment Date with respect to the fee accrued to but not including the first day of each month and on the Facility Termination Date, and (y) documentary and processing charges in connection with the issuance or Modification of and draws under such Facility LC in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time. 26 2.19.5. ADMINISTRATION; REIMBURSEMENT BY LENDERS. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Agent and the Agent shall promptly notify the applicable Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the applicable Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrowers pursuant to Section 2.19.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Phoenix, Arizona local time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances. 2.19.6. REIMBURSEMENT BY BORROWERS. The Borrowers, jointly and severally, shall be irrevocably and unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; PROVIDED that neither any Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by such Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrowers shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 3% per annum plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrowers for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.19.5. Subject to the terms and conditions of this Agreement (including without limitation the submission of a Borrowing Notice in compliance with Section 2.8 and the satisfaction of the applicable conditions precedent set forth in Article IV), any Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation. 27 2.19.7. OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this Section 2.19 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. Each Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and such Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among such Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of such Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. Each Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrowers and shall not put the LC Issuer or any Lender under any liability to any Borrower. Nothing in this Section 2.19.7 is intended to limit the right of any Borrower to make a claim against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.19.6. 2.19.8. ACTIONS OF LC ISSUER. The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.19, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC. 2.19.9. INDEMNIFICATION. The Borrowers hereby jointly and severally agree to indemnify and hold harmless each Lender, the LC Issuer and the Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or 28 expenses which such Lender, the LC Issuer or the Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights any Borrower may have against any defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrowers shall not be required to indemnify any Lender, the LC Issuer or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.19.9 is intended to limit the obligations of the Borrowers under any other provision of this Agreement. 2.19.10. LENDERS' INDEMNIFICATION. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.19 or any action taken or omitted by such indemnitees hereunder. 2.19.11. FACILITY LC COLLATERAL ACCOUNT. Each Borrower agrees that it will, upon the request of the Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Agent (the "Facility LC Collateral Account") at the Agent's office at the address specified pursuant to Article XIII, in the name of such Borrower but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which such Borrower shall have no interest other than as set forth in Section 8.1. Each Borrower hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of such Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. 29 The Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.19.11 shall either obligate the Agent to require any Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 8.1. 2.19.12. RIGHTS AS A LENDER. In its capacity as a Lender, the LC Issuer shall have the same rights and obligations as any other Lender. 2.20 REPLACEMENT OF LENDER. If any Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrowers may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Company and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrowers shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrowers hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. ARTICLE III YIELD PROTECTION; TAXES 3.1 YIELD PROTECTION. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or the LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation or the LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or the LC Issuer in respect of its Eurodollar Loans, Facility LCs or participations therein, or 30 (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or the LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or the LC Issuer of making, funding or maintaining its Eurodollar Loans, or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or the LC Issuer in connection with its Eurodollar Loans, Facility LCs or participations therein, or requires any Lender or any applicable Lending Installation or the LC Issuer to make any payment calculated by reference to the amount of Eurodollar Loans, Facility LCs or participations therein held or interest or LC Fees received by it, by an amount deemed material by such Lender or the LC Issuer, as the case may be, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or the LC Issuer, as the case may be, of making or maintaining its Eurodollar Loans or Commitment or of issuing or participating in Facility LCs or to reduce the return received by such Lender or applicable Lending Installation or the LC Issuer, as the case may be, in connection with such Eurodollar Loans, Commitment, Facility LCs or participations therein, then, within 15 days of demand by such Lender or the LC Issuer, as the case may be, the Borrowers jointly and severally agree to pay such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer, as the case may be, for such increased cost or reduction in amount received. 3.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender or the LC Issuer determines the amount of capital required or expected to be maintained by such Lender or the LC Issuer, any Lending Installation of such Lender or the LC Issuer, or any corporation controlling such Lender or the LC Issuer is increased as a result of a Change, then, within 15 days of demand by such Lender or the LC Issuer, the Borrowers jointly and severally agree to pay such Lender or the LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the LC Issuer reasonably determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs, as the case may be, hereunder (after taking into account such Lender's or the LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or the LC Issuer or any Lending Installation or any corporation controlling any Lender or the LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 31 3.3 AVAILABILITY OF TYPES OF ADVANCES. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4 FUNDING INDEMNIFICATION. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the applicable Borrower for any reason other than default by the Lenders, the Borrowers jointly and severally agree to indemnify each Lender for any reasonable loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5 TAXES. (i) All payments by the Borrowers to or for the account of any Lender, the LC Issuer or the Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and without deduction for any and all Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, the LC Issuer or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, the LC Issuer or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) such Borrower shall make such deductions, (c) such Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) such Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrowers hereby jointly and severally agree to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes"). (iii) The Borrowers hereby jointly and severally agree to indemnify the Agent, the LC Issuer and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent, the LC Issuer or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent, the LC Issuer or such Lender makes demand therefor pursuant to Section 3.6. 32 (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not less than ten Business Days after the date of this Agreement, (i) deliver to each of the Company and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Company and the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Company and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Company or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Company and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Company with an appropriate form pursuant to clause (iv) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrowers shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Company (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which 33 rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Company (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be rebuttably presumptive evidence of the amount due, binding on the Borrowers in the absence of demonstrable error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the applicable Borrower of such written statement. The obligations of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1 EFFECTIVENESS. This Agreement shall become effective as of the date hereof (the "Effective Date") upon receipt by the Agent of (i) counterparts of this Agreement duly executed by the Borrowers and the Required Lenders, (ii) each of the documents listed on the List of Closing Documents attached hereto as Schedule 4.1, (iii) such other documents as the Agent or any Lender may reasonably request, (iv) an amendment fee equal to 0.50% of the Aggregate Commitment hereunder for the ratable account of the Lenders in accordance with their respective Commitments hereunder, and (v) all other fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, all expenses required to be paid or reimbursed by the Borrowers hereunder or under the Original Agreement. 4.2 EACH CREDIT EXTENSION. The Lenders shall not be required to make any Credit Extension unless on the applicable Credit Extension Date: (i) There exists no Default or Unmatured Default. 34 (ii) The representations and warranties contained in Article V are true and correct in all material respects as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date. (iii) The Aggregate Outstanding Credit Exposure does not, and after making such proposed Credit Extension would not, exceed the Maximum Credit Amount. Each Borrowing Notice, Swing Line Borrowing Notice or request for issuance of a Facility LC, as the case may be, with respect to each such Credit Extension shall constitute a representation and warranty by the applicable Borrower that the conditions contained in Sections 4.2(i), (ii) and (iii) have been satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrowers jointly and severally represent and warrant to the Lenders that: 5.1 EXISTENCE AND STANDING. Each of the Borrowers and the Subsidiaries is a corporation duly and properly incorporated , validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except for any failure to be so authorized that could not reasonably be expected to have a Material Adverse Effect. 5.2 AUTHORIZATION AND VALIDITY. Each Borrower has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by each Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which such Borrower is a party constitute legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3 NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and delivery by the Borrowers of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Company or any of its Subsidiaries or (ii) the Company's or any Subsidiary's articles or certificate of incorporation or by-laws, or (iii) the provisions of any material indenture, instrument or agreement to which the Company or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Company or a Subsidiary pursuant to the terms of any such material indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has 35 not been obtained by the Company or any of its Subsidiaries, is required to be obtained by the Company or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrowers of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4 FINANCIAL STATEMENTS. The March 31, 2001 consolidated financial statements of the Company and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Company and its Subsidiaries at such date and the consolidated results of their operations for the period then ended, subject to normal year-end adjustments and the absence of notes. 5.5 MATERIAL ADVERSE CHANGE. Except as set forth on Schedule 5.5, since March 31, 2001 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 5.6 TAXES. The Company and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Company or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7 LITIGATION AND CONTINGENT OBLIGATIONS. Except as set forth on Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extensions. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries have no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8 SUBSIDIARIES. Schedule 5.8 contains an accurate list of all Subsidiaries of the Company as of the Effective Date, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Company or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. 5.9 ERISA. There are no Unfunded Liabilities under any Single Employer Plans, and neither the Company nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans, the amount of which Unfunded Liabilities and/or withdrawal liabilities, in the aggregate, could reasonably be expected to have a Material Adverse Effect. Each Plan complies in all material respects with all applicable requirements of law and regulations, to the knowledge of the Company no Reportable Event has occurred with respect to any Plan, neither the Company nor 36 any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and to the knowledge of the Company no steps have been taken to reorganize or terminate any Plan. 5.10 ACCURACY OF INFORMATION. No information, certificate or report furnished by the Company or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading in any material respect. 5.11 REGULATION U. Neither the Company nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (as defined in Regulation U). 5.12 MATERIAL AGREEMENTS. Neither the Company nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect. 5.13 COMPLIANCE WITH LAWS. The Company and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14 OWNERSHIP OF PROPERTIES. Except as set forth on Schedule 6.15, as of the Effective Date, the Company and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.15, to all of the Property and assets reflected in the Company's most recent consolidated financial statements provided to the Agent as owned by the Company and its Subsidiaries and all other Property material to the Company's and its Subsidiaries' businesses, except as sold or otherwise disposed of in the ordinary course of business. The Company and each Subsidiary owns and/or possesses all the patents, trademarks, trade names, service marks, copyrights, licenses and rights with respect to the foregoing necessary for the present conduct of its business without any known conflict with the rights of others, except where the failure to own and/or possess any patents, trademarks, trade names, service marks, copyrights, licenses and/or rights could not reasonably be expected to have a Material Adverse Effect and/or subject the Company or any Subsidiary to any material liability in connection with any infringement and/or similar cause of action related to any of the foregoing. 5.15 PLAN ASSETS; PROHIBITED TRANSACTIONS. None of the Borrowers is an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Credit Extensions hereunder gives rise to a prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to "plan assets" of the Company and its Subsidiaries. 37 5.16 ENVIRONMENTAL MATTERS. In the ordinary course of its business, the officers of the Company consider the effect of Environmental Laws on the business of the Company and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Company and its Subsidiaries due to Environmental Laws. On the basis of this consideration, the Company has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has any knowledge or has received any actual notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17 INVESTMENT COMPANY ACT. Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19 SUBORDINATED INDEBTEDNESS. The Obligations constitute senior indebtedness which is entitled to the benefits of the subordination provisions of all outstanding Subordinated Indebtedness. 5.20 INSURANCE. Schedule 5.20 accurately sets forth as of the Effective Date all insurance policies and programs currently in effect with respect to the respective properties and assets and business of the Company and its Subsidiaries, specifying, for each such policy and program, (i) the amount thereof, (ii) the risks insured against thereby, (iii) the name of the insurer and each insured party thereunder, (iv) the policy or other identification number thereof, (v) the expiration date thereof, (vi) the annual premium with respect thereto, and (vii) any reserves relating to any self-insurance program that is in effect. ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1 FINANCIAL REPORTING. The Company will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 105 days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting 38 principles and required or approved by the Company's independent certified public accountants) audit report certified by independent certified public accountants acceptable to the Required Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated and consolidating (by segment or line of business) basis for itself and its Subsidiaries (consolidating statements need not be certified by such accountants), including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated and consolidating (by segment or line of business) unaudited balance sheets as at the close of each such period and consolidated and consolidating (by segment or line of business) profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its principal financial officer or corporate controller. (iii) As soon as possible, and in any event within 30 days after the end of each calendar month, for itself and its Subsidiaries, consolidated and consolidating (by segment or line of business) unaudited balance sheets as at the end of such period and consolidated and consolidating (by segment or line of business) profit and loss and reconciliation of surplus statements and a statement of cash flows for such calendar month, all certified by its principal financial officer or corporate controller. (iv) As soon as available, but in any event within 60 days prior the beginning of each fiscal year of the Company, a copy of the plan and forecast (including a projected consolidated and consolidating (by segment or line of business) balance sheet, income statement and funds flow statement) of the Company and its Subsidiaries for such fiscal year. (v) Together with the financial statements required under Sections 6.1(i) and (ii), (A) a compliance certificate in substantially the form of Exhibit B signed by its principal financial officer or corporate controller showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof, and (B) a copy of the Company's most recently completed weekly contract variance report. (vi) As soon as possible, and in any event within 30 days after the close of each calendar month (and more often if requested by the Agent or the Required Lenders), a Borrowing Base Certificate, together with such supporting documents as the Agent may request, all certified as being true and correct by its principal financial officer or corporate controller. 39 (vii) Within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (viii) As soon as possible and in any event within 10 days after the Company knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the principal financial officer or corporate controller of the Company, describing said Reportable Event and the action which the Company proposes to take with respect thereto. (ix) As soon as possible and in any event within 10 days after receipt by the Company, copy of (a) any notice or claim to the effect that the Company or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Company, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Company or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (x) Promptly upon the furnishing thereof to the shareholders of the Company, copies of all financial statements, reports and proxy statements so furnished. (xi) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Company or any of its Subsidiaries files with the Securities and Exchange Commission. (xii) As soon as practicable, and in any event within 30 days after the end of each calendar month, a Work-in-Progress Report, substantially in the form attached hereto as Exhibit F, as at the end of such period. (xiii) As soon as possible, and in any event within 30 days after the end of each calendar month, a Backlog Report, substantially in the form attached hereto as Exhibit G, as at the end of such period. (xiv) As soon as possible, and in any event within 30 days after the end of each calendar month, a Monthly Cash Summary, substantially in the form attached hereto as Exhibit H, as at the end of such period. (xv) As soon as possible, and in any event within 30 days after the end of each calendar month, an Accounts Receivable Aging Report, substantially in the form attached hereto as Exhibit I, as at the end of such period. (xvi) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 40 6.2 USE OF PROCEEDS. The Borrowers will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general corporate purposes. The Borrowers will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any margin stock (as defined in Regulation U). 6.3 NOTICE OF DEFAULT. The Company will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4 CONDUCT OF BUSINESS. The Company will, and will cause each Subsidiary to, carry on and conduct its business only in Approved Lines of Business and do all things necessary to remain duly incorporated and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, in each case, except to the extent (i) permitted by Section 6.12 or (ii) that a failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.5 TAXES. The Company will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. 6.6 INSURANCE; INSURANCE AND CONDEMNATION PROCEEDS. (a) The Company shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain, in full force and effect the insurance policies and programs listed on Schedule 5.20 or substantially similar policies and programs or other policies and programs as reflect coverage that is reasonably consistent with prudent industry practice. The Company shall deliver to the Agent (i) endorsements to all "All Risk" physical damage insurance policies on all of the Company's and its Subsidiaries' tangible personal property and assets and business interruption insurance policies naming the Agent loss payee, and (ii) certificates as to all general liability and other liability policies naming the Agent an additional insured. In the event the Company or any of its Subsidiaries, at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto within ten days after written notice from the Agent, then the Agent, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter so long as such failure shall continue (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Agent deems advisable. All sums so disbursed by the Agent shall constitute part of the Obligations, payable as provided in this Agreement. (b) The Company shall direct (and, if applicable, shall cause any Subsidiary to direct) all insurers under policies of property insurance, flood insurance, machinery and business interruption insurance and payors of any damage or condemnation claim or award relating to such property to pay all proceeds payable under such policies or with respect to such claim or award for any loss with respect to the Collateral directly to the Agent, for the benefit 41 of the Agent and the Holders of the Secured Obligations; PROVIDED that if such proceeds or award is less than $2,000,000 ("Excluded Proceeds"), unless a Default shall have occurred and be continuing, the Agent shall remit such Excluded Proceeds to the Company. Each such policy shall contain a long-form loss-payable endorsement naming the Agent as loss payee, which endorsement shall be in form and substance acceptable to the Agent. The Agent shall, upon receipt of such proceeds (other than Excluded Proceeds) and at the Company's direction, either apply the same to the principal amount of the Revolving Loans outstanding at the time of such receipt and create a corresponding reserve against the Aggregate Commitment in an amount equal to such application (the "Decision Reserve") or hold them as cash collateral for the Obligations in an interest bearing account. For up to one hundred eighty days from the date of any loss (the "Decision Period"), the Company may notify the Agent that it intends to restore, rebuild or replace the property subject to any insurance payment or condemnation award and shall, as soon as practicable thereafter, provide the Agent detailed information, including a construction schedule and cost estimates. Should a Default occur and be continuing during the Decision Period, should the Company notify the Agent during the Decision Period that it has decided not to rebuild or replace such property, or should the Company fail to notify the Agent of the Company's decision during the Decision Period, then the amounts held as cash collateral pursuant to this Section 6.6 or as the Decision Reserve shall upon the Required Lenders' direction be applied as a mandatory prepayment of the Loans and the Aggregate Commitment shall automatically be permanently reduced, ratably among the Lenders, in an amount equal to the amount of such mandatory prepayment. Proceeds held as cash collateral pursuant to this Section 6.6 or as the Decision Reserve shall be disbursed as payments for restoration, rebuilding or replacement of such property become due; PROVIDED, however, should a Default occur and be continuing after the Company has notified the Agent that it intends to rebuild or replace the property, the Decision Reserve or amounts held as cash collateral may, or shall, upon the Required Lenders' direction, be applied as a mandatory prepayment of the Loans. Upon completion of the restoration, rebuilding or replacement of such property, the unused proceeds shall be released to the Company, PROVIDED that no Default or Unmatured Default shall have occurred and be continuing. 6.7 COMPLIANCE WITH LAWS. The Company will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, except for violations that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 6.8 MAINTENANCE OF PROPERTIES. The Company will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times in all material respects. 6.9 INSPECTION. The Company will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Company and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Company and each Subsidiary, and to discuss the affairs, finances and accounts of the Company and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate. 42 6.10 DIVIDENDS. The Company will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, except: (i) Any Subsidiary may declare and pay dividends or make distributions to the Company or to a Wholly-Owned Subsidiary. (ii) The Company may issue its common stock upon the conversion of any of its convertible preferred stock. (iii) The Company may declare and pay a dividend on, and redeem or repurchase, its preferred stock in cash as a consequence of its failure to deliver its common stock in connection with a conversion of such preferred stock. 6.11 INDEBTEDNESS. The Company will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: (i) The Loans and the Reimbursement Obligations. (ii) Indebtedness existing on the date hereof and described in Schedule 6.11. (iii) Indebtedness arising under Rate Management Transactions. (iv) Subordinated Indebtedness in an aggregate principal amount not to exceed $150,000,000 at any one time outstanding. (v) Capitalized Lease Obligations and/or Indebtedness secured by purchase money Liens in an aggregate amount not to exceed $30,000,000 at any one time outstanding, including any refinancing of such purchase money Indebtedness PROVIDED that such refinancing does not increase the principal amount of such Indebtedness or extend the Lien to any additional Property. (vi) Mortgage financing for the acquisition or improvement of real property in an aggregate principal amount not to exceed $6,000,000 at any one time outstanding. (vii) Indebtedness of any Borrower (other than the Company) to the Company, PROVIDED that such Indebtedness shall be unsecured, shall not be evidenced by a note or other instrument, and shall be expressly subordinate to the payment in full of the Secured Obligations in a manner reasonably satisfactory in form and substance to the Agent. (viii) Indebtedness of any Foreign Subsidiary to the Company, PROVIDED that such Indebtedness shall not be evidenced by a note or other instrument, and PROVIDED FURTHER that such Indebtedness complies with Section 6.14(v). (ix) Contingent Obligations permitted Section 6.20. 43 6.12 MERGER. The Company will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except (i) that a Subsidiary may merge into the Company or a Wholly-Owned Subsidiary or (ii) the Company or any Subsidiary may merge in connection with a Permitted Acquisition, PROVIDED that in any merger to which the Company is party, the Company shall be the surviving corporation. 6.13 SALE OF ASSETS. The Company will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Sales of obsolete or surplus equipment and equipment traded in or exchanged for replacement equipment, together with any intellectual property reasonably related thereto, in each case in the ordinary course of business. (iii) Leases and other transfers of Property between any Borrowers. (iv) Sales and other dispositions of Property on or prior to March 31, 2002 in connection with the discontinuance of operations of the Equipment Distribution Group. (v) Sales and other dispositions of Mortgaged Real Property, subject to Section 2.7.2(b). 6.14 INVESTMENTS AND ACQUISITIONS. The Company shall not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition, except: (i) Cash Equivalent Investments. (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 6.14. (iii) Permitted Acquisitions, PROVIDED that the Company shall have obtained the prior written consent of the Required Lenders. (iv) The Company may make loans or advances to other Borrowers permitted by Section 6.11(vii). (v) The Company may make loans and advances to Foreign Subsidiaries permitted by Section 6.11 (viii), PROVIDED that the aggregate amount of such Indebtedness outstanding at any one time, together with the aggregate Purchase Price of all Permitted Acquisitions consummated during the term of this Agreement involving the acquisition or creation of a Foreign Subsidiary, shall not exceed $5,000,000. 44 6.15 LIENS. The Company will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Company or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies (other than Liens imposed by the PBGC) on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Company or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 6.15. (vi) Liens in favor of the Agent, for the benefit of the Holders of Secured Obligations, granted pursuant to any Collateral Document. (vii) Liens arising under Capitalized Leases and purchase money Liens (including refinancings thereof) permitted by Section 6.11(v). (viii) Liens on real property securing Indebtedness permitted by Section 6.11(vi). (ix) Liens to secure the performance of statutory obligations, bids, leases, government contracts, performance and surety bonds and other similar obligations in the ordinary course of business. (x) Bankers' liens and rights of setoff arising by operation of law and contractual rights of setoff. 6.16 CAPITAL EXPENDITURES. The Company will not, nor will it permit any Subsidiary to, expend, or be committed to expend, in excess of $15,000,000 for Capital Expenditures during the period from April 1, 2001 to March 31, 2002 or during each fiscal year ending thereafter, on a non-cumulative basis in the aggregate for the Company and its Subsidiaries. 45 6.17 AFFILIATES. The Company will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than the Company or such Subsidiary would obtain in a comparable arms-length transaction. 6.18 SUBORDINATED INDEBTEDNESS. The Company will not, and will not permit any Subsidiary to, make any amendment or modification to the indenture, note or other agreement evidencing or governing any Subordinated Indebtedness which is adverse to the interests of the Lenders, or directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness. The Company shall give the Agent ten Business Days' prior written notice of the terms of any amendment or modification to the indenture, note or other agreement evidencing or governing any Subordinated Indebtedness. 6.19 SALE AND LEASEBACK TRANSACTIONS AND OTHER OFF-BALANCE SHEET LIABILITIES. The Company will not, nor will it permit any Subsidiary to, enter into or suffer to exist any (i) Sale and Leaseback Transaction, except Sale and Leaseback Transactions with respect to the Mortgaged Real Property, subject to Section 2.7.2(b), or (ii) any other transaction pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities, except for Rate Management Transactions permitted under the terms of Section 6.21. 6.20 CONTINGENT OBLIGATIONS. The Company will not, nor will it permit any Subsidiary to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except (i) by endorsement of instruments for deposit or collection in the ordinary course of business, (ii) the Reimbursement Obligations, (iii) joint and several liability of the Borrowers for the Obligations, (iv) Contingent Obligations of the Company with respect to obligations of any Subsidiary and (v) obligations arising in connection with performance and surety bonds in the ordinary course of business. 6.21 FINANCIAL CONTRACTS. The Company will not, nor will it permit any Subsidiary to, enter into or remain liable upon any Financial Contract, except Financial Contracts pursuant to which the Company or any Subsidiary has hedged its reasonably estimated interest rate, foreign currency or commodity exposure. 6.22 FINANCIAL COVENANTS. 6.22.1. INTEREST COVERAGE RATIO. The Company will not permit the Interest Coverage Ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, to be less than 1.25 to 1 for each fiscal quarter ending on or before September 30, 2001; to be less than 1.50 to 1 for the fiscal quarter ending on December 31, 2001; to be less than 1.75 to 1 for the fiscal quarter ending on March 31, 2002; or to be less than 2.50 to 1 for each fiscal quarter ending thereafter. 46 6.22.2. FIXED CHARGE COVERAGE RATIO. The Company will not permit the Fixed Charge Coverage Ratio, determined as of the end each of its fiscal quarters for the then most recently ended four fiscal quarters, to be less than 1.25 to 1 for each fiscal quarter ending on or before March 31, 2002, or to be less than 1.50 to 1 for each fiscal quarter ending thereafter. 6.22.3. ADJUSTED LEVERAGE RATIO. The Company will not permit the Adjusted Leverage Ratio, determined as of the end of each of its fiscal quarters, to be greater than 3.75 to 1 at the end of each fiscal quarter ending on or before September 30, 2001; to be greater than 3.60 to 1 at the end of the fiscal quarter ending on December 31, 2001; to be greater than 3.25 to 1 at the end of the fiscal quarter ending on March 31, 2002; or to be greater than 2.50 to 1 at the end of each fiscal quarter ending thereafter. 6.22.4. MINIMUM NET WORTH. The Company will at all times maintain Consolidated Net Worth of not less than the sum of (i) $120,000,000 PLUS (ii) 50% of Consolidated Net Income earned in each fiscal quarter beginning with the quarter ending June 30, 2001 (without deduction for losses for any such fiscal quarter) PLUS (iii) the amount of any addition to the consolidated stockholders' equity of the Company and its Subsidiaries at any time resulting from the issuance or sale of any Equity Interests by the Company after June 30, 2001. 6.22.5. LOSSES. The Company shall not permit (i) the net after tax loss incurred by the Wireless Technology Group after March 31, 2001 and prior to April 1, 2002 to be greater than $3,000,000 or (ii) Consolidated Net Income for any fiscal quarter to be less than zero. 6.22.6. CALCULATION OF FINANCIAL COVENANTS. (a) For purposes of calculating each of the financial covenants contained in this Section 6.22, the outstanding principal amount of the Loans hereunder as of the last day of the fiscal period for which such financial covenant is calculated shall be reduced by the amount of Blocked Cash on deposit at the close of business on such day, but only to the extent that such amount of Blocked Cash was on such day or subsequently shall have been collected. (b) In the event that the Company or any Subsidiary shall have consummated a Permitted Acquisition during any four fiscal quarter period for which any financial covenant contained in this Section 6.22 is calculated, such financial covenant shall be calculated as if such Permitted Acquisition (including any Indebtedness incurred in connection therewith) had been consummated on the first day of such four fiscal quarter period, PROVIDED that the Company shall not include such Permitted Acquisition in the calculation of Consolidated EBIT or Adjusted EBITDA unless the Company shall have delivered to the Lenders, at or prior to the time financial statements as of the last day of such four fiscal quarter period are delivered to the Lenders pursuant to Section 6.1, audited financial statements of the acquired business or Person, stated in U.S. Dollars and presented in conformity with U.S. generally accepted accounting principles, and covering the period from the first day of such four fiscal quarter period to the actual date of the consummation of such Permitted Acquisition. The audit report with respect to such financial statements shall be certified by independent certified public accountants acceptable to the Agent. 47 6.23 SUBSIDIARIES. If at any time after the date hereof, the Company or any Subsidiary shall create or acquire any Subsidiary, the Company shall promptly notify the Agent thereof, which notice shall specify the date as of which such Subsidiary became a Subsidiary. Within 60 days after the date specified in such notice, the Company shall (i) cause such Subsidiary to execute and deliver to the Agent a Joinder Agreement and such Collateral Documents with respect to substantially all of the Property of such Subsidiary as the Agent shall reasonably request (all such Collateral Documents to be in form and substance reasonably satisfactory to the Agent) and (ii) pledge and/or cause any other Subsidiary to pledge to the Agent, for the benefit of the Holders of Secured Obligations, all of the Equity Interests of such Subsidiary held by the Company or any other Subsidiary, in each case together with such supporting documentation, including authorizing resolutions and/or opinions of counsel, as the Agent may reasonably request. Notwithstanding the foregoing, (A) if the Company or any of its Subsidiaries acquires a Subsidiary pursuant to a Permitted Acquisition, the Company may, as an alternative to complying with the preceding sentence, within 60 days after the consummation of such Permitted Acquisition, cause such Subsidiary to merge into, or to transfer all or substantially all of its assets to, any other Borrower, and (B) if such acquired or created Subsidiary is a Foreign Subsidiary, such Foreign Subsidiary shall not be required to execute and deliver to the Agent a Joinder Agreement or any Collateral Documents and the Company and any other Subsidiary shall not be required to pledge to the Agent more than 65% of such Foreign Subsidiary's capital stock or other Equity Interests. 6.24 ISSUANCE OF STOCK. The Company shall, by June 30, 2001, have received gross cash proceeds of at least $10,000,000 from the issuance by the Company of common stock or convertible preferred stock pursuant to an Equity Financing. 6.25 FUTURE LIENS ON REAL PROPERTY. Each Borrower shall execute and deliver to the Agent, within 30 days after its acquisition of any real property, a mortgage, deed of trust or other appropriate instrument evidencing a Lien upon any such acquired property, to be in form and substance reasonably acceptable to the Agent and subject only to such Liens as otherwise shall be permitted by this Agreement, and a title insurance policy insuring the Agent's interest therein. The foregoing provision shall not apply to real property acquired with purchase money financing otherwise permitted hereunder, until such purchase money financing has been repaid and the purchase money lien released. 6.26 NOTICE OF REDEMPTION OF PREFERRED STOCK. Upon receipt by the Company of any notice from a holder of such preferred stock demanding the redemption of such preferred stock as a result of the failure by the Company to deliver its common stock pursuant to such holder's election to convert such preferred stock into such common stock, the Company shall promptly (but in any event written one Business Day following such receipt) send a copy of such notice to the Agent. 48 ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1 Any representation or warranty made or deemed made by or on behalf of the Company or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement or any other Loan Document, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2 Nonpayment of principal of any Loan when due, nonpayment of any Reimbursement Obligation within one Business Day after the same becomes due, or nonpayment of interest upon any Loan or of any commitment fee, LC Fee or other obligations under any of the Loan Documents within five Business Days after the same becomes due. 7.3 The breach by the Company or any of its Subsidiaries of any of the terms or provisions of Article VI Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20, 6.21, 6.22 (Financial Covenants), 6.24, 6.25 or 6.26, PROVIDED that a breach of Section 6.15 occurring as a result of a non-consensual Lien securing an obligation not in excess of $1,000,000 shall not constitute a Default unless such breach shall not have been remedied within 30 days after such Lien arose. 7.4 The breach by the Company or any of its Subsidiaries (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement or any other Loan Document which is not remedied within twenty days after written notice from the Agent or any Lender. 7.5 Failure of the Company or any of its Subsidiaries to pay when due any Indebtedness aggregating in excess of $1,000,000 ("Material Indebtedness"); or the default by the Company or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior to its stated maturity; or any Material Indebtedness of the Company or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Company or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6 The Company or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect 49 or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7 Without the application, approval or consent of the Company or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Company or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Company or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 consecutive days. 7.8 Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Company and its Subsidiaries which, when taken together with all other Property of the Company and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9 The Company or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $5,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10 Any Unfunded Liabilities shall exist under any Single Employer Plan or any Reportable Event shall occur in connection with any Plan, in either case, which could reasonably be expected to have a Material Adverse Effect. 7.11 The Company or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Company or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), could reasonably be expected to have a Material Adverse Effect. 7.12 The Company or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Company and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of 50 each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount which could reasonably be expected to have a Material Adverse Effect. 7.13 The Company or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Company, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect. 7.14 Any Change in Control shall occur. 7.15 Nonpayment by the Company or any Subsidiary of any Rate Management Obligation when due or the breach by the Company or any Subsidiary of any term, provision or condition contained in any Rate Management Transaction. 7.16 Any Collateral Document shall for any reason, other than an act or omission of the Agent or any Holder of Secured Obligations, fail to create a valid and perfected security interest in the Collateral purported to be covered thereby, subject only to the Liens permitted by the Credit Agreement, and such failure shall not be remedied within ten days; or any Borrower shall take any action to discontinue or to assert the invalidity or unenforceability of any Collateral Document, whether as to such Borrower or in its entirety. 7.17 The Company shall fail to comply in a timely manner with the terms of any preferred stock issued by the Company pursuant to which any holder thereof shall have elected to convert such preferred stock to common stock of the Company, and as a consequence thereof any such holder shall have given notice to the Company demanding the redemption of such preferred stock. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1 ACCELERATION; FACILITY LC COLLATERAL ACCOUNT. (i) If any Default described in Section 7.6 or 7.7 occurs with respect to any Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent, the LC Issuer or any Lender, and the Borrowers will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"). If any other Default occurs and is continuing, the Required Lenders (or the Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall 51 become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrowers hereby expressly waives, and (b) upon notice to the Borrowers and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (ii) If at any time while any Default is continuing, the Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Agent may make demand on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (iii) The Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrowers to the Lenders or the LC Issuer under the Loan Documents. (iv) At any time while any Default is continuing, neither any Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Agent to the Borrowers or paid to whomever may be legally entitled thereto at such time. (v) If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligation and power of the LC Issuer to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to any Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrowers, rescind and annul such acceleration and/or termination. 8.2 AMENDMENTS. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or waiving any Default hereunder; PROVIDED, HOWEVER, that no such supplemental agreement shall, without the consent of each Lender affected thereby: (i) Extend the final maturity of any Loan, or extend the expiry date of any Facility LC to a date after the Facility Termination Date or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation related thereto, or reduce the rate or extend the time of payment of interest or fees thereon or Reimbursement Obligations related thereto. 52 (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Aggregate Commitment (except as provided in Section 2.1(b)), the Commitment of any Lender hereunder or the commitment to issue Facility LCs, or permit any Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Borrower from joint and several liability for the Obligations or, except as provided in the Collateral Documents, release all or substantially all of the Collateral. Notwithstanding the foregoing, the Agent, the Borrowers and a Lender or other financial institution providing an additional Commitment pursuant to Section 2.1(b) may enter into a supplement hereto for such purpose without the consent of any other party hereto. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent, no amendment of any provision relating to the Swing Line Lender or any Swing Line Loans shall be effective without the written consent of the Swing Line Lender, and no amendment of any provision relating to the LC Issuer shall be effective without the written consent of the LC Issuer. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3 PRESERVATION OF RIGHTS. No delay or omission of the Lenders, the LC Issuer or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or the inability of any Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent, the LC Issuer and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of the Borrowers contained in this Agreement shall survive the making of the Credit Extensions herein contemplated. 9.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to any Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 53 9.3 HEADINGS. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and understanding among the Borrowers, the Agent, the LC Issuer and the Lenders and supersede all prior agreements and understandings among the Borrowers, the Agent, the LC Issuer and the Lenders relating to the subject matter thereof other than the fee letters described in Section 10.13. 9.5 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6 EXPENSES; INDEMNIFICATION. (i) The Borrowers jointly and severally agree to reimburse the Agent and the Arranger for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents. The Borrowers also jointly and severally agree to reimburse the Agent, the Arranger, the LC Issuer and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, the Arranger, the LC Issuer and the Lenders, which attorneys may be employees of the Agent, the Arranger, the LC Issuer or the Lenders) paid or incurred by the Agent, the Arranger, the LC Issuer or any Lender in connection with the collection and enforcement of the Loan Documents. Expenses being reimbursed by the Borrowers under this Section include, without limitation, costs and expenses incurred in connection with the Reports described in the following sentence. The Borrowers acknowledge that from time to time Bank One may prepare and may distribute to the Lenders (but shall have no obligation or duty to prepare or to distribute to the Lenders) certain audit reports (the "Reports") pertaining to the Borrowers' assets for internal use by Bank One from information furnished to it by or on behalf of the Borrowers, after Bank One has exercised its rights of inspection pursuant to this Agreement. (ii) The Borrowers hereby further jointly and severally agree to indemnify the Agent, the Arranger, the LC Issuer and each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or 54 preparation therefor whether or not the Agent, the Arranger, the LC Issuer or any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Credit Extension hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrowers under this Section 9.6 shall survive the termination of this Agreement. (iii) The Borrowers acknowledge and agree that, promptly after the Effective Date, the Agent (or counsel for the Agent), on behalf of the Lenders, will enter into an engagement letter with BDO Seidman, or, if BDO Seidman declines such engagement, another consultant satisfactory to the Agent (in either case, the "Consultant"), pursuant to which the Agent will direct the Consultant to deliver a completed report to the Lenders, no later than October 31, 2001, with respect to the following aspects of the Borrowers' operations: (i) procedures for accumulating field production data; (ii) procedures for reporting field production data into internal accounting systems; (iii) procedures for documenting the scope of work changes in the field and change order requests; and (iv) benchmarking of the Borrowers' procedures for reporting field production data with the standards and best practices in the industry, all in form and substance satisfactory to the Agent. The Borrowers hereby jointly and severally agree (a) to provide the Consultant with access to management and information on a basis sufficient to enable the Consultant to complete its engagement in accordance with its terms and (b) to pay or reimburse the Consultant's reasonable fees and expenses in connection with such engagement. 9.7 NUMBERS OF DOCUMENTS. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.8 ACCOUNTING. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 9.9 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10 NONLIABILITY OF LENDERS. The relationship between the Borrowers on the one hand and the Lenders, the LC Issuer and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to any Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender undertakes any responsibility to any Borrower to review or inform such Borrower of any matter in connection with any phase of such Borrower's business or operations. Each Borrower agrees that neither the Agent, the Arranger, the LC Issuer nor any Lender shall have liability to such Borrower (whether sounding in tort, contract or otherwise) for losses suffered by such Borrower in connection with, arising 55 out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any liability with respect to, and each Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by such Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11 CONFIDENTIALITY. Each Lender agrees to hold any confidential information which it may receive from the Borrowers pursuant to this Agreement in confidence, except for disclosure (i) to its affiliates and to other Lenders and their respective affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. 9.12 PERFORMANCE OF OBLIGATIONS. The Borrowers agree that, after the occurrence and during the continuance of a Default, the Agent may, but shall have no obligation to, (i) at any time, pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Collateral (other than any of the foregoing which is permitted hereunder) and (ii) make any other payment or perform any act required of any Borrower under any Loan Document or take any other action which the Agent in its discretion deems necessary or desirable to protect or preserve the Collateral, including, without limitation, any action to (y) effect any repairs or obtain any insurance called for by the terms of any of the Loan Documents and to pay all or any part of the premiums therefor and the costs thereof and (z) pay any rents payable by any Borrower which are more than 30 days past due, or as to which the landlord has given notice of termination, under any lease. The Agent shall use its reasonable efforts to give the Borrowers five (5) Business Days' notice of any action taken under this Section 9.12 prior to the taking of such action; PROVIDED that the failure to give such notice shall not affect the Borrowers' obligations in respect thereof, and PROVIDED FURTHER that the right of the Agent to obtain any insurance required by the terms of this Agreement shall be governed by Section 6.6(b). The Borrowers jointly and severally agree to pay to the Agent, promptly after receipt of a reasonably detailed invoice therefor, the principal amount of all funds advanced by the Agent under this Section 9.12, together with interest thereon at the rate from time to time applicable to Floating Rate Loans from the date of such advance until the outstanding principal balance thereof is paid in full. If the Borrowers fail to make payment in respect of any such advance under this Section 9.12 within one (1) Business Day after the date the Borrowers receive written demand therefor from the Agent, the Agent shall promptly notify each Lender and each Lender agrees that it shall thereupon make available to the Agent, in immediately available funds, the amount equal to such Lender's Pro Rata Share of such advance. If such funds are not made available to the Agent by such Lender within one (1) Business Day after the Agent's demand therefor, the Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender 56 to make available to the Agent its Pro Rata Share of any such unreimbursed advance under this Section 9.12 shall neither relieve any other Lender of its obligation hereunder to make available to the Agent such other Lender's Pro Rata Share of such advance on the date such payment is to be made nor increase the obligation of any other Lender to make such payment to the Agent. All outstanding principal of, and interest on, advances made under this Section 9.12 shall constitute Obligations secured by the Collateral until paid in full by the Borrowers. 9.13 JOINT AND SEVERAL LIABILITY OF THE BORROWERS. 9.13.1. JOINT AND SEVERAL OBLIGATIONS. The Borrowers shall be jointly and severally liable for the payment of the Obligations and the performance of each and all of the covenants and agreements of the Borrowers under this Agreement and the other Loan Documents. 9.13.2. LIMITATION ON OBLIGATIONS. (a) In any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Borrower under this Agreement would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such Borrower's liability under this Agreement, then, notwithstanding any other provision of this Agreement to the contrary, the amount of such liability shall, without any further action by the Borrowers, the Agent, the LC Issuer or any Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant Borrower's "Maximum Liability"). This Section 9.13.2(a) with respect to the Maximum Liability of the Borrowers is intended solely to preserve the rights of the Agent, the LC Issuer and the Lenders hereunder to the maximum extent not subject to avoidance under applicable law, and neither any Borrower nor any other Person shall have any right or claim under this Section 9.13.2(a) with respect to the Maximum Liability, except to the extent necessary so that the obligations of each Borrower hereunder shall not be rendered voidable under applicable law. (b) Each of the Borrowers agrees that the Obligations may at any time and from time to time exceed the Maximum Liability of such Borrower, and may exceed the aggregate Maximum Liability of all the Borrowers, without impairing the Borrowers' obligations hereunder or affecting the rights and remedies of the Agent, the LC Issuer and the Lenders hereunder. Nothing in this Section 9.13.2(b) shall be construed to increase any Borrower's obligations hereunder beyond its Maximum Liability. (c) In the event any Borrower (a "Paying Borrower") shall make any payment or payments under this Agreement in excess of its own primary obligations with respect to Loans made to it and Facility LC issued for its account or shall suffer any loss as a result of any realization upon any Collateral granted by it to secure its obligations under this Agreement in excess of its own primary obligations with respect to Loans made to it and Facility LCs issued for its account, each other Borrower (each a "Non-Paying Borrower") shall contribute to such Paying Borrower an amount equal to such Non-Paying Borrower's "Pro Rata Share" of such payment or 57 payments made, or losses suffered, by such Paying Borrower. For the purposes hereof, each Non-Paying Borrower's "Pro Rata Share" with respect to any such payment or loss by a Paying Borrower shall be determined as of the date on which such payment or loss was made by reference to the ratio of (i) such Non-Paying Borrower's Maximum Liability as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder) to (ii) the aggregate Maximum Liability of all Borrowers hereunder (including such Paying Borrower) as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder). Nothing in this Section 9.13.2(c) shall affect any Borrower's several liability for the entire amount of the Obligations (up to such Borrower's Maximum Liability). Each of the Borrowers covenants and agrees that its right to receive any contribution under this Section 9.13.2(c) from a Non-Paying Borrower shall be subordinate and junior in right of payment to all the Obligations. The provisions of this Section 9.13.2(c) are for the benefit of all of the parties to this Agreement and may be enforced by or on behalf of any one, or more, or all of them in accordance with the terms hereof. 9.13.3. OBLIGATIONS UNCONDITIONAL. Subject to Section 9.13.2, the obligations of each of the Borrowers hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any of the Obligations, by operation of law or otherwise, or any obligation of any other guarantor of any of the Obligations, or any default, failure or delay, willful or otherwise, in the payment or performance of the Obligations; (ii) any modification or amendment of or supplement to this Agreement, any Note, any Rate Management Transaction or any other Loan Document; (iii) any release, nonperfection or invalidity of any direct or indirect security for any Obligations under this Agreement, any Note, any Rate Management Transaction, any other Loan Document, or any obligations of any other guarantor of any of the Obligations, or any action or failure to act by the Agent, the LC Issuer, any Lender or any affiliate of any Lender with respect to any Collateral securing all or any part of the Obligations; (iv) any change in the corporate existence, structure or ownership of the Company or any other Borrower or any other guarantor of any of the Obligations, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Borrower or any other guarantor of the Obligations, or its assets, or any resulting release or discharge of any obligation of the Company or any other Borrower or any other guarantor of any of the Obligations; (v) the existence of any claim, setoff or other rights which any Borrower may have at any time against the Company or any other Borrower or any other guarantor of any of the Obligations, the Agent, the LC Issuer, any Lender or any other Person, whether in connection herewith or any unrelated transactions; 58 (vi) any invalidity or unenforceability relating to or against the Company or any other Borrower or any other guarantor of any of the Obligations, for any reason related to this Agreement, any Rate Management Transaction, any other Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment, by the Company or any other Borrower or any other guarantor of the Obligations, of the principal of or interest on any Note or any other amount payable by the Company or any other Borrower under this Agreement, any Note, any Rate Management Transaction or any other Loan Document; or (vii) any other act or omission to act or delay of any kind by the Company or any other Borrower or any other guarantor of the Obligations, the Agent, the LC Issuer, any Lender or any other Person, or any other circumstance whatsoever which might, but for the provisions of this Section 9.13.3, constitute a legal or equitable discharge of any Borrower's obligations hereunder. Each of the Borrowers hereby fully and completely waives, releases and relinquishes any and all defenses and claims based on principles of suretyship and/or guaranty and any and all benefits under Arizona Revised Statutes Sections 12-1641 through 12-1646 and Rule 17(f) of the Arizona Rules of Civil Procedure. 9.14 NO NOVATION. Notwithstanding anything herein to the contrary, it is the intention of the parties hereto that the execution and delivery of this Agreement not effect a novation, payment, discharge, or extinguishment of the Original Agreement, but merely a restatement and substitution of the terms thereof. ARTICLE X THE AGENT 10.1 APPOINTMENT; NATURE OF RELATIONSHIP. Bank One, Arizona, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2 POWERS. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The 59 Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of any Borrower or any guarantor of any of the Obligations or of any Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Company or any Borrower to the Agent at such time, but is voluntarily furnished by the Company or any Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5 ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 60 10.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8 AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrowers for which the Agent is entitled to reimbursement by the Borrowers under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, PROVIDED that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or any Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10 RIGHTS AS A LENDER. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Company or any of its Subsidiaries in which the Company or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. 10.11 LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Company and such 61 other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12 SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Company, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrowers or any Lender, appoint any of its affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrowers shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13 AGENT'S FEE. The Borrowers jointly and severally agree to pay to the Agent, for its own account, the fees agreed to by the Company and the Agent pursuant to those certain letter agreements dated February 9, 2000 and June 14, 2001, or as otherwise agreed from time to time. 10.14 DELEGATION TO AFFILIATES. The Borrowers and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its affiliates. Any such affiliate (and such affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 62 10.15 EXECUTION OF COLLATERAL DOCUMENTS. The Lenders hereby empower and authorize the Agent to execute and deliver to the Borrowers on their behalf any Collateral Documents and all related financing statements and any financing statements, agreements, documents or instruments as shall be necessary or appropriate to effect the purposes of the Collateral Documents. 10.16 COLLATERAL RELEASES. The Lenders hereby empower and authorize the Agent to execute and deliver to the Borrowers on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing. 10.17 CO-AGENTS, SYNDICATION AGENT, ETC. Neither any of the Lenders identified in this Agreement as a "co-agent" nor the Syndication Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Agent in Section 10.11. ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1 SETOFF. In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any affiliate of any Lender to or for the credit or account of such Borrower may be offset and applied toward the payment of the Secured Obligations owing to such Lender, whether or not the Secured Obligations, or any part thereof, shall then be due. 11.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. 11.3 APPLICATION OF PAYMENTS. So long as a Default shall have occurred and be continuing, or if the Borrowers shall otherwise fail to direct the application of payments hereunder, the Agent shall, unless otherwise specified 63 at the direction of the Required Lenders, which direction shall be consistent with the last two sentences of this Section 11.3, apply all payments and prepayments in respect of any Obligations and all proceeds of Collateral in the following order: (A) first, to pay interest on and then principal of any portion of the Loans which the Agent may have advanced on behalf of any Lender for which the Agent has not then been reimbursed by such Lender or the Borrowers; (B) second, to pay interest on and then principal of any advance made under Section 9.12 for which the Agent has not then been paid by the Borrowers or reimbursed by the Lenders; (C) third, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Agent; (D) fourth, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Lenders and the LC Issuer; (E) fifth, to pay interest due in respect of Swing Line Loans; (F) sixth, to pay interest due in respect of the Loans (other than Swing Line Loans) and Reimbursement Obligations; (G) seventh, to the ratable payment or prepayment of principal outstanding on Swing Line Loans; (H) eighth, to the ratable payment or prepayment of principal outstanding on Loans, Reimbursement Obligations and Rate Management Obligations owing to any Lender or any affiliate of any Lender; (I) ninth, to provide required cash collateral pursuant to Section 8.1; and (J) tenth, to the ratable payment of all other Obligations. Unless otherwise designated (which designation shall only be applicable prior to the occurrence of a Default) by the Borrowers, all principal payments in respect of Revolving Loans shall be applied first to repay outstanding Floating Rate Loans and then to repay outstanding Eurodollar Rate Loans, with those Eurodollar Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods. The order of priority set forth in this Section 11.3 and the related provisions of this Agreement are set forth solely to determine the rights and priorities of the Agent, the Lenders, the LC Issuer and other Holders of Secured Obligations as among themselves. The order of priority set forth in clauses (D) through (J) of this Section 11.3 may at any time and from time to time be changed by the Required Lenders without necessity of notice to or consent of or approval by the Borrowers, or any other Person, provided that the order of priority of payments in respect of Swing Line Loans may be changed only with the prior written consent of the Swing Line Lender. The order of priority set forth in clauses (A) through (C) of this Section 11.3 may be changed only with the prior written consent of the Agent. 64 11.4 RELATIONS AMONG LENDERS. Except with respect to the exercise of set-off rights of any Lender in accordance with Section 11.1, the proceeds of which are applied in accordance with this Agreement, and except as set forth in the following sentence, each Lender agrees that it will not take any action, nor institute any actions or proceedings, against any Borrower or any other obligor hereunder or with respect to any Collateral or Loan Document, without the prior written consent of the Required Lenders or, as may be provided in this Agreement or the other Loan Documents, at the direction of the Agent. Notwithstanding the foregoing, and subject to Section 11.2, any Lender shall have the right to enforce on an unsecured basis the payment of the principal of and interest on any Loan made by it after the date such principal or interest has become due and payable pursuant to the terms of this Agreement. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns, except that (i) no Borrower shall have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.2 PARTICIPATIONS. 12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Outstanding Credit Exposure of such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's 65 obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrowers and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. VOTING RIGHTS. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Credit Extension or Commitment in which such Participant has an interest which forgives principal, interest, fees or any Reimbursement Obligation or reduces the interest rate or fees payable with respect to any such Credit Extension or Commitment, extends the Facility Termination Date, postpones any date fixed for any regularly-scheduled payment of principal of or interest on, any Loan in which such Participant has an interest, or any regularly scheduled payment of fees on any such Credit Extension or Commitment, releases any guarantor of any such Credit Extension or releases any collateral held in the Facility LC Collateral Account (except in accordance with the terms hereof) or all or substantially all of any other Collateral securing any such Credit Extension. 12.2.3. BENEFIT OF SETOFF. Each Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, PROVIDED that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 12.3 ASSIGNMENTS. 12.3.1. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. The consent of the Company, the Agent and the LC Issuer shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an affiliate thereof; PROVIDED, HOWEVER, that if a Default has occurred and is continuing, the consent of the Company shall not be required. Such consent shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Lender or an affiliate thereof shall (unless each of the Company and the Agent otherwise consents) be in an amount not less 66 than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender's Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated). 12.3.2. EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of an assignment, together with any consents required by Section 12.3.1, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Outstanding Credit Exposure under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by any Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Outstanding Credit Exposure assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrowers shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.4 DISSEMINATION OF INFORMATION. Each Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Company and its Subsidiaries, including without limitation any information contained in any Reports; PROVIDED that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5 TAX TREATMENT. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). ARTICLE XIII NOTICES 13.1 NOTICES. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (a) in the 67 case of any Borrower, at the address or facsimile number of the Company set forth on the signature pages hereof, (b) in the case of the Agent, at its address or facsimile number set forth below its signature hereto, (c) in the case of any Lender, at its address or facsimile number set forth in its administrative questionnaire or (d) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrowers in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2 CHANGE OF ADDRESS. The Borrowers and the Agent may each change the address for service of notice upon it by a notice in writing to the other parties hereto. Any Lender may change the address for service of notice upon it by a notice in writing to the Borrowers and the Agent. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrowers, the Agent, the LC Issuer and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ARIZONA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2 CONSENT TO JURISDICTION. EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ARIZONA STATE COURT SITTING IN MARICOPA COUNTY, ARIZONA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. 15.3 WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. [Signature Pages Follow] 68 PRICING SCHEDULE LEVEL I LEVEL II LEVEL III LEVEL IV APPLICABLE MARGIN STATUS STATUS STATUS STATUS - ----------------- ------ ------ ------ ------ Eurodollar Rate 3.00% 3.25% 3.50% 3.75% ABR 1.50% 1.75% 2.00% 2.25% LEVEL I LEVEL II LEVEL III LEVEL IV APPLICABLE MARGIN STATUS STATUS STATUS STATUS - ----------------- ------ ------ ------ ------ Letter of Credit Fee 2.75% 3.00% 3.25% 3.50% Commitment Fee 0.375% 0.375% 0.50% 0.50% For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Financials" means the annual or quarterly financial statements of the Company delivered pursuant to Section 6.1(i) or (ii). "Level I Status" exists at any date if, as of the last day of the fiscal quarter of the Company referred to in the most recent Financials, the Leverage Ratio is less than 1.50 to 1.00. "Level II Status" exists at any date if, as of the last day of the fiscal quarter of the Company referred to in the most recent Financials, (i) the Company has not qualified for Level I Status and (ii) the Leverage Ratio is less than 2.00 to 1.00. "Level III Status" exists at any date if, as of the last day of the fiscal quarter of the Company referred to in the most recent Financials, (i) the Company has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is less than 2.50 to 1.00. "Level IV Status" exists at any date if the Company has not qualified for Level I Status, Level II Status or Level III Status. "Status" means Level I Status, Level II Status, Level III Status or Level IV Status. The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Company's Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be effective five business days after the Agent has received the applicable Financials. If the Company fails to deliver the Financials to the Agent at the time required pursuant to the Credit Agreement, then the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table until five days after such Financials are so delivered. The Company's Status will be deemed to be Level IV Status for the first six months after the date hereof. 69 COMMITMENT SCHEDULE LENDER COMMITMENT - ------ -------------- Bank One, Arizona, NA $27,500,000.00 Union Bank of California, N.A. $20,000,000.00 The Bank of Nova Scotia $15,000,000.00 Sun Trust Bank $15,000,000.00 First Tennessee Bank National Association $12,500,000.00 Comerica West Incorporated $10,000,000.00 -------------- Total $100,000,000.00 70 EX-99.1 7 ex99-1.txt PRESS RELEASE DATED 6/22/01 EXHIBIT 99.1 INTERNATIONAL FIBERCOM RENEGOTIATES COMMERCIAL BANKING FACILITY, CONCLUDES PRIVATE PLACEMENT PHOENIX -- (BUSINESS WIRE) -- June 22, 2001 -- International FiberCom Inc. (Nasdaq:IFCI), a leading provider of a full range of services to telecommunications, cable and wireless service providers, announced today that it has entered into an amended and restated credit agreement with its lenders in connection with its $100 million revolving line of credit. Under this new agreement, the company renegotiated certain financial ratios and required balances under the original credit agreement in order to bring it in compliance and to be consistent with its current and anticipated level of operations during the term of the facility, which runs through March 31, 2003. The interest rate increased 125 basis points under the amended facility. Additionally, the company completed the private placement of $10 million of Series D Convertible Preferred Stock to Crescent International Ltd., an investment company managed by GreenLight (Switzerland) SA, and warrants exercisable to purchase 509,554 shares of common stock at a price of $5.89 per share for a five-year term. The Series D Preferred is convertible into common stock at the lower of $5 per share or the average of the five lowest consecutive closing prices of the common stock for the 22 days preceding the conversion date. Crescent also agreed to purchase up to $10 million of common stock of the company in increments of between $200,000 and $2.5 million at the discretion of the company during the 18-month commitment period. The purchase price of the common stock under this commitment will be equal to the average of the three lowest consecutive closing prices during the 22 days preceding the sale. The company agreed to provide registration rights to Crescent in connection with the placement. This news release contains certain forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, by their very nature, include risks and uncertainties. Accordingly, the company's actual results could differ materially from those discussed in this release. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. Such factors, many of which are beyond the control of the company, include the following: the company's success in obtaining new contracts; the volume and type of work orders that are received under such contracts; the accuracy of the cost estimates for projects; the company's ability to complete its projects on time and within budget; levels of, and ability to collect accounts receivable; availability of trained personnel and utilization of the company's capacity to complete work; the company's ability to complete proposed acquisitions and, upon their completion, to integrate the acquisitions into its organization and manage its growth; competition and competitive pressures on pricing; the company's success in marketing its wireless products and services; and economic conditions in the United States and in the regions served by the company. A more complete listing of cautionary statements and risk factors is contained in the company's report on Form 10-K for the year ended Dec. 31, 2000 filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----