Exhibit 10.1

 

Execution Copy

 

FIRST AVENUE NETWORKS, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of December 14,
2004, is by and among FIRST AVENUE NETWORKS, INC., a Delaware corporation (the
“Company”), and each of the investors listed on Schedule I hereto (each of the
persons or entities listed on Schedule I, individually, a “Purchaser” and,
collectively, the “Purchasers”).

 

WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, severally and not jointly, an
aggregate of 12,870,000 shares (the “Shares”) of the authorized but unissued
shares of the Company’s common stock, $0.001 par value per share (including any
securities into which or for which such shares may be exchanged for, or
converted into, pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar event, the
“Common Stock”), at an aggregate purchase price of $93,307,500.00, all upon the
terms and subject to the conditions set forth in this Agreement; and

 

WHEREAS, simultaneously with entering into this Agreement, the Company and the
Purchasers are entering into that certain Registration Rights Agreement, dated
as of the date hereof (the “Registration Rights Agreement”), pursuant to which
the Company will assume obligations with respect to the registration of the
Shares and the Warrant Shares (as defined below) on the terms set forth therein.

 

NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:

 

1. Definitions; Certain Rules of Construction. As used in this Agreement, the
following terms shall have the following respective meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this Agreement,
“control,” when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

 

“Board” means the board of directors of the Company.

 

“business day” (whether such term is capitalized or not) means any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York or the Commonwealth of
Virginia are authorized or required by law or other governmental action to
close.

 

“Closing Date” means the date hereof.

 

“Code” means the Internal Revenue Code of 1986.

 

“Environmental Protection Laws” means any law, statute or regulation enacted by
any jurisdiction in connection with or relating to the protection or regulation
of the environment, including, without limitation, those laws, statutes and
regulations regulating the disposal, removal, production, storing, refining,
handling, transferring, processing or transporting of hazardous or toxic
substances, and any orders, decrees or judgments issued by any court of
competent jurisdiction in connection with any of the foregoing.

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“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any Person required to be aggregated with the Company or
any Subsidiary of the Company under Sections 414(b), (c), (m) or (o) of the
Code.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and all of
the rules and regulations promulgated thereunder.

 

“Exchange Act Reports” means the Company’s reports filed with the SEC since
December 31, 2001, pursuant to Section 13 of the Exchange Act.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

 

“Indebtedness” means, as applied to any Person, all indebtedness for borrowed
money, whether current or funded, or secured or unsecured.

 

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such property
or asset, whether or not filed, recorded or otherwise perfected under applicable
law, other than (a) those resulting from taxes which have not yet become
delinquent, (b) minor liens and encumbrances that do not materially detract from
the value of the property or materially impair the operations of the Company or
materially interfere with the use of such property or asset or (c) those
relating to Indebtedness incurred prior to the date hereof and any replacement
thereof.

 

“Majority Purchasers” means Purchasers holding, at any time, a majority of the
outstanding Shares purchased hereunder on such date.

 

“Material Adverse Effect” means a material adverse effect on the business,
assets, liabilities, properties, operations, prospects or condition (financial
or otherwise) of the Company and its Subsidiaries taken as a whole.

 

“Margin Stock” is defined in Regulation U of the Board of Governors of the
Federal Reserve System.

 

“Offering Memorandum” means the Confidential Offering Memorandum of First Avenue
Networks, Inc., dated as of December 13, 2004.

 

“Person” (whether or not capitalized) means an individual, entity, partnership,
limited liability company, corporation, association, trust, joint venture,
unincorporated organization, and any Governmental Authority.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Plan” means any employee benefit plan, program or arrangement, whether oral or
written, maintained or contributed to by the Company, any Subsidiary of the
Company or any ERISA Affiliate, or with respect to which the Company, any
Subsidiary of the Company or any ERISA Affiliate may incur liability.

 

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“Registration Statements” means the Company’s registration statements filed with
the SEC since December 31, 2001, pursuant to the Securities Act.

 

“Rule 144” means Rule 144 promulgated under the Securities Act and any successor
or substitute rule, law or provision.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” means the Exchange Act Reports and the Registration Statements
filed with the SEC prior to the date hereof.

 

“Securities Act” means the Securities Act of 1933, as amended, and all of the
rules and regulations promulgated thereunder.

 

“Subsidiary” means with respect to any Person at any time, (a) any other Person
the accounts of which would be consolidated with those of such first Person in
its consolidated financial statements as of such time, and (b) any other Person
(i) which is, at such time, controlled by, or (ii) capital securities of which
having ordinary voting power to elect a majority of the board of directors (or
other persons having similar functions), or other ownership interest of which
ordinarily constituting a majority voting interest, are at such time, directly
or indirectly, owned or controlled by, in the case of each of clauses (i) and
(ii), such first Person or one or more of its Subsidiaries or by such first
Person and one or more of its Subsidiaries. Unless otherwise expressly provided,
all references herein to “Subsidiary” means a Subsidiary of the Company.

 

“Teligent Acquisition” means the acquisition of the fixed wireless assets of
Teligent, Inc. by the Company pursuant to an Asset Purchase Agreement among
Teligent, Inc. and the Company, dated as of November 8, 2004.

 

“Transaction Documents” means, collectively, the Registration Rights Agreement
and the Warrants.

 

“Transfer Agent Instruction Letter” means the letter, dated as of the Closing
Date, from the Company to its transfer agent in the form attached hereto as
Exhibit G.

 

“Warrant Shares” means the shares of Common Stock issued or issuable upon the
exercise of the Warrants.

 

“in writing” means any form of written communication or a communication by means
of facsimile transmission.

 

The following table sets forth certain other defined terms and the section of
this Agreement in which the meaning of each such term appears:

 

     Section(s)

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“Aggregate Purchase Price”

   2.1

“Agreement”

   Preamble

 

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     Section(s)

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“Closing”

   2.2

“Common Stock”

   Preamble

“Company”

   Preamble

“Disclosure Schedules”

   3

“Losses”

   7.1

“Permits”

   3.19(b)

“Purchase Price Per Share”

   2.1

“Purchaser”

   Preamble

“Purchaser Indemnitee”

   7.1

“Registration Rights Agreement”

   Preamble

“Securities Laws Exemption”

   3.32

“Shares”

   Preamble

“Warrant(s)”

   2.3

 

2. Purchase and Sale of Shares.

 

2.1 Purchase and Sale. Subject to and upon the terms and conditions set forth in
this Agreement, the Company agrees to issue and sell to each Purchaser, and each
Purchaser hereby agrees, severally and not jointly, to purchase from the
Company, at the Closing, the number of Shares set forth opposite such
Purchaser’s name on Schedule I hereto, at a purchase price equal to $7.25 per
share (the “Purchase Price Per Share”). The aggregate purchase price payable by
the Purchasers to the Company for all of the Shares shall be $93,307,500.00 (the
“Aggregate Purchase Price”).

 

2.2 Closing. The closing of the transactions contemplated under this Agreement
(the “Closing”) shall take place at 5:00 pm (Eastern Time) at the offices of
Ropes & Gray LLP, One International Place, Boston, MA 02110, on the Closing
Date, or on such other date and at such time as may be agreed upon between the
Purchasers, on the one hand, and the Company, on the other hand. At the Closing,
the Company shall deliver to each Purchaser a single stock certificate,
registered in the name of such Purchaser, representing the number of Shares
purchased by such Purchaser, against payment of the purchase price by wire
transfer of immediately available funds to such account as the Company shall
designate in advance in writing, which stock certificate shall bear the legend
set forth in Section 6.2(a). The stock certificates delivered to the Purchasers
and representing the Shares will be registered in the names and addresses of the
Purchasers set forth on Schedule I hereto.

 

2.3 Issuance of Common Stock Purchase Warrants at Closing. Subject to and upon
the terms and conditions set forth in this Agreement, the Company agrees to
issue to each Purchaser, at the Closing, a Common Stock Purchase Warrant,
substantially in the form attached as Exhibit A hereto (each individually, a
“Warrant” and, collectively with all Common Stock Purchase Warrants issued
pursuant to this Section 2.3 to the other Purchasers, the “Warrants”),
exercisable for the number of shares of Common Stock set forth opposite the name
of such Purchaser under the heading “Number of Warrant Shares” on Schedule I
hereto, at an exercise price equal to the Purchase Price Per Share. No
additional consideration shall be payable by any Purchaser in respect of the
issuance by the Company of such Purchaser’s Warrant at the Closing.

 

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3. Representations and Warranties of the Company. In order to induce the
Purchasers to enter into this Agreement and to purchase the Shares, except as
set forth in the corresponding sections of the Disclosure Schedules delivered
concurrently herewith (the “Disclosure Schedules”), the Company hereby makes the
following representations and warranties as of the Closing Date, all of which
shall survive the execution and delivery of this Agreement and the purchase of
the Shares:

 

3.1 Corporate Status. Each of the Company and its Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate or limited liability
company, as applicable, power and authority to own its property and assets and
to transact the business in which it is engaged and presently proposes to engage
and (b) has duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified and where the failure to be
so qualified would reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is currently in violation of any
of the provisions of its Certificate of Incorporation (or other charter
document) or By-laws, each as amended to date.

 

3.2 Corporate Power and Authority. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
herein and therein has been taken. When executed and delivered by the Company,
this Agreement and each of the Transaction Documents shall constitute the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally
and by general equitable principles. The Company has all requisite corporate
power and authority to enter into this Agreement and the Transaction Documents
and to carry out and perform its obligations under the terms hereof and thereof.

 

3.3 No Violation. Neither the execution, delivery and performance by the Company
of this Agreement and the Transaction Documents nor compliance with the terms
and provisions hereof and thereof (a) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or Governmental Authority, except as would not have a Material Adverse
Effect, (b) will conflict or be inconsistent with or result in any breach of,
any of the material terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of the Company
or any Subsidiary pursuant to the terms of, any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its or their property or assets
are bound or to which it may be subject or result in the acceleration of any
material obligation of the Company, or (c) will violate any provision of the
Certificate of Incorporation or by-laws of the Company, each as amended to date.

 

3.4 Capitalization. Exhibit 3.4 sets forth the number of authorized, issued and
outstanding shares of capital stock of the Company, and outstanding warrants and
options to purchase capital stock of the Company (a) as of the date hereof, (b)
as of the date hereof pro forma to give effect to the Teligent Acquisition and
(c) as of the date hereof pro forma to give effect to the sale of the Shares and
Warrants hereunder. As of the date hereof, the authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, of which 21,288,016
shares are issued and outstanding. As of the date hereof, 6,547,305 shares of
Common Stock were reserved for future issuance pursuant to outstanding options
and warrants issued by the Company. As of the date hereof, except as set forth
above, as set forth in Section 3.4 of the Disclosure Schedules, and for the
exercise rights of the Warrants, there are no other

 

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outstanding options, warrants, rights (including conversion or preemptive
rights) or any agreement for the purchase or acquisition from the Company or any
Subsidiary of any shares of the Company’s capital stock or voting agreements
with respect to equity of the Company. All shares of the capital stock of the
Company subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. There
are no obligations, contingent or otherwise, of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Common Stock or other
equity securities of the Company or to provide funds to or make any investment
(in the form of a loan, capital contribution, guaranty or otherwise) in any
other entity. The sale of the Shares and the issuance of the Warrants under this
Agreement, and the issuance of any Warrant Shares upon exercise of the Warrants
in their current form, will not result in the Company being obligated to issue,
sell or purchase, pursuant to any existing pre-emptive, anti-dilution,
redemption or other right of third parties, shares of Common Stock or other
securities to or from any Person (other than the Purchasers), and will not
result in a right of any holder of convertible or contingent securities issued
by the Company to adjust the exercise, conversion, exchange or reset price under
such securities, including, in any such case, pursuant to any “poison pill” or
shareholders rights plan. None of the outstanding shares of capital stock of the
Company were issued in violation of the Securities Act or any state securities
laws.

 

3.5 Valid Issuance of the Shares. The Shares, the Warrants and the Warrant
Shares have been duly authorized, and the Shares and the Warrant Shares, upon
issuance pursuant to the terms hereof and the terms of the Warrants,
respectively, (a) will be validly issued, fully paid and nonassessable, (b) will
not be subject to any encumbrances, preemptive rights or any other similar
contractual rights of the stockholders of the Company or any other Person, and
(c) the applicable Purchaser (with respect to the Shares) and the applicable
Holder (as defined in the Warrant) will obtain sole record and beneficial
ownership of such Shares and Warrant Shares (as applicable) and take good
marketable title thereto, free and clear of any Liens (defined for purposes
hereof without regard to the carve-outs set forth in clauses (a) through (c) of
the definition of Lien), claims, charges, taxes, options or transfer
restrictions of any kind which are imposed by the Company, or arise as a result
of the Company’s action or omission, other than those transfer restrictions
explicitly set forth in this Agreement and in the Warrants. The Company has
reserved from its duly authorized capital stock the number of shares of Common
Stock issuable upon execution of this Agreement and upon exercise in full of the
Warrants (assuming the Warrants vest in full).

 

3.6 Litigation. Except as disclosed in Section 3.6 of the Disclosure Schedules,
no actions, suits, claims, investigations or proceedings are pending or, to the
Company’s knowledge, threatened that would reasonably be expected to have,
individually or in the aggregate (a) a Material Adverse Effect or (b) an adverse
effect on the rights or remedies of the Purchasers or on the ability of the
Company or its Subsidiaries to perform their respective obligations under this
Agreement or the Transaction Documents. Neither the Company nor any Subsidiary
is a party to or named in or subject to any order, writ, injunction, judgment or
decree of any court or Governmental Authority. There is no action, suit, claim,
proceeding or investigation by the Company or any Subsidiary currently pending
or that the Company or any Subsidiary currently intends to initiate.

 

3.7 Approvals. Except for (a) any required filings and recordings which have
been made and are in full force and effect, (b) the filing of a registration
statement with the SEC pursuant to the Registration Rights Agreement and (c)
applicable blue sky notice filings, no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any Person or Governmental Authority, is required to authorize or
is required in connection with (i) the execution, delivery and performance of
this Agreement or the Transaction Documents or (ii) the legality, validity,
binding effect or enforceability of this Agreement or the Transaction Documents.
The execution and delivery by the Company of this Agreement and the Transaction
Documents, the consummation of

 

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the transactions contemplated herein and therein, and the issuance of the Shares
and the Warrants and, upon exercise of the Warrants, the Warrant Shares, do not
require the consent or approval of the stockholders of the Company or any other
Person.

 

3.8 Contracts. All material agreements to which the Company is a party or to
which the property or assets of the Company are subject are included as part of
or specifically identified in the SEC Reports to the extent required by the
rules and regulations of the SEC as in effect at the time of filing of such SEC
Reports. All such material agreements required to be filed as exhibits to the
SEC Reports are legal, valid and binding obligations of the Company in
accordance with their respective terms and, to the knowledge of the Company, the
other parties thereto, except in any case as may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally
and by general equitable principles. The Company and its Subsidiaries are not,
nor to their knowledge is any counterparty, in violation of or default under,
any material agreement.

 

3.9 Conformity to Securities Act and Exchange Act; No Misstatement or Omission.
Each of the SEC Reports as of the date it was filed with the SEC in the case of
filings under the Exchange Act or declared effective in the case of the
Registration Statements, complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as applicable) and the
respective rules and regulations of the SEC thereunder and did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading. Since December 31, 2003,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act.

 

3.10 Financial Statements; Indebtedness.

 

(a) Except as set forth in Section 3.10(a) of the Disclosure Schedules, the
financial statements and supporting schedules included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2003, and in the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 and in
any Registration Statements or other SEC Reports, in each case filed with the
SEC, are complete and correct in all material respects and present fairly the
consolidated financial position of the Company and its Subsidiaries as of the
dates specified and the consolidated results of their operations and cash flows
for the periods specified, in each case, in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as indicated therein or in the notes thereto.

 

(b) Except for Indebtedness reflected in Section 3.10(b) of the Disclosure
Schedules and in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2003, and in the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004, the Company has no Indebtedness outstanding at
the date hereof. The Company is not in default with respect to any outstanding
Indebtedness or any instrument relating thereto, and no event has occurred, or
facts and circumstances exist, which, after passage of time, would result in
such a default.

 

3.11 Margin Regulations. Neither the sale of the Shares and Warrants, nor the
use of the proceeds thereof, will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.

 

3.12 Investment Company Act. The Company is not an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940.

 

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3.13 Public Utility Holding Company Act. The Company is not 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.

 

3.14 No Material Adverse Changes. Since September 30, 2004, (a) no event has
occurred which has had, or would reasonably be expected to have, a Material
Adverse Effect; (b) except as contemplated by this Agreement, as described in
the SEC Reports, or as set forth in Section 3.14(b) of the Disclosure Schedules,
there has been no transaction entered into by the Company or any of its
Subsidiaries other than transactions in the ordinary course of business or
transactions which would not, individually or in the aggregate, be material to
the Company; (c) there have not been any changes in the Company’s authorized
capital or any increases in the Indebtedness of the Company and its Subsidiaries
taken as a whole, except as set forth in Section 3.14(c) of the Disclosure
Schedules; (d) there has been no actual or, to the knowledge of the Company,
threatened revocation of, or default under, any contract to which the Company or
any of its Subsidiaries is a party, except as would not have a Material Adverse
Effect; (e) except as set forth in Section 3.14(e) of the Disclosure Schedules,
there have not been any amendments or changes in the charter documents or
by-laws of the Company or the Subsidiaries; (f) except as set forth in Section
3.14(f) of the Disclosure Schedules, there have not been any entry into,
amendment of, relinquishment, termination or non-renewal by the Company or the
Subsidiaries of any material contract, license, lease, transaction, commitment
or other right or obligation, other than in the ordinary course of business,
consistent with past practice; and (g) there has not been any transfer or grant
of a right with respect to the Intellectual Property owned or licensed by the
Company or the Subsidiaries, except as among the Company and the Subsidiaries.

 

3.15 Tax Returns and Payments. Except as disclosed in Section 3.15 of the
Disclosure Schedules, each of the Company and each of its Subsidiaries has filed
all federal income tax returns and all other domestic and foreign tax returns
and reports required to be filed by it and has paid all taxes and assessments
payable by it which have become due, except for those contested in good faith
and adequately reserved against (in the good faith determination of the
Company), all of which, to the extent outstanding on the Closing Date, have been
disclosed by the Company in the SEC Reports. All such returns and reports are
true and correct in all material respects. Except as disclosed in Section 3.15
of the Disclosure Schedules, each of the Company and each of its Subsidiaries
has paid, or has provided adequate reserves (in the good faith judgment of the
Company) for the payment of, all material federal, state and foreign taxes that
are not yet due and payable for all fiscal years, including the current fiscal
year, to date. Except as disclosed in Section 3.15 of the Disclosure Schedules,
no action, suit, proceeding, investigation, audit or claim is now pending or, to
the knowledge of the Company or its Subsidiaries, threatened by any authority
regarding any taxes relating to the Company or any of its Subsidiaries which
would reasonably be expected to have a Material Adverse Effect. As of the
Closing Date, neither the Company nor any of its Subsidiaries has entered into
an agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of the Company or any of its Subsidiaries. Except as disclosed in Section
3.15 of the Disclosure Schedules, no tax return of the Company or any of its
Subsidiaries is or has been the subject of an audit or examination by any taxing
authority, other than any such audit or examination which has been completed or
closed. Each of the Company and its Subsidiaries has withheld from each payment
made to any of its past or present employees, officers and directors, and any
other person, the amount of all material taxes and other deductions required to
be withheld therefrom and paid the same to the proper taxing authority within
the time required by law.

 

3.16 Subsidiaries. As of the Closing Date, the Company has no directly held
Subsidiary other than those listed in Section 3.16 of the Disclosure Schedules.
Each of the Company and the Subsidiaries has good and marketable title to all of
the shares it purports to own of the stock of each

 

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Subsidiary, free and clear in each case of any Lien (defined for purposes hereof
without regard to the carve-outs contained in (a) to (c) of the definition of
Lien). All such shares have been duly authorized, validly issued and are fully
paid and nonassessable. As of the Closing Date, the Company is not party to any
joint venture or similar arrangement.

 

3.17 Properties. The Company and each of its Subsidiaries owns its properties
and assets, including all such properties reflected in their balance sheets
included in the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2004, free and clear of all Liens, other than as referred to in
such balance sheet or in the notes thereto. With respect to leased property and
assets, the Company and its Subsidiaries are in compliance with such leases and
hold a valid leasehold interest, free of any Liens.

 

3.18 Labor Relations. The Company and its Subsidiaries are not engaged in any
unfair labor practice. No unfair labor practice complaint is pending against the
Company or any of its Subsidiaries or, to the best of its knowledge, threatened
against it or any of its Subsidiaries, before the National Labor Relations Board
or similar foreign labor relations authority, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Company or any of its Subsidiaries, or, to the best of its
knowledge, threatened against it or any of its Subsidiaries. No strike, labor
dispute, slowdown or stoppage is pending against the Company or any of its
Subsidiaries or, to the best of its knowledge, threatened against the Company or
any of it Subsidiaries. No union representation question exists with respect to
the employees of the Company or any of its Subsidiaries and no union organizing
activities are taking place. The Company and its Subsidiaries have complied in
all material respects with all applicable state and federal equal opportunity
and other laws related to employment. To the Company’s knowledge, no employee of
the Company or any Subsidiary is or will be in violation of any judgment,
decree, or order, or any term of any employment contract, patent disclosure
agreement, or other contract or agreement relating to the relationship of any
such employee with the Company or any Subsidiary, or any other party because of
the nature of the business presently conducted or presently proposed to be
conducted by the Company and its Subsidiaries. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any of the foregoing. Subject to general principles related to wrongful
termination of employees, the employment of each officer and employee of the
Company and its Subsidiaries is terminable at the will of the Company or the
applicable Subsidiary.

 

3.19 Regulatory Matters.

 

(a) Authorizations. The Company holds all Federal Communications Commission
(“FCC”), state public utility commission (“PUC”) and foreign regulatory
authority permits, licenses, certificates, registrations and other similar
authorizations necessary or appropriate for the conduct of its business
(collectively, the “Authorizations”), the lack of which would, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. The
Company and its Subsidiaries have maintained and kept in force and effect, and
have applied in a timely manner for renewal of all such Authorizations. Except
as disclosed in Section 3.19(a) of the Disclosure Schedules, the Company and its
Subsidiaries are in compliance with all such Authorizations and any terms and
conditions thereto except such non-compliance as would not, individually or in
the aggregate, have a Material Adverse Effect. Except as disclosed in Section
3.19(a) of the Disclosure Schedules, each Authorization which is material to the
business of the Company is valid and in full force and effect, and the Company
and its Subsidiaries have not received notice from the FCC, any PUC, or any
foreign regulatory authority of its intention to revoke, suspend, condition or
fail to renew any such Authorization, which would, individually or in the
aggregate, have a Material Adverse Effect. Except as disclosed in Section
3.19(a) of the Disclosure Schedules, no event has occurred or facts and
circumstances exist, which allows or would reasonably be

 

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expected to allow, or which after notice or lapse of time would allow or would
reasonably be expected to allow, revocation, suspension, non-renewal or
termination or result in any other material impairment of the Company’s or its
Subsidiaries’ rights under any of its Authorizations to the extent that such
revocation, termination or impairment would have a Material Adverse Effect.

 

(b) Compliance with Law. Except as disclosed in Section 3.19(a) of the
Disclosure Schedules, the conduct of the Company’s business complies with all
applicable U.S., state, local and foreign laws (including, without limitation,
the Communications Act of 1934, as amended, and the Communications Assistance
for Law Enforcement Act), ordinances, rules, regulations, and orders (including,
without limitation, those issued by the FCC, any PUC or any foreign regulatory
authority), except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect.

 

3.20 Permits. The Company and its Subsidiaries have all franchises, permits,
licenses and any similar authority (the “Permits”) necessary for the conduct of
their business as now being conducted by them, the lack of which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As of the date hereof, no suspension or cancellation of any of
the Permits is pending or, to the knowledge of the Company, threatened which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
presently proposed to be conducted. The Company and its Subsidiaries are not in
default under any of such franchises, permits, licenses or other similar
authorities.

 

3.21 ERISA. Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate maintains or contributes to any Plan other than those listed in
Section 3.21 of the Disclosure Schedules.

 

(a) Compliance with ERISA. The Company and each ERISA Affiliate is in compliance
with ERISA, except for such failures to comply that, in the aggregate for all
such failures, would not reasonably be expected to have a Material Adverse
Effect and no contributions required to be made by the Company or any ERISA
Affiliate to any pension plan are overdue.

 

(b) PBGC. No liability to the PBGC has been or is expected to be incurred by the
Company or any ERISA Affiliate with respect to any pension plan that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. No circumstance exists that constitutes grounds under
section 4042 of ERISA entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administer, any pension plan or trust created
thereunder, nor has the PBGC instituted any such proceeding.

 

(c) Multiemployer Plans. Neither the Company nor any ERISA Affiliate has
incurred or presently expects to incur any withdrawal liability under Title IV
of ERISA with respect to any multiemployer plan except for such withdrawal
liability that, in the aggregate of all such liabilities, would not reasonably
be expected to have a Material Adverse Effect. There have been no “reportable
events” (as such term is defined in section 4043 of ERISA) with respect to any
multiemployer plan that could result in the termination of such multiemployer
plan and give rise to a liability of the Company or any ERISA Affiliate in
respect thereof except for such “reportable events” that, in the aggregate for
all such “reportable events,” would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has incurred or
does it expect to incur liability under Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension plan” for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified and nothing has occurred, whether by action or by failure to act,
which could reasonably be expected to cause the loss of such qualification.

 

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3.22 No Undisclosed Liabilities. Except as disclosed, reflected or reserved
against in the financial statements and supporting schedules included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2003, and
in the Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2004 and in any Registration Statements or other SEC Reports, there are no
material liabilities of the Company or any Subsidiary, other than liabilities
incurred in the ordinary course of business consistent with past practice since
September 30, 2004 or which in the aggregate would not reasonably be expected to
result in a Material Adverse Effect.

 

3.23 Insurance. The Company maintains insurance of the types and in the amounts
and covering such risks as is prudent and adequate for its business as currently
conducted and for the value of its properties as is customary for companies
engaged in similar lines of business in similar industries, all of which
insurance is in full force and effect. Neither the Company nor any Subsidiary
has (i) received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in order
to continue such insurance or (ii) any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business.

 

3.24 Accounts Receivable. The accounts and notes receivable of the Company and
its Subsidiaries reflected on the balance sheet included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2003, and all accounts and
notes receivable arising subsequent to December 31, 2003, (i) arose from bona
fide sales transactions in the ordinary course of business consistent with past
practice and are payable on ordinary trade terms, (ii) to the knowledge of the
Company and each Subsidiary, are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (iii)
to the knowledge of the Company and each Subsidiary, are not subject to any
valid set-off or counterclaim, and (iv) are not the subject of any actions or
proceedings brought by or on behalf of the Company or any Subsidiary.

 

3.25 Brokers. Except as disclosed in Section 3.25 of the Disclosure Schedules,
neither the Company nor any Subsidiary has any liability to pay any fees,
commissions or other similar compensation to any broker, finder, investment
banker, financial advisor or other similar Person in connection with the
transactions contemplated by this Agreement.

 

3.26 Leases. Each of the Company and the Subsidiaries has complied with all
material obligations under all leases for real property to which it is a party
as a lessee. All leases relating to the leasehold estates of each of the Company
and the Subsidiaries necessary for the conduct of the business of such Person
are, with respect to the Company, valid and enforceable, and, to the knowledge
of the Company, are, valid and enforceable with respect to the lessor, and each
of the Company and the Subsidiaries that is the lessee in respect thereof
currently enjoys peaceful and undisturbed possession of the premises subject
thereto.

 

3.27 Intellectual Property. Except as set forth in Section 3.27 of the
Disclosure Schedules, each of the Company and the Subsidiaries owns, possesses
or has the right to use all of the patents, trademarks, service marks, trade
names, copyrights, franchises and licenses, and rights with respect thereto
(collectively, “Intellectual Property”), necessary for the present conduct of
its business and as such business is proposed to be conducted, without any
infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the Company’s and/or its
Subsidiaries’ Intellectual Property with the exception of agreements for the
sale or license of the Company’s products or services in the ordinary course of
business. The Company has not received any communications alleging that the
Company or any Subsidiary has violated or, by conducting its business as
presently proposed, would violate any of the Intellectual Property of any other
Person.

 

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3.28 Environmental Compliance.

 

(a) Compliance. Each of the Company and the Subsidiaries is in compliance with
all Environmental Protection Laws in effect in each jurisdiction where it is
currently doing business and no material expenditures will be required in order
to comply with any Environmental Protection Law.

 

(b) Liability. Neither the Company nor any Subsidiary is subject to any
liability under any Environmental Protection Law that, in the aggregate for all
such liabilities, would reasonably be expected to have a Material Adverse
Effect.

 

(c) Notices. Neither the Company nor any Subsidiary has received any

 

(i) notice from any Governmental Authority by which any of its currently or
previously owned or leased properties has been identified in any manner by any
Governmental Authority as a hazardous substance disposal or removal site, “Super
Fund” clean-up site, or candidate for removal or closure pursuant to any
Environmental Protection Law,

 

(ii) notice of any Lien arising under or in connection with any Environmental
Protection Law that has attached to any revenues of, or to, any of its currently
or previously owned or leased properties, or

 

(iii) communication, written or oral, from any Governmental Authority concerning
any action or omission in connection with its currently or previously owned or
leased properties resulting in the release of any hazardous substance resulting
in any violation of any Environmental Protection Law,

 

in each case where the effect of which, in the aggregate for all such notices
and communications, would reasonably be expected to have a Material Adverse
Effect.

 

3.29 Registration Rights. Except as set forth on Section 3.29 of the Disclosure
Schedules, the Company is not currently subject to any agreement providing any
Person any rights (including piggyback registration rights) to have any
securities of the Company registered with the SEC or registered or qualified
with any other Governmental Authority. Currently, no Person has, with respect to
the Company, and the Company will not grant to any Person any registration
rights (including demand and “piggyback” registration rights) inconsistent with
or superior to any of those contained in the Registration Rights Agreement, so
long as any of the registration rights under the Registration Rights Agreement
remain in effect.

 

3.30 Transactions with Affiliates and Employees. Except as set forth in the SEC
Reports or in Section 3.30 of the Disclosure Schedules, none of the officers,
directors or employees of the Company (or members of any such Person’s immediate
family) is presently a party to any transaction or agreement with the Company
(other than for services as employees, officers and directors entered into in
the ordinary course of business consistent with past practices) exceeding
$60,000 in value, including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner. Except in connection
with the Transaction Documents or the Teligent Acquisition or as set forth in
Section 3.30 of

 

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the Disclosure Schedules, there are no agreements, understandings or proposed
transactions between the Company or any Subsidiary, on the one hand, and any of
its officers, affiliates or directors, or any of their affiliates, on the other
hand.

 

3.31 Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorizations, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and its Subsidiaries have
established and maintained disclosure controls and procedures (as such term is
defined in Rule 13a-14 and Rule l5d-14 under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information
relating to the Company and its Subsidiaries is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, and such disclosure controls and procedures are effective to
perform the functions for which they were established; the Company’s auditors
and the audit committee of the board of directors of the Company have been
advised of: (i) any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company’s or its
Subsidiaries’ ability to record, process, summarize, and report financial data;
and (ii) any fraud, whether or not material, that involves management or other
employees who have a role in the Company’s or its Subsidiaries’ internal
controls; any material weaknesses in internal controls have been identified for
the Company’s auditors; since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses; the principal executive officer and
principal financial officer of the Company have made all certifications required
by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any related
rules and regulations promulgated by the SEC, and the statements contained in
any such certification are complete and correct; and the Company and its
Subsidiaries are otherwise in compliance with all applicable provisions of the
Sarbanes-Oxley Act that are effective.

 

3.32 Securities Laws. Subject to the accuracy of the Purchasers’ representations
and warranties set forth in Section 4 below and an Investor Questionnaire
executed and delivered by each Purchaser to the Company, such Investor
Questionnaire in the form attached hereto as Exhibit B, the offer, sale and
issuance of the Shares and the Warrants, and issuance of Warrant Shares, as
provided in this Agreement and the Warrants, is and is intended to be (a) exempt
from the registration requirements of the Securities Act pursuant to one or more
of Sections 3(b) and 4(2) thereof and Regulation D promulgated thereunder, and
(b) exempt from registration or qualification requirements of applicable state
securities laws (together, the “Securities Laws Exemptions”). Neither the
Company nor anyone acting on its behalf has taken any action that would cause
the loss of such exemptions.

 

3.33 No Integrated Offering. Neither the Company, nor any Affiliate of the
Company, 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 cause the offering or issuance
of the Shares, the Warrants or any Warrant Shares pursuant to this Agreement and
the Transaction Documents to be integrated with prior offerings by the Company
for purposes of the Securities Act which would cause the exemptions from SEC
registration upon which the Company is relying for the offering or issuance of
the Shares, the Warrants or any Warrant Shares pursuant to this Agreement to be
unavailable, or would cause any applicable state securities laws exemptions or
any applicable stockholder approval provisions exemptions, including, without
limitation, under the rules and regulations of any national securities exchange
or automated quotation system on which any of the

 

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securities of the Company are listed or designated to be unavailable, nor will
the Company take any action or steps that would cause the offering or issuance
of the Shares, the Warrants or any Warrant Shares pursuant to this Agreement and
the Transaction Documents to be integrated with other offerings.

 

3.34 Section 203 of the DGCL. Each Purchaser is not an “interested stockholder”
(as defined in Section 203 of Delaware General Corporation Law (the “DGCL”)) of
the Company as of the Closing Date, nor will a Purchaser be deemed an
“interested stockholder” as a result of the consummation of the transactions
contemplated herein, and the restrictions on “business combinations” (as defined
in Section 203 of the DGCL) set forth in Section 203 of the DGCL do not apply to
the transactions contemplated hereby. The Board of Directors of the Company has
approved the issuance to each Purchaser of the Warrant Shares issuable upon
exercise of the Warrants, and the restrictions on “business combinations” set
forth in Section 203 of the DGCL will not apply to any exercise of the Warrants
by a Purchaser.

 

3.35 Teligent Asset Purchase Agreement. The representations and warranties
provided by the Company and, to the knowledge of the Company, Teligent, Inc., in
the Asset Purchase Agreement among Teligent, Inc. and the Company dated as of
November 8, 2004 are true and correct.

 

3.36 Solvency. Based on the consolidated financial condition of the Company and
the Subsidiaries as of the date hereof, (i) the fair saleable value of the
Company’s assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
and contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted, including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debts when such amounts
are required to be paid. The Company has no present intention to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).

 

3.37 Disclosure. Neither this Agreement, the Registration Rights Agreement, the
Warrants, the Offering Memorandum, nor any other statements or certificates made
or delivered in connection herewith or therewith, when taken as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.

 

4. Representations and Warranties of the Purchasers. Each Purchaser represents
and warrants, severally (as to such Purchaser only) and not jointly, to the
Company as follows:

 

4.1 Authorization. All corporate, partnership or limited liability company
action on the part of such Purchaser necessary for the authorization, execution,
delivery and performance of this Agreement and the Registration Rights
Agreement, and the consummation of the transactions contemplated herein and
therein, has been taken. When executed and delivered by such Purchaser, each of
this Agreement and the Registration Rights Agreement will constitute the legal,
valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally and by general equitable principles. Such Purchaser has all requisite
corporate, partnership or limited liability company power and authority to enter
into each of this Agreement and the Registration Rights Agreement, and to carry
out and perform its obligations under the terms hereof and thereof.

 

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4.2 Purchase Entirely for Own Account. Such Purchaser is acquiring the Shares
and the Warrants for its own account for investment and not for resale or with a
view to distribution thereof in violation of the Securities Act.

 

4.3 Investor Status; Etc. Such Purchaser certifies and represents to the Company
that it is an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act and was not organized for the purpose of
acquiring any of the Shares or the Warrants. Such Purchaser’s financial
condition is such that it is able to bear the risk of holding the Shares for an
indefinite period of time and the risk of loss of its entire investment. Such
Purchaser has sufficient knowledge and experience in investing in companies
similar to the Company so as to be able to evaluate the risks and merits of its
investment in the Company.

 

4.4 Securities Not Registered. Such Purchaser understands that the Shares, the
Warrants and any Warrant Shares issued thereunder have not been registered under
the Securities Act, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act, and that the
Shares, the Warrants and any Warrant Shares issued thereunder must continue to
be held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration. Such Purchaser
understands that the exemptions from registration afforded by Rule 144 (the
provisions of which are known to it) promulgated under the Securities Act depend
on the satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.

 

4.5 No Violation. Neither the execution, delivery and performance by such
Purchaser of this Agreement and the Registration Rights Agreement nor compliance
with the terms and provisions hereof by such Purchaser (a) will contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or Governmental Authority, except as would not
have a material adverse effect on such Purchaser’s ability to consummate the
transactions contemplated hereby; or (b) will violate any provision of the
organizational documents of such Purchaser, except as would not have a material
adverse effect on such Purchaser’s ability to consummate the transactions
contemplated hereby.

 

4.6 Brokers. Such Purchaser has not retained, utilized or been represented by
any broker or finder in connection with the transactions contemplated by this
Agreement.

 

4.7 Consents. All consents, approvals, orders and authorizations required on the
part of such Purchaser in connection with the execution, delivery or performance
of this Agreement and the consummation of the transactions contemplated herein
have been obtained and are effective as of the date hereof.

 

4.8 Disclosure of Information. Such Purchaser has relied on its own examination
of the Company, including the merits and risks involved in making an investment
decision with respect to the Common Stock. Such Purchaser believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares and the Warrants. Such Purchaser further
acknowledges that it has reviewed the Offering Memorandum and that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares and the Warrants and the
business, properties, prospects and financial condition of the Company.

 

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5. Conditions Precedent.

 

5.1 Conditions to the Obligation of the Purchasers to Consummate the Closing.
The obligation of each Purchaser to consummate the Closing and to purchase and
pay for the Shares and Warrants to be purchased by it is subject to the
satisfaction (or waiver by such Purchaser) of the following conditions
precedent:

 

(a) The representations and warranties of the Company contained herein shall be
true and correct in all respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Company shall
have performed all obligations and conditions herein required to be performed or
complied with by the Company on or prior to the Closing Date.

 

(b) There shall have been no event or events which has occurred since the date
hereof that taken individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect.

 

(c) No proceeding challenging this Agreement or the Transaction Documents, or
the transactions contemplated hereby or thereby, or seeking to prohibit, alter,
prevent or materially delay the Closing, shall have been instituted before any
court, arbitrator or Governmental Authority or official or shall be pending
against or involving the Company or any Subsidiary.

 

(d) The sale of the Shares and Warrant Shares and the issuance of the Warrants
to the Purchasers shall not be prohibited by any law, rule, governmental order
or regulation. All necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with, any
Governmental Authority or of or with any other Person with respect to any of the
transactions contemplated hereby shall have been duly obtained or made and shall
be in full force and effect.

 

(e) The Purchasers shall have received from Ropes & Gray LLP, outside counsel to
the Company, an opinion addressed to such Purchaser, dated the Closing Date and
substantially in the form of Exhibit C hereto.

 

(f) The Purchasers shall have received from Wiley Rein & Fielding LLP, outside
regulatory counsel to the Company, an opinion addressed to such Purchaser, dated
the Closing Date and substantially in the form of Exhibit D hereto.

 

(g) The Purchasers and Tejas Securities Group, Inc. (“Tejas Securities”), as
placement agent, shall have received a letter from KBA Group LLP, independent
certified public accountants for the Company, dated the Closing Date, addressed
to Tejas Securities and the Purchasers, in form and substance reasonably
satisfactory to Tejas Securities and the Purchasers.

 

(h) The Registration Rights Agreement shall have been executed and delivered to
the Purchasers by the Company.

 

(i) The Company shall have delivered to the Purchasers a certificate
substantially in the form of Exhibit E hereto dated the Closing Date and signed
by the secretary or another officer of the Company, certifying (i) that the
copies of the Certificate of Incorporation, the By-Laws and resolutions of the
Board approving this Agreement, the Transaction Documents and the transactions
contemplated hereby and thereby attached thereto, are all true, complete and
correct and remain in full force and effect as of such date, and (ii) as to the
incumbency and specimen signature of each officer of the Company executing this
Agreement, the Transaction Documents and any other document delivered in
connection herewith on behalf of the Company.

 

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(j) The Company shall have delivered to the Purchasers a certificate
substantially in the form of Exhibit F hereto dated the Closing Date and signed
by the Company’s chief financial officer, certifying that (i) the
representations and warranties of the Company contained in Section 3 hereof are
true and correct in all respects on the Closing Date and (ii) the Company has
performed and complied with all of the agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Company on or before the Closing Date.

 

(k) Such Purchaser shall have received from the Company an original stock
certificate evidencing the purchase of the Shares and an original Warrant, in
each case for the number of shares of Common Stock and the number of Warrant
Shares, respectively, set forth opposite such Purchaser’s name on Schedule I
hereto, and bearing the legends required to be imprinted thereon pursuant to
Section 6.2 hereof.

 

(l) The Company shall have delivered to the Purchasers a certificate of good
standing for the Company and each Subsidiary issued by the Secretary of State of
its applicable state of incorporation or organization, and, with respect to the
Company a certificate of qualification to do business issued by the Secretary of
the Commonwealth of the Commonwealth of Virginia.

 

(m) The Purchasers shall have received a copy of the duly executed Transfer
Agent Instruction Letter in the form of Exhibit G hereto.

 

(n) All instruments and corporate proceedings of the Company in connection with
the transactions contemplated by this Agreement and the Transaction Documents
shall be satisfactory in form and substance to such Purchaser, and such
Purchaser shall have received copies (executed or certified, as may be
appropriate) of all documents which any Purchaser may have reasonably requested
in connection with such transactions.

 

(o) The occurrence of the Closing on or prior to December 31, 2004.

 

5.2 Conditions to the Obligation of the Company to Consummate the Closing. The
obligation of the Company to consummate the Closing and to issue and sell the
Shares and Warrants to each Purchaser at the Closing is subject to the
satisfaction of the following conditions precedent:

 

(a) The representations and warranties of such Purchaser contained herein shall
be true and correct in all respects on and as of the Closing Date.

 

(b) The Registration Rights Agreement shall have been executed and delivered by
such Purchaser.

 

(c) Such Purchaser shall have performed all obligations and conditions herein
required to be performed or complied with by such Purchaser on or prior to the
Closing Date, including but not limited to tendering its respective portion of
the Aggregate Purchase Price.

 

(d) No proceeding challenging this Agreement or the Transaction Documents, or
the transactions contemplated hereby or thereby, or seeking to prohibit, alter,
prevent or materially delay the Closing, shall have been instituted before any
court, arbitrator or Governmental Authority or official or shall be pending
against or involving such Purchaser.

 

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(e) The sale of the Shares and the issuance of the Warrants and the Warrant
Shares by the Company shall not be prohibited by any law, rule, governmental
order or regulation. All necessary consents, approvals, licenses, permits,
orders and authorizations of, or registrations, declarations and filings with,
any Governmental Authority or of any other Person with respect to any of the
transactions contemplated hereby shall have been duly obtained or made and shall
be in full force and effect.

 

(f) Such Purchaser shall have delivered to the Company each of a Form W-9 or
Form W-8, as applicable, and a completed Investor Questionnaire in the form of
Exhibit B hereto.

 

6. Certain Covenants and Agreements.

 

6.1 Transfer of Securities. Each Purchaser agrees severally (as to itself only)
and not jointly that it shall not sell, assign, pledge, transfer or otherwise
dispose of or encumber any of the Shares, the Warrants or any Warrant Shares,
except: (i) pursuant to an effective registration statement under the Securities
Act; (ii) to an Affiliate (so long as such Affiliate agrees to certify that it
is an “accredited investor” as defined in Rule 501(a) under the Securities Act
and to be bound by the terms and provisions of this Agreement as if, and to the
fullest extent as, such Purchaser) or to partners or members in a pro rata
distribution; or (iii) pursuant to an available exemption from registration
under the Securities Act (including sales permitted pursuant to Rule 144) and
applicable state securities laws. Any transfer or purported transfer of the
Shares in violation of this Section 6.1 shall be void. The Company shall not
register any transfer of the Shares in violation of this Section 6.1. The
Company may, and may instruct any transfer agent for the Company, to place such
stop transfer orders as may be required on the transfer books of the Company in
order to ensure compliance with the provisions of this Section 6.1.

 

6.2 Legends.

 

(a) To the extent applicable, each certificate or other document evidencing the
Shares, the Warrants and any Warrant Shares shall be endorsed with the legend
set forth below, and each Purchaser covenants that, except to the extent such
restrictions are waived by the Company, it shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in this Agreement and the legends endorsed on such
certificate:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER
SAID ACT.”

 

(b) The legend set forth in Section 6.2(a) shall be removed from the
certificates evidencing the Shares, Warrants and any Warrant Shares, (i)
following any sale of such Shares, Warrants or Warrant Shares pursuant to Rule
144 or any effective registration statement, or (ii) if such Shares, Warrants or
Warrant Shares are eligible for sale under Rule 144(k) (and the holder of such
Shares, Warrants or Warrant Shares has submitted a written request for removal
of the legend indicating that the holder has complied with the applicable
provisions of Rule 144), or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the SEC) (and the
holder of such Shares, Warrants or Warrant Shares has submitted a written
request for removal of the legend indicating that the holder has complied with
such judicial interpretation or pronouncement). Subject to receipt of
appropriate certifications, the Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent promptly upon the occurrence of any of
the events in clauses (i), (ii) or (iii) above to effect the removal of the
legend on

 

-18-

--------------------------------------------------------------------------------

certificates evidencing the Shares or any Warrant Shares and shall also cause
its counsel to issue a “blanket” legal opinion to the Company’s transfer agent
promptly after the effective date of any registration statement covering the
resale of the Shares or any Warrant Shares (provided that there is an effective
registration statement covering the resale of the Shares or any Warrant Shares,
as the case may be), if required by the Company’s transfer agent, to allow sales
without restriction pursuant to an effective registration statement. The Company
agrees that at such time as such legend is no longer required under this Section
6.2(b), it will, no later than three (3) business days following the delivery by
a Purchaser to the Company or the Company’s transfer agent of a certificate
representing the Shares, Warrants or any Warrant Shares issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Shares, Warrants or Warrant Shares that is free
from all restrictive and other legends; provided that in the case of removal of
the legend for reasons set forth in clause (ii) above, the holder of such
Shares, Warrants or Warrant Shares has submitted a written request for removal
of the legend indicating that the holder has complied with the applicable
provisions of Rule 144. The Company may not make any notation on its records or
give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section 6.

 

6.3 Publicity. Except to the extent required by applicable laws, rules,
regulations or stock exchange requirements, the Company, the Subsidiaries and
their Affiliates shall not, without the written consent of the Majority
Purchasers, make any public announcement or issue any press release with respect
to the transactions contemplated by this Agreement; provided that the Company,
each Subsidiary and their respective Affiliates shall not, without the prior
written consent of the Purchaser, disclose or publish the name of such Purchaser
in any such press release or public announcement. Except to the extent required
by applicable laws, rules, regulations or stock exchange requirements, the
Purchasers and their Affiliates shall not, without the written consent of the
Company make any public announcement or issue any press release with respect to
the transactions contemplated by this Agreement. In no event will either (i) the
Company, the Subsidiaries or any of their Affiliates or (ii) any Purchaser or
any of its Affiliates make any public announcement or issue any press release
with respect to the transactions contemplated by this Agreement without
consulting with the Company, on the one hand, and the Majority Purchasers, on
the other hand, to the extent feasible, as to the content of such public
announcement or press release. Notwithstanding the foregoing, the parties agree
that the Company shall issue a press release in the form of Exhibit G hereto
promptly following (and in no event more than 24 hours after) the Closing and,
on or before 9:30 a.m., New York time, on the first trading day following the
Closing Date, the Company shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by this Agreement and the Transaction
Documents in the form required by the Exchange Act, and attaching the material
transaction documents (including, without limitation, this Agreement (and all
schedules to this Agreement) and the Registration Rights Agreement) as exhibits
to such filing (including all attachments, the “8-K Filing”, and the description
and attachments, the “8-K Materials”). From and after the filing of the 8-K
Filing with the SEC, no Purchaser shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Purchaser with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing with the SEC without the express written consent of
such Purchaser; provided that the Company shall not be responsible for any
information obtained by any Purchaser or any Inspector (as defined in the
Registration Rights Agreement) as a result of such Purchaser’s exercise of its
inspection rights under the Registration Rights Agreement; and provided further
that in the event the Company or any of its Subsidiaries provides any
information to a Purchaser under the Transaction Documents and the Company
reasonably believes that such information represents material nonpublic
information, the Company (a) shall prior to such disclosure to any Purchaser
notify such Purchaser of such belief and shall not provide such information to
any Purchaser which does not expressly consent to receive such information and
(b) to the extent any

 

-19-

--------------------------------------------------------------------------------

Purchaser determines not to receive such information, the Company shall be
deemed not to be in breach of the original obligation to provide such
information. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material non-public information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents; provided that the Purchaser will provide to the
Company two Business Days’ advance notice prior to such disclosure, and shall
refrain from making such disclosure if the Company makes such disclosure during
such two-day period. No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. made in compliance with this
Section 6.3.

 

6.4 Use of Proceeds. The Company covenants and agrees that the proceeds from the
sale of the Shares and Warrants shall be used by the Company for the purposes
described in the Offering Memorandum.

 

6.5 Integration. The Company shall not sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Shares or Warrants in a manner that would require the registration under the
Securities Act of the sale of the Shares or the issuance of the Warrants or any
Warrant Shares to the Purchasers.

 

6.6 Reservation of Common Stock for Issuance; Listing of Shares. The Company
agrees to reserve from its duly authorized capital stock the total number of
shares of Common Stock issuable upon execution of this Agreement and upon the
exercise in full of all of the Warrants. The Company agrees that at any time, if
and when its shares of Common Stock are listed on NASDAQ or any other securities
exchange, that it will use best efforts to promptly list and qualify the Shares
and any Warrant Shares for trading on NASDAQ or such other securities exchange.

 

6.7 Actions with respect to Securities Laws Exemptions. Neither the Company nor
anyone acting on its behalf shall take any action that would cause the loss of
any Securities Laws Exemptions.

 

6.8 Restrictions on Certain Stock Issuances or Registrations. The Company agrees
that prior to the effectiveness of the Mandatory Registration Statement (as
defined in the Registration Rights Agreement), the Company shall not (i) issue
any shares of Common Stock, or securities convertible into or exercisable for
shares of Common Stock, that could be eligible for sale without restriction
under the Securities Act prior to the effectiveness of the Mandatory
Registration Statement (as defined in the Registration Rights Agreement), or
(ii) grant any registration rights after the date hereof to any other Person
that would entitle such Person to have the sale of securities held by such
Person registered under the Securities Act by the Company under a registration
statement that is declared effective prior to the effectiveness of the Mandatory
Registration Statement, provided, that this Section 6.8 shall not be deemed to
restrict the ability of the Company to (a) issue shares of Common Stock upon the
exercise or conversion of any options, warrants, convertible debt instruments or
other contingent securities outstanding on the date hereof, (b) issue shares,
options or warrants in connection with the Teligent Acquisition or to employees,
directors or consultants of the Company or (c) perform its obligations in
connection with the Teligent Acquisition.

 

6.9 NASDAQ Listing. After the Closing Date, the Company shall use commercially
reasonable efforts to have its Common Stock listed on the Nasdaq National
Market.

 

-20-

--------------------------------------------------------------------------------

6.10 Compliance with Section 310(b) of the Communications Act. The Company will
use commercially reasonable efforts to promptly, and in any event no later than
30 days following the Closing Date, ascertain whether it is in compliance with
Section 310(b) of the Communications Act (including, without limitation, by
sending a questionnaire to investors) and, to the extent any noncompliance is
discovered, promptly take all commercially reasonable efforts necessary to
remedy any noncompliance.

 

7. Indemnification

 

7.1 By the Company. The Company, without limitation as to time, agrees to
indemnify, defend and hold harmless each Purchaser and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners,
members, investment advisers and controlling persons (collectively, the
“Purchaser Indemnitees”) to the fullest extent permitted by law from and against
any and all claims, losses, liabilities, damages, deficiencies, judgments,
assessments, fines, settlements, costs or expenses (including interest,
penalties and reasonable fees, disbursements and other charges of counsel)
(collectively, “Losses”) based upon, arising out of or otherwise in respect of
any breach by the Company of any representation, warranty, covenant or agreement
of the Company contained in this Agreement or in the Transaction Documents.

 

7.2 Applicability. Notwithstanding any term to the contrary in this Section 7,
the indemnification and contribution provisions of the Registration Rights
Agreement shall govern any claim made with respect to registration statements
filed pursuant thereto or sales made thereunder.

 

8. Miscellaneous Provisions.

 

8.1 Rights Cumulative. Each and all of the various rights, powers and remedies
of the parties shall be considered to be cumulative with and in addition to any
other rights, powers and remedies which such parties may have at law or in
equity in the event of the breach of any of the terms of this Agreement. The
exercise or partial exercise of any right, power or remedy shall neither
constitute the exclusive election thereof nor the waiver of any other right,
power or remedy available to such party.

 

8.2 Pronouns. All pronouns or any variation thereof shall be deemed to refer to
the masculine, feminine or neuter, singular or plural, as the identity of the
person, persons, entity or entities may require.

 

8.3 Notices.

 

(a) Any notices, reports or other correspondence (hereinafter collectively
referred to as “correspondence”) required or permitted to be given hereunder
shall be sent by postage prepaid first class mail, overnight courier or
telecopy, or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.

 

(b)   All correspondence to the Company shall be addressed as follows:     First
Avenue Networks, Inc.     230 Court Square     Suite 202     Charlottesville, VA
22902     Attn: Chief Financial Officer

 

-21-

--------------------------------------------------------------------------------

with a copy to: Ropes & Gray LLP One International Place Boston, MA 02110
Attention: Joel F. Freedman

 

(c) All correspondence to the Purchasers shall be addressed pursuant to the
contact information set forth on Schedule I attached hereto.

 

(d) Any party may change the address to which correspondence to it is to be
addressed by notification as provided for herein.

 

8.4 Captions. The captions and paragraph headings of this Agreement are solely
for the convenience of reference and shall not affect its interpretation.

 

8.5 Severability. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.

 

8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the State of New York
without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.

 

8.7 Waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or be construed as, a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.

 

8.8 Assignment. The rights and obligations of any party hereto shall inure to
the benefit of and shall be binding upon the authorized successors and permitted
assigns of such party. The Company may not assign this Agreement or any rights
or obligations hereunder without the prior written consent of each Purchaser.
Each Purchaser may assign or transfer any or all of its rights under this
Agreement to any Person provided that such assignee or transferee agrees in
writing to be bound, with respect to the transferred Shares and Warrant Shares,
by Sections 6.1 and 6.2 hereof; whereupon such assignee or transferee shall be
deemed to be a “Purchaser” for all purposes of this Agreement.

 

8.9 Survival. The respective representations and warranties given by the parties
hereto shall survive the Closing Date and the consummation of the transactions
contemplated herein. The respective covenants and agreements agreed to by a
party hereto shall survive the Closing Date and the consummation of the
transactions contemplated herein in accordance with their respective terms and
conditions.

 

8.10 Entire Agreement. This Agreement and the Transaction Documents constitute
the entire agreement between the parties hereto respecting the subject matter
hereof and supersede all prior agreements, negotiations, understandings,
representations and statements respecting the subject matter hereof, whether
written or oral, including but not limited to the various Term Sheets dated
December 7, 2004 between the Company and the Purchasers. The Company agrees that
in the event it enters into any agreement or understanding with any Purchaser
pursuant to which the Company grants such Purchaser

 

-22-

--------------------------------------------------------------------------------

any rights or other terms relating to the purchase, registration, holding or
disposition of Shares, Warrant Shares or Warrants that are more favorable than
those set forth herein or in the Transaction Documents, the Company shall also
grant each other Purchaser such more favorable rights or other terms.

 

8.11 Amendments. Any amendment, supplement or modification of or to any
provision of this Agreement and any waiver of any provisions of this Agreement
shall be effective only if made or given in writing and signed by the Company
and the Majority Purchasers, provided, that any amendment, supplement,
modification or waiver that is materially and disproportionately adverse to any
Purchaser(s), when compared to all other Purchasers similarly situated, shall
require the consent of such Purchaser(s).

 

8.12 No Third Party Rights. This Agreement is intended solely for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debt holder of the
Company) other than the parties hereto, provided, that each of the Purchaser
Indemnitees that are not Purchasers are entitled to all rights and benefits as
third party beneficiaries of Section 7 of this Agreement.

 

8.13 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document. The parties hereto confirm that any
facsimile copy of another party’s executed counterpart of this Agreement (or its
signature page thereof) will be deemed to be an executed original thereof.

 

8.14 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not
relying upon any Person (including, without limitation, any other Purchaser),
other than the Company and its officers and directors (acting in their capacity
as representatives of the Company), in deciding to invest and in making its
investment in the Company. Each Purchaser agrees that no other Purchaser nor the
respective controlling persons, officers, directors, partners, agents or
employees of any other Purchaser shall be liable to such Purchaser for any
losses incurred by such Purchaser in connection with its investment in the
Company.

 

8.15 Expenses. At the Closing, the Company shall reimburse the Purchasers for
all fees and expenses incurred by them in connection with the transactions
contemplated hereby; provided that the Company shall not be required to pay any
legal expenses of the Purchasers other than the reasonable fees and
disbursements of Akin Gump Strauss Hauer & Feld LLP, counsel to LC Capital
Master Fund Ltd. The Company further agrees to reimburse the Purchasers on
demand for the reasonable out-of-pocket expenses of the Purchasers incurred in
connection with any amendment to, or waiver or enforcement of, this Agreement or
the other Transaction Documents. The Company shall also pay all stamp and other
taxes and duties levied in connection with the issuance of the Shares and the
Warrants and, upon exercise thereof, the Warrant Shares.

 

[Signature pages follow.]

 

-23-

--------------------------------------------------------------------------------

Each of the parties hereto has caused a counterpart of this Agreement to be duly
executed and delivered as of the date first written above.

 

THE COMPANY:

 

FIRST AVENUE NETWORKS, INC. By:  

/s/ Dean M. Johnson

--------------------------------------------------------------------------------

Name:   Dean M. Johnson Title:   President and CEO

--------------------------------------------------------------------------------

PURCHASERS:

 

Xerion Partners II Master Fund Limited

By:

 

/s/ John Hale

--------------------------------------------------------------------------------

Name:

 

John Hale

Title:

    Ahab Partners, L.P.

By:

 

/s/ Jonathan Gallen

--------------------------------------------------------------------------------

Name:

 

Jonathan Gallen

Title:

 

Managing Member, Pequod, LLC

   

General Partner, Ahab Partners, L.P.

Ahab International Ltd.

By:

 

/s/ Jonathan Gallen

--------------------------------------------------------------------------------

Name:

 

Jonathan Gallen

Title:

 

President, Ahab Capital Management, Inc.

   

Investment Advisor, Ahab International, Ltd.

LC Capital Master Fund, Ltd.

By:

 

/s/ Richard F. Conway

--------------------------------------------------------------------------------

Name:

 

Richard F. Conway

Title:

 

Director

Stanfield Offshore Leveraged Assets Ltd.

By:

 

/s/ Chris Pucillo

--------------------------------------------------------------------------------

Name:

 

Chris Pucillo

Title:

 

Portfolio Manager

--------------------------------------------------------------------------------

Fleet Maritime, Inc.

By:

 

OZ Management, L.L.C.,

   

As Investment Manager

By:

 

/s/ Joel Frank

--------------------------------------------------------------------------------

Name:

 

Joel Frank

Title:

 

Chief Financial Officer

OZ Master Fund, Ltd By:   OZ Management, L.L.C.

By:

 

/s/ Joel Frank

--------------------------------------------------------------------------------

Name:

 

Joel Frank

Title:

 

Chief Financial Officer

Milfam I, L.P.

By:

 

/s/ Lloyd I. Miller

--------------------------------------------------------------------------------

Name:

 

Lloyd I. Miller

Title:

 

General Partner

Harbert Event Driven Master Fund, Ltd

By:

 

The Event Driven Offshore Manager, LLC

By:

 

/s/ Tony Reinee

--------------------------------------------------------------------------------

Name:

 

Tony Reinee

Title:

 

Vice President

Ore Hill Hub Fund, Ltd.

By:

 

/s/ Frederick Wahl

--------------------------------------------------------------------------------

Name:

 

Frederick Wahl

Title:

   

--------------------------------------------------------------------------------

Loeb Partners Corporation

By:

 

/s/ Bob Grubin

--------------------------------------------------------------------------------

Name:

 

Bob Grubin

Title:

    Millennium Partners, L.P.

By:

 

Millennium Management, L.L.C.

By:

 

/s/ Terry Feeney

--------------------------------------------------------------------------------

Name:

 

Terry Feeney

Title:

 

Chief Operating Officer

Tracer Capital Partners L.P.

By:

 

/s/ Riley McCormack

--------------------------------------------------------------------------------

Name:

 

Riley McCormack

Title:

 

Managing Member of the

   

Investment Manager

Tracer Capital Partners QP L.P.

By:

 

/s/ Riley McCormack

--------------------------------------------------------------------------------

Name:

 

Riley McCormack

Title:

 

Managing Member of the

   

Investment Manager

Tracer Capital Offshore Fund Ltd.

By:

 

/s/ Riley McCormack

--------------------------------------------------------------------------------

Name:

 

Riley McCormack

Title:

 

Managing Member of the

   

Investment Manager

--------------------------------------------------------------------------------

Greywolf Capital Partners II LP

By:

 

/s/ William Troy

--------------------------------------------------------------------------------

Name:

 

William Troy

Title:

 

Partner

Greywolf Capital Overseas Fund

By:

 

/s/ William Troy

--------------------------------------------------------------------------------

Name:

 

William Troy

Title:

 

Partner

Schottenfeld Qualified Associates, LP

By:

 

/s/ Richard Schottenfeld

--------------------------------------------------------------------------------

Name:

 

Richard Schottenfeld

Title:

 

Managing Member

Rajendra Singh and Neera Singh JTWROS

By:

 

/s/ Rajendra Singh and Neera Singh

--------------------------------------------------------------------------------

Name:

 

Rajendra Singh and Neera Singh

Title:

    Strome Hedgecap Ltd.

By:

 

/s/ Mark Strome

--------------------------------------------------------------------------------

Name:

 

Mark Strome

Title:

 

Director

--------------------------------------------------------------------------------

Witches Rock Portfolio Ltd.

By:

 

Tudor Investment Corporation,

   

Investment Advisor

By:

 

/s/ William T. Flaherty

--------------------------------------------------------------------------------

Name:

 

William T. Flaherty

Title:

 

Managing Director

The Tudor BVI Global Portfolio Ltd.

By:

 

Tudor Investment Corporation,

   

Trading Advisor

By:

 

/s/ William T. Flaherty

--------------------------------------------------------------------------------

Name:

 

William T. Flaherty

Title:

 

Managing Director

Tudor Proprietary Trading, L.L.C.

By:

 

/s/ William T. Flaherty

--------------------------------------------------------------------------------

Name:

 

William T. Flaherty

Title:

 

Managing Director

Singer Children’s Management Trust

By:

 

/s/ Karen Singer

--------------------------------------------------------------------------------

Name:

 

Karen Singer

Title:

 

Trustee

The IBS Turnaround Fund, L.P.

By:

 

/s/ David Taft

--------------------------------------------------------------------------------

Name:

 

David Taft

Title:

 

President, IBS Capital Corp.,

   

Its General Partner

--------------------------------------------------------------------------------

The IBS Opportunity Fund, Ltd.

By:

 

/s/ David Taft

--------------------------------------------------------------------------------

Name:

 

David Taft

Title:

 

Manager

Harbert Distressed Investment Master Fund, Ltd.

By:

 

Harbert Distressed Investment Offshore

Manager, LLC

By:

 

/s/ Philip A. Falcone

--------------------------------------------------------------------------------

Name:

 

Philip A. Falcone

Title:

 

Vice President

Cypress Management Partnership

By:

 

/s/ Jonathan Marcus

--------------------------------------------------------------------------------

Name:

 

Jonathan Marcus

Title:

 

Authorized Signatory

George Haywood IRA Rollover

By:

 

/s/ George W. Haywood

--------------------------------------------------------------------------------

Name:

 

George W. Haywood

Title:

    George W. Haywood

/s/ George W. Haywood

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Cheryl J. Haywood

/s/ Cheryl J. Haywood

--------------------------------------------------------------------------------

John Colton

/s/ John L. Colton

--------------------------------------------------------------------------------

Bradley S. Farber

/s/ Bradley S. Farber

--------------------------------------------------------------------------------

James M. Deutsch

/s/ James M. Deutsch

--------------------------------------------------------------------------------

Twin Beeches Foundation

/s/ John L. Colton

--------------------------------------------------------------------------------

Name:

 

John L. Colton

Title:

    James A. Schwartz

/s/ James Schwartz

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Redwood Master Fund Ltd.

By:

 

/s/ Jonathan Kolatch

--------------------------------------------------------------------------------

Name:

 

Jonathan Kolatch

Title:

 

Director

--------------------------------------------------------------------------------

LIST OF EXHIBITS

 

Exhibit A:    Form of Warrant Exhibit B:    Form of Investor Questionnaire
Exhibit C:    Form of Legal Opinion of Ropes & Gray LLP Exhibit D:    Form of
Legal Opinion of Wiley Rein & Fielding LLP Exhibit E:    Form of Secretary’s
Certificate Exhibit F:    Form of Officer’s Certificate Exhibit G:    Form of
Transfer Agent Instructions Exhibit H:    Form of Company Press Release

--------------------------------------------------------------------------------

Schedule I

List of Purchasers

--------------------------------------------------------------------------------

SCHEDULE 1

 

LIST OF PURCHASERS

 

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

Ahab International, Ltd.

c/o Ahab Capital Management, Inc.

299 Park Avenue

21st Floor

New York, NY 10171

   350,000    52,500    2,537,500.00

Ahab Partners, L.P.

299 Park Avenue

21st Floor

New York, NY 10171

   250,000    37,500    1,812,500.00

Bradley S. Farber

228 West 71st Street, Apt 12H

New York, NY 10023

   30,000    4,500    217,500.00

Cheryl J. Haywood

c/o Lehman Brothers

399 Park Ave., 6th Floor

New York, NY 10022

Attn: Michael Arpaia

   270,000    40,500    1,957,500.00

Cypress Management Partnership

100 Pine Street, Suite 2700

San Francisco, Ca 94111

   250,000    37,500    1,812,500.00

Fleet Maritime, Inc.

c/o OZ Management, L.L.C.

9 West 57th Street, 39th Floor

New York, NY 10019

   16,100    2,415    116,725.00

George W. Haywood

Tejas Securities Group, Inc.

2700 Via Fortuna

Suite 400

Austin, Texas 78746

Attn: Brandy Samaniego

   130,000    19,500    942,500.00

 

1

--------------------------------------------------------------------------------

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

George Haywood IRA Rollover

Tejas Securities Group, Inc.

2700 Via Fortuna

Suite 400

Austin, Texas 78746

Attn: Brandy Samaniego

   300,000    45,000    2,175,000.00

Greywolf Capital Overseas Fund

411 West Putnam Avenue

Suite 265

Greenwich, CT 06830

Attn: Cevdet Samikoglu

   800,000    120,000    5,800,000.00

Greywolf Capital Partners II LP

411 West Putnam Avenue

Suite 265

Greenwich, CT 06830

Attn: Cevdet Samikoglu

   200,000    30,000    1,450,000.00

Harbert Distressed

Investment Master Fund, Ltd.

c/o International Fund Services (Ireland) Limited

Third Floor, Bishop’s Square

Redmond’s Hill

Dublin 2, Ireland

Attn: Phil Falcone

   500,000    75,000    3,625,000.00

Harbert Event Driven Master Fund, Ltd.

c/o International Fund Services (Ireland) Limited

Third Floor, Bishop’s Square

Redmond’s Hill

Dublin 2, Ireland

Attn: Tony Reiner

   125,000    18,750    906,250.00

James A. Schwartz

88 Hickory Court

Tenafly, NJ 07670

   3,000    450    21,750.00

James M. Deutsch

50 Murray Street, #1912

New York, NY 10007

   7,000    1,050    50,750.00

 

2

--------------------------------------------------------------------------------

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

John L. Colton

98 Beechwood Road

Summit, NJ 07901

   205,000    30,750    1,486,250.00

LC Capital Master Fund, Ltd.

c/o Lampe, Conway & Co.

680 Fifth Avenue, Suite 1202

New York, NY 10019

Attn: Eirc Schaeffer

   1,000,000    150,000    7,250,000.00

Loeb Partners Corporation

61 Broadway

Suite 2400

New York, NY 10006

Attn: Robert Grubin

   200,000    30,000    1,450,000.00

Milfam I, L.P.

c/o Lloyd I. Miller

4550 Gordon Drive

Naples, FL 34102

   150,000    22,500    1,087,500.00

Millennium Partners, L.P.

c/o Millenium Management, L.L.C.

666 Fifth Avenue, 8th Floor

New York, NY 10103

Attn: Ted Wachtell, Brian Daly

   1,000,000    150,000    7,250,000.00

Ore Hill Hub Fund, Ltd.

444 Madison Avenue, 12th Floor

New York, NY 10022

Attn: Johannes Homan

   650,000    97,500    4,712,500.00

OZ Master Fund, Ltd.

c/o OZ Management, L.L.C.

9 West 57th Street, 39th Floor

New York, NY 10019

   983,900    147,585    7,133,275.00

Rajendra Singh and Neera Singh JTWROS

201 North Union Street,

Suite 360

Alexandria, VA 22314

   250,000    37,500    1,812,500.00

Redwood Master Fund Ltd.

910 Sylvan Avenue

Englewood Cliffs, NJ 08632

Attn: Ara Cohen

   325,000    48,750    2,356,250.00

 

3

--------------------------------------------------------------------------------

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

Schottenfeld Qualified Associates, LP

800 Third Avenue, 10th Floor

New York, NY 10022

Attn: Rich Schottenfeld

   70,000    10,500    507,500.00

Singer Children’s Management Trust

c/o Romulus Holdings, Inc.

560 Sylvan Avenue

Englewood Cliffs, NJ 07632

Attn: Gary Singer

   500,000    75,000    3,625,000.00

Stanfield Offshore Leveraged Assets Ltd.

c/o Stanfield Capital Partners LLC

430 Park Avenue

New York, NY 10022

   1,750,000    262,500    12,687,500.00

Strome Hedgecap Ltd.

c/o Strome Investment Management

100 Wilshire Blvd, Suite 1500

Santa Monica, CA 90401

   250,000    37,500    1,812.500.00

The IBS Opportunity Fund, Ltd.

c/o IBS Capital Corporation

Two International Place, 24th Floor

Boston, MA 02110

Attn: Dave Taft

   85,000    12,750    616,250.00

The IBS Turnaround Fund, L.P.

c/o IBS Capital Corporation

Two International Place, 24th Floor

Boston, MA 02110

Attn: Dave Taft

   415,000    63,250    3,008,750.00

 

4

--------------------------------------------------------------------------------

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

The Tudor BVI Portfolio Ltd.

c/o Tudor Investment Corporation

50 Rowes Wharf

6th Floor

Boston, MA 02110

Attn: Harry Nudelman

   194,164    29,125    1,407,689.00

Tracer Capital Offshore Fund Ltd.

c/o Goldman Sachs (Cayman) Trust, Limited

P.O. Box 896, Harbour Centre

George Town, Grand Cayman

Cayman Islands, British West Indies

   61,125    9,169    443,156.25

Tracer Capital Partners QP L.P.

540 Madison Avenue, 21st Floor

New York, NY 10022

Attn: Riley McCormack, Tom Perrone

   60,188    9,028    436,363.00

Tracer Capital Partners, L.P.

540 Madison Avenue, 21st Floor

New York, NY 10022

Attn: Riley McCormack, Tom Perrone

   3,687    553    26,730.75

Tudor Proprietary Trading, L.L.C.

c/o Tudor Investment Corporation

50 Rowes Wharf

6th Floor

Boston, MA 02110

Attn: Harry Nudelman

   104,550    15,682    757,987.50

Twin Beeches Foundation

98 Beechwood Road

Summit, NJ 07901

   5,000    750    36,250.00

 

5

--------------------------------------------------------------------------------

Name and Address of

Purchaser

--------------------------------------------------------------------------------

   Number of
Shares of
Common
Stock

--------------------------------------------------------------------------------

   Number of
Warrants

--------------------------------------------------------------------------------

   Total Purchase
Price

--------------------------------------------------------------------------------

Witches Rock Portfolio Ltd.

c/o Tudor Investment Corporation

50 Rowes Wharf, 6th Floor

Boston, MA 02110

   1,201,286    180,193      8,709,323,50

Xerion Partners II Master Fund Limited

c/o BNY Alternative Investment Services Ltd.

18 Church Street, Skandia House

Hamilton HM11, Bermuda

   175,000    26,250      1,268,750.00     

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

TOTAL

   12,870,000    1,930,500    $ 93,307,500.00     

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6