<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) APRIL 2, 1998
LET'S TALK CELLULAR & WIRELESS, INC.
(Exact name of registrant as specified in charter)
Florida 0-23351 65-0292891
- -------------------------------------------------------------------------------
State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
800 Brickell Avenue, Suite 400, Miami, Florida 33131
- -------------------------------------------------------------------------------
(Address of principal offices) (Zip Code)
Registrant's telephone number including area code (305) 358-8255
(Former name or former address, if changed since last report) Not applicable
--------------
<PAGE> 2
Item 2. ACQUISITION OF ASSETS.
On April 2, 1998, Let's Talk Cellular & Wireless, Inc., a Florida
corporation (the "Registrant"), completed the acquisition of all of the
outstanding capital stock (the "Shares") of Sosebee Enterprises, Inc., a Georgia
corporation doing business as "Cellular Warehouse," and Cellular Warehouse,
Inc., a Georgia corporation (together, the "Companies"). The Shares were
purchased by the Registrant from Messrs. Richard J. Sosebee and Frederick L.
Hill, III (the "Selling Shareholders"), each of whom owned half of the
outstanding common stock of each Company. The Selling Shareholders received as
consideration from the Registrant an aggregate of (i) Seventeen Million Six
Hundred Nineteen Thousand Seven Hundred and Seventy Dollars ($17,619,770
million) in cash and (ii) Five Hundred and Fifty Thousand (550,000) shares of
the common stock of the Registrant. The cash portion of the consideration paid
by the Registrant was financed through a Loan and Security Agreement, dated
April 2, 1998, by and among the Registrant and certain of its subsidiaries,
certain Lenders and The Chase Manhatten Bank, as Agent. The consideration was
negotiated at arms-length by the Registrant and the Selling Shareholders. The
Companies are independent specialty retailers of cellular and wireless products,
services and accessories. The Registrant intends to operate the Companies in
substantially the same manner as they operated prior to the Registrant's
acquisition of the Shares.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS. Audited Financial Statements will be
provided by an amendment to this Form 8-K.
EXHIBITS
2.1 Amended and Restated Stock Purchase Agreement dated as of
March 1, 1998 by and between Let's Talk Cellular & Wireless, Inc. and
Certain Selling Shareholders Relating to the Acquisition of Sosebee
Enterprises, Inc. d/b/a Cellular Warehouse and Cellular Warehouse,
Inc.
10.1 Loan and Security Agreement dated April 2, 1998 by and among
Let's Talk Cellular & Wireless, Inc. and certain of its subsidiaries,
certain Lenders and The Chase Manhatten Bank, as Agent.
10.2 Authorized Agency Agreement between BellSouth Cellular National
Marketing, Inc. and Let's talk Cellular & Wireless, Inc., effective
April 1, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LET'S TALK CELLULAR & WIRELESS, INC.
(Registrant)
By: /s/ Nicolas Molina
--------------------------------
Nicolas Molina
Chief Executive Officer
<PAGE> 1
EXHIBIT 2.1
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
LET'S TALK CELLULAR & WIRELESS, INC.
AND
CERTAIN SELLING SHAREHOLDERS
RELATING TO THE ACQUISITION OF
SOSEBEE ENTERPRISES, INC.
D/B/A CELLULAR WAREHOUSE
AND
CELLULAR WAREHOUSE, INC.
DATED AS OF MARCH 1, 1998
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE OF STOCK......................................................................................1
1.1 Purchase and Sale.....................................................................................1
1.2 Purchase Price........................................................................................1
1.3 Purchase Price Adjustments............................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................................................4
2.1 Corporate Organization, Etc...........................................................................4
2.2 Subsidiaries..........................................................................................5
2.3 Stock Record Books....................................................................................5
2.4 Corporate Minute Books................................................................................5
2.5 Title to Stock........................................................................................5
2.6 Authorization, Etc....................................................................................5
2.7 Options and Rights....................................................................................6
2.8 No Violation..........................................................................................6
2.9 Financial Statements..................................................................................6
2.10 Employees.............................................................................................7
2.11 Absence of Certain Changes............................................................................7
2.12 Contracts.............................................................................................7
2.13 True and Complete Copies..............................................................................9
2.14 Title and Related Matters.............................................................................9
2.15 Litigation...........................................................................................10
2.16 Tax Matters..........................................................................................10
2.17 Compliance with Law and Applicable Government Regulations............................................11
2.18 ERISA and Related Matters............................................................................12
2.19 Intellectual Property................................................................................15
2.20 Customer Warranties..................................................................................15
2.21 Products Liability...................................................................................15
2.22 Environmental Matters................................................................................16
2.23 Capital Expenditures and Investments.................................................................17
2.24 Dealings with Affiliates.............................................................................17
2.25 Insurance............................................................................................17
2.26 Accounts Receivable; Inventories.....................................................................17
2.27 Brokerage............................................................................................18
2.28 Customers and Suppliers..............................................................................18
2.29 Permits..............................................................................................18
2.30 Acquisitions.........................................................................................18
2.31 Improper and Other Payments..........................................................................18
2.32 Disclosure...........................................................................................19
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
2.33 Indebtedness.........................................................................................19
2.34 Securities Laws Matters..............................................................................19
2.35 Legends..............................................................................................19
2.36 Amendments to Disclosure Schedules...................................................................20
2.37 Pre-Closing Covenants................................................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................................20
3.1 Corporate Organization, Etc..........................................................................20
3.2 Authorization, Etc...................................................................................20
3.3 No Violation.........................................................................................21
3.4 Investment Intent....................................................................................21
3.5 Reports and Financial Statements.....................................................................21
3.6 Absence of Certain Changes...........................................................................21
ARTICLE IV COVENANTS OF THE SELLERS.............................................................................22
4.1 Regular Course of Business...........................................................................22
4.2 Amendments...........................................................................................22
4.3 Capital Changes; Pledges.............................................................................22
4.4 Dividends............................................................................................22
4.5 Capital and Other Expenditures.......................................................................22
4.6 Leases...............................................................................................23
4.7 Assets...............................................................................................23
4.8 Accounts Payable.....................................................................................23
4.9 Accounting Policies..................................................................................23
4.10 Borrowing............................................................................................23
4.11 Full Access and Disclosure...........................................................................23
4.12 Tax Matters..........................................................................................23
4.13 Certain Operational Matters..........................................................................24
ARTICLE V COVENANTS OF THE PURCHASER............................................................................24
5.1 Confidentiality......................................................................................24
5.2 Board Membership.....................................................................................24
5.3 Director Indemnification.............................................................................24
ARTICLE VI OTHER AGREEMENTS.....................................................................................25
6.1 Agreement to Defend..................................................................................25
6.2 Further Assurances...................................................................................25
6.3 No Solicitation or Negotiation.......................................................................25
6.4 No Termnation of Sellers Obligations by Subsequent Incapacity,
Dissolution, Etc.....................................................................................25
6.5 Deliveries After Closing.............................................................................26
6.6 Non-Competition......................................................................................26
6.7 Public Announcements.................................................................................27
6.8 Hart-Scott-Rodino Act................................................................................27
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.9 Trading in LTC Common Stock..........................................................................27
6.10 Certain Tax Matters..................................................................................28
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER......................................................29
7.1 Representations and Warranties; Performance..........................................................29
7.2 Consents and Approvals...............................................................................29
7.3 Opinion of the Sellers' Counsel......................................................................30
7.4 No Material Adverse Change...........................................................................30
7.5 No Proceeding or Litigation..........................................................................30
7.6 Financing............................................................................................30
7.7 Carrier Agreements...................................................................................30
7.8 Accounting Matters...................................................................................30
7.9 Condition of Assets..................................................................................30
7.10 Termination of Affiliate Contracts...................................................................30
7.11 Secretary's Certificate..............................................................................30
7.12 Certificates of Good Standing........................................................................31
7.13 Leases...............................................................................................31
7.14 Employment Agreements................................................................................31
7.15 Resignations.........................................................................................31
7.16 Escrow Agreement.....................................................................................31
7.17 LTC Common Stock.....................................................................................31
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLERS.......................................................31
8.1 Representations and Warranties; Performance..........................................................31
8.2 Consents and Approvals...............................................................................32
8.3 No Proceeding or Litigation..........................................................................32
8.4 Escrow Agreement.....................................................................................32
8.5 Employment Agreements................................................................................32
8.6 Secretary's Certificate..............................................................................32
8.7 LTC Common Stock.....................................................................................32
ARTICLE IX REGISTRATION RIGHTS..................................................................................32
9.1 Piggy Back Registrations.............................................................................32
9.2 Expenses of Registration.............................................................................34
9.3 Registration Procedures..............................................................................34
9.4 Participation in Underwritten Registrations..........................................................35
9.5 Further Information..................................................................................35
9.6 Indemnification......................................................................................35
ARTICLE X CLOSING...............................................................................................37
10.1 Closing..............................................................................................37
10.2 Intervening Litigation...............................................................................37
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI TERMINATION AND ABANDONMENT..........................................................................37
11.1 Methods of Termination...............................................................................37
11.2 Procedure Upon Termination...........................................................................38
ARTICLE XII SURVIVAL OF TERMS; INDEMNIFICATION..................................................................38
12.1 Survival.............................................................................................38
12.2 Limitations..........................................................................................39
12.3 Indemnification by Sellers...........................................................................39
12.4 Indemnification by the Purchaser.....................................................................40
12.5 Third-Party Claims...................................................................................40
12.6 Security for the Indemnification Obligation..........................................................42
ARTICLE XIII MISCELLANEOUS PROVISIONS...........................................................................42
13.1 Amendment and Modification...........................................................................42
13.2 Waiver of Compliance; Consents.......................................................................42
13.3 Certain Definitions..................................................................................42
13.4 Notices..............................................................................................49
13.5 Assignment...........................................................................................50
13.6 Governing Law........................................................................................50
13.7 Counterparts.........................................................................................50
13.8 Headings.............................................................................................51
13.9 Entire Agreement.....................................................................................51
13.10 Consent to Jurisdiction; Service of Process..........................................................51
13.11 Binding Effect.......................................................................................51
13.12 Injunctive Relief....................................................................................51
13.13 Delays or Omissions..................................................................................51
13.14 Severability.........................................................................................52
13.15 Expenses.............................................................................................52
13.16 Waiver of Jury Trial.................................................................................52
</TABLE>
(iv)
<PAGE> 6
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE/EXHIBIT RESPONSIBILITY
- ---------------- --------------
("SELLERS" OR "PURCHASER")
<S> <C> <C>
1.1 Stock Certificates..................................................................................S
1.2(b) Form of Escrow Agreement............................................................................P
2.1(a) Foreign Qualifications of Corporation...............................................................S
2.1(b) Charter and Bylaws of Corporation...................................................................S
2.3 Stock Record Books, Stockholders - Capital Stock....................................................S
2.4 Minute Books, Officers and Directors................................................................S
2.8 Violations, Notices and Consents....................................................................S
2.9(a) Financial Statements................................................................................S
2.9(b) Audit Adjustments...................................................................................S
2.9(c) Postclosing Indebtedness............................................................................S
2.10 Employees...........................................................................................S
2.11 Permitted Dividends and Distributions...............................................................S
2.12(a) Contracts...........................................................................................S
2.14(a) Title Matters.......................................................................................S
2.14(b) Leases..............................................................................................S
2.14(c) Liens and Other Encumbrances........................................................................S
2.15 Litigation..........................................................................................S
2.16(a) Tax Matters.........................................................................................S
2.16(e) Review of Tax Returns...............................................................................S
2.18 ERISA Matters.......................................................................................S
2.19(a) Material Proprietary Rights.........................................................................S
2.19(b) Proprietary Rights Owned by Others..................................................................S
2.20 Warranties..........................................................................................S
2.21 Products Liability..................................................................................S
2.22 Environmental Matters...............................................................................S
2.23 Capital Expenditures................................................................................S
2.24 Affiliated Transactions.............................................................................S
2.25 Insurance and Claims................................................................................S
2.27 Brokerage...........................................................................................S
2.28 Significant Customers and Suppliers.................................................................S
2.29 Permits.............................................................................................S
2.30 Acquisitions........................................................................................S
2.31 Improper and Other Payments.........................................................................S
7.1 Form of Officer's Certificate - Corporations........................................................P
7.3 Form of Opinion of Shareholders' Counsel............................................................P
7.4 Form of Certificate of Chief Financial Officer of the Corporation...................................P
7.11 Form of Secretary's Certificate - Corporation.......................................................P
7.13 Form of Estoppel Letter.............................................................................P
7.14 Form of Employment Agreements.......................................................................P
8.1 Form of Officer's Certificate - Purchaser...........................................................P
8.6 Form of Secretary's Certificate - Purchaser.........................................................P
</TABLE>
(v)
<PAGE> 7
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
------------------------
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of the 1st day
of March, 1998, by and between Let's Talk Cellular & Wireless, Inc., a Florida
corporation (the "PURCHASER"), and the shareholders of Sosebee Enterprises,
Inc., a Georgia corporation doing business as "Cellular Warehouse," and Cellular
Warehouse, Inc., a Georgia corporation (together with Sosebee Enterprises, Inc.,
the "CORPORATIONS" and each individually, a "CORPORATION"), listed on the
signature pages hereto (collectively, the "SELLERS"). The Purchaser and the
Sellers are parties to that certain Stock Purchase Agreement, dated as of
February 1, 1998 (the "First Agreement"), and desire to amend and restate such
agreement as hereinafter set forth. Terms used herein and not otherwise defined
shall have the meanings set forth in SECTION 13.3 hereof.
ARTICLE I
PURCHASE OF STOCK
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, the Sellers agree to sell, and the Purchaser agrees to purchase from
the Sellers, all of the issued and outstanding shares of capital stock of both
Corporations (collectively, the "SHARES"). The number of Shares which are the
subject of this Agreement and the stock certificates evidencing the Shares are
described in SCHEDULE 1.1 hereto.
1.2 PURCHASE PRICE.
(a) In consideration for the conveyance of the Shares and in
reliance on the representations and warranties, covenants and
agreements of the Sellers contained herein and the documents
contemplated hereby, the Purchaser shall pay to the Sellers the
following consideration (the "Purchase Price"):
(i) Seventeen and One-Half Million Dollars ($17.5
million) in cash plus or minus the Purchase Price adjustments
set forth in SECTION 1.3 (such amount, subject to such
adjustments, being hereinafter referred to as the "CASH
AMOUNT"); and
(ii) 550,000 shares of LTC Common Stock (the "LTC
SHARES"), which shall be issued to each Seller in his
Proportionate Share.
(b) The Purchaser shall deliver the LTC Shares at Closing as
follows: (i) the Purchaser shall deliver stock certificates
representing one third of each Seller's Proportionate Share of the LTC
Shares (the "ESCROW SHARES") to SunTrust Bank, Atlanta, as escrow agent
(the "ESCROW AGENT"), to hold pursuant to the terms and conditions of
the escrow agreement (the "ESCROW AGREEMENT") substantially in the form
of EXHIBIT 1.2(B) hereto, and (ii) the Purchaser shall deliver to each
Seller stock certificates representing the remainder of his
Proportionate Share of LTC Shares. The Cash Amount shall be paid to
<PAGE> 8
the Sellers by means of wire transfer of immediately available federal
funds on the Closing Date.
(c) If, between the date of this Agreement and the Closing
Date, the outstanding shares of LTC Common Stock shall have been
changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within such period, or any
similar event made, declared or effected within such period and with a
record date, if applicable, within such period, the number of LTC
Shares shall be correspondingly appropriately adjusted.
(d) The Purchaser shall pay to the Sellers on the Closing Date
interest on the Cash Amount of the Purchase Price including any payment
under Section 1.3(a) at a rate of seven percent (7%) per annum, which
shall accrue from March 1, 1998 to the date of actual payment.
1.3 PURCHASE PRICE ADJUSTMENTS.
(a) PRE CLOSING ADJUSTMENT. At least five (5) days prior to
the Closing Date the Sellers shall prepare and deliver to the Purchaser
a balance sheet and calculation of the Target Date Net Worth for the
Corporations as of January 2, 1998 (the "TARGET DATE"), prepared
consistent with each Corporation's past practices in preparing its
December 31, 1996 and 1995 year end financial statements and June 27,
1997 balance sheet (the "TARGET DATE BALANCE SHEET"). If the Target
Date Balance Sheet shows a Net Worth Shortfall, the Cash Amount of the
Purchase Price paid at Closing shall be reduced by the aggregate amount
of such Net Worth Shortfall. If the Target Date Balance Sheet shows a
Net Worth Surplus, an amount equal to the aggregate amount of such Net
Worth Surplus shall be disbursed by the Corporations on the Closing
Date in accordance with the instructions of the President of Sosebee
Enterprises, Inc.
(b) DISPUTE RESOLUTION PROCEDURES. The Purchaser shall have
until thirty (30) days after the Closing to review the Target Date
Balance Sheet and Target Date Net Worth calculation and propose any
adjustments thereto. All adjustments proposed by the Purchaser shall be
set forth in detail in a written statement delivered to the Sellers
(the "ADJUSTMENT STATEMENT") and shall be incorporated into the Target
Date Balance Sheet unless the Sellers shall object in writing to such
proposed adjustments (the proposed adjustment or adjustments to which
Sellers object are referred to herein as the "CONTESTED ADJUSTMENTS"
and the Sellers' objection notice is referred to herein as the
"CONTESTED ADJUSTMENT NOTICE") within thirty (30) days of delivery by
the Purchaser to the Sellers of the Adjustment Statement. If the
Sellers deliver a Contested Adjustment Notice to the Purchaser, the
Purchaser and the Sellers shall use reasonable efforts to resolve their
dispute regarding the Contested Adjustments, but if a final resolution
thereof is not obtained within twenty (20) days after the Sellers
deliver to the Purchaser said Contested Adjustment Notice, the
Purchaser and the Sellers shall promptly retain a nationally recognized
independent accounting firm acceptable to both the Sellers and the
Purchaser (the "INDEPENDENT ACCOUNTANT") to resolve any remaining
disputes concerning the
-2-
<PAGE> 9
Contested Adjustments. Either the Sellers or the Purchaser may retain
the Independent Accountant upon the expiration of such 20-day period.
If the Independent Accountant is retained, then (i) the Sellers and the
Purchaser shall each submit to the Independent Accountant in writing
not later than 15 days after the Independent Accountant is retained
their respective positions with respect to the Contested Adjustments,
together with such supporting documentation as they deem necessary or
as the Independent Accountant requests, and (ii) the Independent
Accountant shall, within 30 days after receiving the positions of both
the Sellers and the Purchaser and all supplementary supporting
documentation requested by the Independent Accountant, render its
decision as to the Contested Adjustments, which decision shall be final
and binding on, and nonappealable by, the Sellers and the Purchaser.
The fees and expenses of the Independent Accountant shall be paid by
the party whose estimate of the Target Date Net Worth is furthest from
the Independent Accountant's calculation of the Target Date Net Worth.
The decision of the Independent Accountant shall also include a
certificate of the Independent Accountant setting forth the final
amount of the Net Worth Shortfall or the Net Worth Surplus, as
applicable (the "SETTLEMENT AMOUNT CERTIFICATE"). The Target Date
Balance Sheet shall be deemed to include all proposed adjustments not
disputed by the Sellers and those adjustments accepted or made by the
decision of the Independent Accountant in resolving the Contested
Adjustments.
(c) There shall be a "SETTLEMENT DATE" after the calculation
of the Target Date Net Worth which shall mean the following, as
applicable:
(i) If the Purchaser has not timely delivered an
Adjustment Statement to the Sellers, 35 days after the Closing
Date;
(ii) If the Purchaser has timely delivered an
Adjustment Statement and the Sellers have not timely delivered
a Contested Adjustment Notice, 35 days after the date the
Sellers receive the Adjustment Statement;
(iii) If the Sellers and the Purchaser have any
disputes regarding Contested Adjustments and they resolve
those disputes, five business days after such resolution;
(iv) five business days after the Independent
Accountant delivers the Settlement Amount Certificate, if
applicable; or
(v) Such other date as shall be agreed between the
Sellers and the Purchaser.
(d) POST CLOSING ADJUSTMENTS. As of the Settlement Date, the
following payments to the extent applicable shall be made:
(i) If it is determined there is a Net Worth
Shortfall in excess of the estimated Net Worth Shortfall, the
excess Net Worth Shortfall shall be paid to the Purchaser on
the Settlement Date, irrespective of the Basket Rate; or
-3-
<PAGE> 10
(ii) If it is determined there is a Net Worth
Shortfall less than the estimated Net Worth Shortfall, the
difference shall be paid to the Sellers on the Settlement
Date, irrespective of the Basket Rate; or
(iii) If it is determined that there is Net Worth
Shortfall and the Sellers estimated a Net Worth Surplus, the
Net Worth Shortfall plus the amount of the Net Worth Surplus
added to the Purchase Price pursuant to SECTION 1.3(A) shall
be paid to the Purchaser on the Settlement Date, irrespective
of the Basket Rate.
(iv) If it is determined there is a Net Worth Surplus
in excess of the estimated Net Worth Surplus, the excess Net
Worth Surplus shall be paid to the Sellers on the Settlement
Date, irrespective of the Basket Rate; or
(v) If it is determined there is a Net Worth Surplus
less than the estimated Net Worth Surplus, the difference
shall be paid to the Purchaser on the Settlement Date,
irrespective of the Basket Rate; or
(vi) If it is determined that there is a Net Worth
Surplus and the Sellers estimated a Net Worth Shortfall, the
Net Worth Surplus plus the amount of the Net Worth Shortfall
deducted from the Purchase Price pursuant to SECTION 1.3(A)
shall be paid to the Sellers on the Settlement Date,
irrespective of the Basket Rate.
(vii) In the event a Net Worth Shortfall is not paid
to the Purchaser on the Settlement Date (unless due to the
fault of the Purchaser), the Sellers shall also pay to the
Purchaser interest on the amount of the Net Worth Shortfall at
a rate of ten percent (10%) per annum, which shall accrue from
the Settlement Date to the date of actual payment. In the
event a Net Worth Surplus is not paid to the Sellers on the
Settlement Date (unless due to the fault of the Sellers), the
Purchaser shall also pay to the Sellers interest on the amount
of the Net Worth Surplus plus the amount of any Net Worth
Shortfall deducted from the Purchase Price pursuant to SECTION
1.3(A) at a rate of ten percent (10%) per annum, which shall
accrue from the Settlement Date to the date of actual payment.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant to the
Purchaser as of the date hereof and, except as otherwise set forth in any
supplement to any schedule hereto delivered by the Sellers to the Purchaser
prior to the Closing Date in accordance with SECTION 2.36, as of the Closing
Date with respect to each Corporation.
2.1 CORPORATE ORGANIZATION, ETC. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with all requisite corporate power and authority
to carry on its business as it is now being conducted, and to own, operate and
lease its properties and assets. The Corporation is duly qualified to do
business and is in corporate and Tax good standing as a foreign corporation in
every jurisdiction
-4-
<PAGE> 11
in which the conduct of its business or the ownership or lease of its properties
require it to be so qualified, except where the failure to be so qualified would
not have a Material Adverse Effect. Such jurisdictions are set forth in SCHEDULE
2.1(A) hereto. True, complete and correct copies of the Corporation's articles
of incorporation and bylaws as presently in effect are set forth in SCHEDULE
2.1(B) hereto.
2.2 SUBSIDIARIES. The Corporation has no Subsidiaries.
2.3 STOCK RECORD BOOKS. The stock record books of the Corporation which
have been delivered to the Purchaser for inspection prior to the date hereof are
complete and correct in all material respects. The authorized, issued and
outstanding capital stock of the Corporation is as set forth in Schedule 2.3
hereto. There are no shares of capital stock of the Corporation held in the
treasury of the Corporation and no shares of capital stock of the Corporation
are currently reserved for issuance for any purpose or upon the occurrence of
any event or satisfaction of any condition.
2.4 CORPORATE MINUTE BOOKS. The corporate minute books of the
Corporation which have been made available to the Purchaser for inspection are
complete and correct in all material respects and contain a record of all of the
proceedings of the shareholders and directors of the Corporation through the
date hereof. A true and complete list of the incumbent directors and officers of
the Corporation is set forth in SCHEDULE 2.4 hereto.
2.5 TITLE TO STOCK. All of the outstanding shares of the capital stock
of the Corporation are owned by the Sellers, are duly authorized, validly
issued, fully paid and nonassessable, are free of all Liens and Contracts, and
have been issued in compliance with all applicable securities laws. All of the
Shares that were acquired from third parties were acquired in compliance with
all applicable securities laws, free and clear of any rescission rights. There
is no outstanding Contract with the Corporation or any other Person to purchase,
redeem or otherwise acquire any outstanding shares of the capital stock of the
Corporation, or securities or obligations of any kind convertible into any
shares of the capital stock of the Corporation. The Corporation has not redeemed
any securities in violation of any Contract or Regulation (including, without
limitation, any state or federal securities laws). Upon payment of the Purchase
Price to the Sellers at the Closing, the Sellers will convey good and marketable
title to the Shares, free and clear of all Liens, Contracts or other limitations
whatsoever. The assignments, endorsements, stock powers and other instruments of
transfer delivered by the Sellers to the Purchaser at the Closing will be
sufficient to transfer the Sellers' entire interest, legal and beneficial, in
the Shares to the Purchaser.
2.6 AUTHORIZATION, ETC. Each Seller has full power and authority to
enter into this Agreement and the agreements contemplated hereby and to deliver
the Shares and the certificates evidencing such Shares to the Purchaser as
provided for herein, free and clear of all Liens. This Agreement has been duly
executed and delivered by each Seller. This Agreement and all other agreements
contemplated hereby to be entered into by the Sellers each constitute a legal,
valid and binding obligation of the Seller who is a party thereto enforceable
against such Seller in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization,
-5-
<PAGE> 12
moratoriums or similar laws at the time in effect affecting the enforceability
or rights of creditors generally and by general equitable principles that may
limit the right to obtain equitable remedies.
2.7 OPTIONS AND RIGHTS. There are no outstanding Options with respect
to the Corporation's outstanding capital stock. As of the Closing Date, there
will be no existing Contracts or Options between the Seller on the one hand, and
any other Person, on the other hand, regarding the Shares.
2.8 NO VIOLATION. Except as set forth in SCHEDULE 2.8 hereto, the
execution, delivery and performance by the Sellers of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Sellers, do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default or event of default under (with due notice, lapse of
time or both), (c) result in the creation of any Lien upon the Corporation's
capital stock or assets pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action by, notice to,
or filing with any Authority pursuant to, the articles of incorporation or
bylaws of the Corporation or any material Regulation (including, without
limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976), Order or any material Contract to which the Corporation, the
Sellers, the Shares or any of the Corporation's assets or properties are
subject.
2.9 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 2.90(A) hereto are (i) the balance
sheet of the Corporation at June 27, 1997, and (ii) compiled balance
sheets and statements of operations, shareholders' equity and cash flow
of the Corporation as of and for the years ended January 2, 1998 and
December 31, 1996 and 1995. Except as set forth on SCHEDULE 2.9(A)
hereto, such balance sheets and the notes thereto fairly present the
financial position of the Corporation at the respective dates thereof,
and such statements of operations, changes in shareholders' equity and
cash flow and the notes thereto fairly present the results of
operations for the periods therein referred to, and fairly present the
financial condition of the Corporation at the respective date of, and
for the period covered by such statements. The Corporation's compiled
balance sheet and statements of operations, shareholders' equity and
cash flow as of and for the year ended January 2, 1998 have been
prepared on a basis consistent with the Corporation's past practices,
and the Corporation's balance sheet at January 2, 1998 has been
prepared on a basis consistent with its balance sheet at June 27, 1997.
SCHEDULE 2.9(B) hereto sets forth a complete and accurate list of the
audit adjustments to the foregoing financial statements in narrative
form (but without specific dollar amounts attributable thereto) that,
if made, would make such statements comply with GAAP. The balance sheet
and statements of operations, shareholders' equity and cash flow as at
January 2, 1998 and the notes thereto are herein collectively referred
to as the "FINANCIAL STATEMENTS" and January 2, 1998 is herein referred
to as the "FINANCIAL STATEMENT DATE."
(b) Except as set forth in SCHEDULE 2.9(C) hereto, the
Corporation does not have any Indebtedness or liability (whether
accrued, absolute, contingent, unliquidated or
-6-
<PAGE> 13
otherwise, known or unknown to the Corporation, whether due or to
become due) arising out of transactions entered into at or prior to the
Financial Statement Date, or facts existing at or prior to the
Financial Statement Date, other than: (i) liabilities set forth in the
Financial Statements (including any notes thereto), (ii) liabilities
and obligations otherwise specifically disclosed as a liability in this
Agreement or in any schedule hereto or (iii) liabilities not in excess
of $25,000.
2.10 EMPLOYEES. SCHEDULE 2.10 sets forth a list of all officers,
directors and key employees (meaning those earning more than $100,000 in 1997)
of the Corporation, together with a description of the rate and basis for their
total compensation. The Corporation is in compliance in all material respects
with all Federal, state and local Regulations or Orders affecting employment and
employment practices of the Corporation, including terms and conditions of
employment and wages and hours. The Corporation has no collective bargaining
agreements and, since January 1, 1996, there have been no strikes, work
stoppages nor any demands for collective bargaining by any union or labor
organization. There is no dispute or controversy with any union or other
organization of the Corporation's employees and no arbitration proceedings
pending or to the best knowledge of the Corporation threatened involving a
dispute or controversy affecting the Corporation.
2.11 ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
there has not been (a) any Material Adverse Change; (b) any damage, destruction
or loss, whether covered by insurance or not, having a Material Adverse Effect;
(c) except as set forth on SCHEDULE 2.11, any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property) in
respect of the Corporation's capital stock or any redemption or other
acquisition of such stock by the Corporation, in each case, without the prior
written consent of the Purchaser; (d) any increase in the compensation payable
to or to become payable by the Corporation to its officers or employees or any
adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers or
key employees or any Affiliate of the Corporation; (e) any entry into any
material Contract not in the ordinary course of business, including without
limitation, any borrowing or capital expenditure; or (f) any change by the
Corporation in accounting methods or principles.
2.12 CONTRACTS.
(a) Except as set forth in SCHEDULE 2.12(A) hereto, as of the
date hereof, the Corporation is not a party to any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan providing for deferred or other
compensation to employees or any other employee benefit plan
(other than as set forth in SCHEDULE 2.18 hereto), or any
Contract with any labor union;
(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii) Contract relating to the borrowing of money or
the mortgaging, pledging or otherwise placing a Lien on any
asset of the Corporation;
-7-
<PAGE> 14
(iv) Guarantee of any obligation;
(v) Contract under which the Corporation has advanced
or loaned any Person amounts in the aggregate exceeding
$10,000;
(vi) Contract pursuant to which the Corporation is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the
Corporation which involves annual compensation in excess of
$25,000;
(vii) Contract or group of related Contracts with the
same party or group of affiliated parties the performance of
which involves annual consideration in excess of $25,000;
(viii) assignment, license, indemnification or
Contract with respect to any intangible property (including,
without limitation, any Proprietary Rights);
(ix) warranty Contract with respect to its services
rendered or its products sold or leased;
(x) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xi) Contract or non-competition provision in any
Contract prohibiting it from freely engaging in any business
or competing anywhere in the world;
(xii) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether for
resale or otherwise in excess of $25,000;
(xiii) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
(xiv) employment, consulting, sales, commissions,
advertising or marketing Contracts which provide for annual
payments in excess of $25,000;
(xv) Contracts providing for "take or pay" or similar
unconditional purchase or payment obligations; or
(xvi) any other Contract which is material to its
operations and business prospects or involves a consideration
in excess of $25,000 annually, excluding any purchase orders
in the ordinary course of business.
(b) The Corporation has performed in all material respects all
obligations required to be performed by it and is not in default in any
respect under or in breach of nor in receipt of any claim of default or
breach under any material Contract to which the Corporation is subject
(including without limitation all performance bonds, warranty
obligations or otherwise); no event has occurred which with the passage
of time or the
-8-
<PAGE> 15
giving of notice or both would result in a default, breach or event of
non-compliance under any material Contract to which the Corporation is
subject (including without limitation all performance bonds, warranty
obligations or otherwise); the Corporation does not have any present
expectation or intention of not fully performing all such obligations;
the Corporation does not have any knowledge of any breach or
anticipated breach by the other parties to any material Contract to
which it is a party.
2.13 TRUE AND COMPLETE COPIES. The Corporation has delivered to the
Purchaser true and complete copies of all the Contracts and documents listed in
the schedules to this Agreement.
2.14 TITLE AND RELATED MATTERS.
(a) Except as set forth in SCHEDULE 2.14(A) hereto, the
Corporation has good and valid title to all its real and personal
property and other assets reflected in the Financial Statements or
acquired after the Financial Statement Date, free and clear of all
Liens, except Permitted Liens. All properties used in the Corporation's
business operations as of the Financial Statement Date are reflected in
the Financial Statements and are reflected therein in accordance with
and to the extent required by GAAP, except as to those assets which are
leased and except as otherwise noted in SCHEDULE 2.9(A). SCHEDULE
2.14(B) hereto sets forth a complete and accurate list of all such
leased assets which have annual rental payments in excess of $6,000
(including the expiration date of such lease, the name of the lessor,
the annual or monthly rental payment and whether a consent is required
from the lessor to consummate the transactions contemplated hereby).
(i) All the Corporation's leases are in full force
and effect, and valid and enforceable in all material respects
in accordance with their respective terms. The Corporation has
not received any notice of any, and there exists no event of
default or event which constitutes or would constitute (with
notice or lapse of time or both) a default by the Corporation
or any other Person under any lease.
(ii) All rent and other amounts due and payable with
respect to the Corporation's leases have been paid through the
date of this Agreement and all rent and other amounts due and
payable with respect to the Corporation's leases which are due
and payable on or prior to the Closing Date will have been
paid on or prior to the Closing Date.
(iii) The Corporation has received no written notice
that the landlord with respect to any currently existing real
property lease would refuse to renew such lease upon
expiration of the period thereof upon substantially the same
terms, except for rent increases consistent with past
experience or market rentals.
(b) None of the assets owned by the Corporation is or will be
on the Closing Date subject to any (i) Contracts of sale or lease
(except as disclosed in SCHEDULE 2.14(B)), except Contracts for the
sale of inventory in the ordinary and regular course of business or
(ii) Liens, except for Permitted Liens and the Liens set forth in
SCHEDULE 2.14(C) hereto.
-9-
<PAGE> 16
(c) Except as set forth on SCHEDULES 2.11 or 2.14(C), there
has not been since the Financial Statement Date and will not be prior
to the Closing Date, any sale, lease, dividend or any other disposition
or distribution by the Corporation of any of its assets or properties,
now or hereafter owned by it, except transactions in the ordinary and
regular course of business or as otherwise previously consented to in
writing by the Purchaser; provided that transactions in the ordinary
and regular course of business shall not be deemed to include any
dividends or other distributions in respect of a Corporation's capital
stock. Immediately after the Closing, the Corporation will continue to
have the right to use all of its properties and assets as they are
currently used in connection with the Corporation's business.
2.15 LITIGATION. Except as set forth in SCHEDULE 2.15 hereto, there is
no Claim pending or, to the best knowledge of the Corporation, threatened
against the Corporation which, if adversely determined, would have a Material
Adverse Effect on the Corporation, nor is there any Order outstanding against
the Corporation having, or which, insofar as can be reasonably foreseen, in the
future may have, a Material Adverse Effect.
2.16 TAX MATTERS.
(a) The Corporation has elected (with the consent of all of
its shareholders), in compliance with all applicable legal
requirements, to be taxed as an S Corporation pursuant to the Code and
corresponding provisions of any applicable state and local laws, and
such elections are in effect for the Corporation. No action has been
taken by the Corporation or any shareholder of the Corporation that may
result in the revocation or termination of any such election. Except as
set forth in SCHEDULE 2.16(A), the Corporation has no liability,
absolute or contingent, for the payment of any Income Tax under the
Code or under the laws of any state or locality. The Corporation has
filed all Tax Returns required to be filed and has timely paid all
relevant Taxes due or claimed to be due by all Taxing Authorities
(whether or not shown on a Tax Return). The Corporation has not
requested any extension of time within which to file or send any Tax
Return. All Taxes applicable for all periods ended on or before the
Financial Statement Date have been paid or fully reserved against on
the Financial Statements in accordance with GAAP, except as provided in
SCHEDULE 2.16(A) hereto. All Taxes which are required to be withheld or
collected by the Corporation have been duly withheld or collected and,
to the extent required, have been paid to the proper Taxing Authority
or properly segregated or deposited as required by applicable law.
There are no Liens for Taxes upon any property or assets of the
Corporation, except for Liens for Taxes not yet due and payable. The
Corporation has not executed any waiver of the statute of limitations
on the right of the Internal Revenue Service or any other Taxing
Authority to assess additional Taxes or to contest the income or loss
with respect to any Tax Return. The Corporation has not received notice
from a Taxing Authority in a jurisdiction where the Corporation does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. The Corporation has not been a member of an affiliated
group filing consolidated or combined federal, state, local or foreign
income Tax Returns and has no liability for the Taxes of any other
Person under Treasury regulation ss. 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by
Contract, or otherwise. The basis of
-10
<PAGE> 17
any depreciable assets, and the methods used in determining allowable
depreciation (including cost recovery), of the Corporation, are
materially correct and in compliance with the Code.
(b) No issues have been raised that are currently pending by
any Taxing Authority in connection with any Tax Returns. No material
issues have been raised in any examination by any Taxing Authority with
respect to the Corporation which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any
other period not so examined. There are no unresolved issues or unpaid
deficiencies relating to such examinations. The items relating to the
business, properties or operations of the Corporation on the Tax
Returns filed by the Corporation for all taxable years (including the
supporting schedules filed therewith), available copies of which have
been made available to the Purchaser, state accurately, in all material
respects, the information requested with respect to the Corporation and
such information was derived from the Corporation's books and records.
(c) The Corporation is not a participant in any joint venture,
partnership, or other arrangement or Contract which is treated as a
partnership for federal income tax purposes. The Corporation is not
party to any tax sharing agreement.
(d) The Corporation has not filed a consent under Section
341(f) of the Code or any comparable provision of any state or local
statute.
(e) SCHEDULE 2.16(E) hereto lists all federal, state, local
and foreign income Tax Returns and all other Tax Returns for which the
annual tax liability is at least $25,000 for taxable periods ending on
or after December 31, 1986 and indicates those Tax Returns that have
been audited and those that are the subject of audit.
(f) None of the assets of the Corporation constitutes
tax-exempt bond financed property or tax exempt use property within the
meaning of Section 168 of the Code, and none of the assets owned by the
Corporation is subject to a lease, safe harbor lease, or other
arrangement as a result of which the Corporation is not treated as the
owner for federal income tax purposes.
(g) The Corporation has not made any payments, is not
obligated to make any payments and is not a party to any agreement that
under any circumstances could obligate it to make any payment that will
not be deductible under section 280G of the Code.
(h) No power of attorney has been granted by the Corporation
with respect to any matter relating to Taxes which is currently in
force.
2.17 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT REGULATIONS. The
Corporation is presently in material compliance with regard to its operations,
practices, real property, structures, equipment and other property, and all
other aspects of its business, with all applicable Regulations and Orders,
including, but not limited to, all Regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection,
-11-
<PAGE> 18
equal opportunity, discrimination, health, sanitation, fire, zoning, building
and occupational safety. There are no Claims pending, or, to the Knowledge of
the Corporation, threatened, nor has the Corporation received any written
notice, regarding any violations of any Regulations and Orders enforced by any
Authority claiming jurisdiction over the Corporation including any requirement
of OSHA or any pollution and environmental control agency (including air and
water).
2.18 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 2.18 hereto, neither the Sellers, nor any ERISA
Affiliate of the Sellers, is a party to or participates in or has any
material liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multiemployer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other material fringe benefit arrangements for any
employee, director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding, which
does not constitute an "employee benefit plan" (as defined in
Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be listed on
SCHEDULE 2.18 for which the Sellers or any ERISA Affiliate of the
Sellers may have any material liability or contingent liability is
sometimes hereinafter referred to as a "BENEFIT PLAN". For purposes of
this Section, the term "ERISA AFFILIATE" shall mean any trade or
business, whether or not incorporated, that together with the Sellers
would be deemed a "single employer" within the meaning of Section
4001(b)(i) of ERISA.
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans listed on SCHEDULE 2.18, and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
recordkeeping agreements, each as in effect on the date hereof, has
been supplied or made available to the Purchaser. In the case of any
Benefit Plan that is not in written form, the Purchaser has been
supplied with an accurate description of such Benefit Plan as in effect
on the date hereof. A true and correct copy of the most recent annual
reports and accompanying schedules, the most recent actuarial reports,
and the most recent summary plan description and Internal Revenue
Service determination letter with respect to each such Benefit Plan, to
the extent applicable, and a schedule of assets (and the fair market
value thereof
-12-
<PAGE> 19
assuming liquidation of any asset which is not readily tradeable) held
with respect to any funded Benefit Plan as of the most recent valuation
date for each Plan has been supplied to the Purchaser by the Sellers,
and subject to market volatility there have been no material adverse
changes in the financial condition in the respective Plans from that
stated in the annual reports and actuarial reports supplied.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 2.18:
(i) All Benefit Plans comply, and have been
administered in form and in operation in all material
respects, with all requirements of law and regulation
applicable thereto, including without limitation the timely
filing of all annual reports required with respect to such
Benefit Plans, and neither of the Corporations nor any ERISA
Affiliate of the Corporations has received any notice from any
governmental agency questioning or challenging such
compliance.
(ii) All Benefit Plans that are intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "CODE") materially comply in form and in
operation with all applicable requirements of Sections 401(a)
and 501(a) of the Code; there have been no amendments to such
Benefit Plans which are not the subject of a determination
letter issued with respect thereto by the Internal Revenue
Service; and no event has occurred that will or could give
rise to disqualification of any such Benefit Plan under such
sections or to any tax under Section 511 of the Code; except
that no representation is made as to the satisfaction of any
formal plan document qualification requirement with respect to
which the remedial amendment period set forth in Section
401(b) of the Code, and any regulations, writings or other IRS
releases thereunder, has not expired.
(iii) None of the assets of any Benefit Plan are
invested in employer securities or employer real property, as
those terms are defined in Section 407(d) of ERISA.
(iv) There have been no non-exempt "prohibited
transactions" (as described in Section 406 of ERISA or Section
4975 of the Code) with respect to any Benefit Plan and neither
of the Corporations nor any ERISA Affiliate of the
Corporations has otherwise engaged in any such non-exempt
prohibited transaction.
(v) There have been no acts or omissions by the
Corporations or any ERISA Affiliate of the Corporations that
have given rise to or may give rise to any material fines,
penalties, taxes or related charges under Sections 502(c),
502(i) or 4071 of ERISA or Chapter 43 of the Code for which
the Corporations or any ERISA Affiliate of the Corporations
may be liable.
-13-
<PAGE> 20
(vi) None of the payments contemplated by the Benefit
Plans would, in the aggregate, constitute excess parachute
payments as defined in Section 280G of the Code.
(vii) There are no actions, suits or claims (other
than routine claims for benefits) pending or to the knowledge
of the Corporation threatened involving any Benefit Plans or
the assets of such Plans, and to the Knowledge of the
Corporations, no facts exist which could give rise to any such
actions, suits or claims (other than routine claims for
benefits).
(viii) As to any Benefit Plan that is subject to
Title IV of ERISA, there have been no "reportable events" (as
described in Section 4043 of ERISA), and no steps have been
taken to terminate any such Plan.
(ix) All Benefit Plans that are group health plans
have been operated in material compliance with the group
health plan continuation coverage requirements of Section
4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable, and no such group health plan is
a self-insured plan.
(x) Actuarially adequate accruals for all obligations
or contingent obligations under the Benefit Plans are
reflected in the Financial Statements provided to the
Purchaser and such obligations include a pro rata amount of
the contributions which would otherwise have been made in
accordance with past practices for the plan years which
include the closing date.
(xi) There are no unfunded benefit liabilities,
within the meaning of Section 4001(a)(16) of ERISA, with
respect to any Benefit Plan subject to Title IV of ERISA.
(xii) No Benefit Plan subject to the requirements of
Section 412 of the Code or Section 402 of ERISA has incurred
an "accumulated funding deficiency" (as defined in such
applicable section and any regulations thereunder), and none
of the assets of the Corporations or their ERISA Affiliates is
subject to any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code.
(xiii) Except as specifically set forth in any
schedule to this Agreement, the execution of and performance
of the transactions contemplated by, this Agreement, will not
(either alone or upon the occurrence of any additional or
subsequent events) result in any payment (whether of severance
pay or otherwise), acceleration, vesting, or increase in
benefits under any Benefit Plan.
(d) MULTIEMPLOYER PLANS. Each Benefit Plan that is a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA)
with respect to which the Corporations or any ERISA Affiliate may have
any liability, including any liability attributable to a current or
former ERISA Affiliate of the Corporations, and the maximum amount of
such
-14
<PAGE> 21
liability (determined in the case as if the Corporations or ERISA
Affiliate of the Corporations incurred complete withdrawal immediately
after the Closing) is listed on SCHEDULE 2.18. With respect to such
Benefit Plans:
(i) Neither the Corporations nor any ERISA Affiliate
of the Corporations has withdrawn, partially withdrawn, or
received any notice of any claim or demand for withdrawal
liability or partial withdrawal liability against any of them;
and
(ii) Neither the Corporations nor any ERISA Affiliate
of the Corporations has received any notice that any such
Benefit Plan is in reorganization, that increased
contributions may be required to avoid a reduction in benefits
under the Benefit Plan or the imposition of any excise tax, or
that any such Benefit Plan is or may become insolvent.
2.19 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.19(A) hereto sets forth a complete and accurate
list of all of the Corporation's material Proprietary Rights. The
Corporation has delivered to the Purchaser correct and complete copies
of all such Proprietary Rights (that are in written form) as amended to
date and has made available to the Purchaser correct and complete
copies of all other written documentation evidencing ownership of, and
any Claims relating to, each such item. The Corporation has taken all
reasonable measures to protect the proprietary nature of each such
Proprietary Right, and to maintain in confidence all trade secrets and
confidential information that it owns or uses.
(b) To the knowledge of the Corporation, (i) no Person other
than a Corporation has any rights to any of the Proprietary Rights
owned or used by the Corporation identified on SCHEDULE 2.19(A) except
pursuant to agreements or licenses specified in SCHEDULE 2.19(B)
hereto, (ii) no other Person is infringing, violating or
misappropriating any such Proprietary Right that the Corporation owns
or uses, and (iii) no such Proprietary Right is subject to any
Outstanding Order or Claim.
2.20 CUSTOMER WARRANTIES. There are no pending, nor to the knowledge of
the Corporation, threatened, any material Claim or group of Claims under or
pursuant to any warranty, whether expressed or implied, on products or services
sold prior to the Closing Date by the Corporation which are not disclosed or
referred to in the Financial Statements and which are not fully reserved
against. Set forth hereto on SCHEDULE 2.20 are the standard terms and conditions
of sale or lease and the aggregate amount of warranty Claims incurred by the
Corporation in fulfillment of its obligation under any Guarantee.
2.21 PRODUCTS LIABILITY. Except as set forth in SCHEDULE 2.21 hereto,
(i) there is no Claim by or before any Authority against or involving the
Corporation or concerning any product manufactured, shipped, sold or delivered
by or on behalf of the Corporation which is pending or, to the best knowledge of
the Corporation, threatened, relating to or resulting from an alleged defect in
design, manufacture, materials or workmanship of any product manufactured,
shipped,
-15-
<PAGE> 22
sold or delivered by or on behalf of the Corporation or any alleged failure to
warn, or any alleged breach of implied warranties or representations which would
have a Material Adverse Effect, nor is there any valid basis for any such Claim,
(ii) to the knowledge of the Corporation, there has not been any Occurrence,
(iii) there has not been any Recalls conducted with respect to any product
manufactured (or to be manufactured), shipped, sold or delivered by or on behalf
of the Corporation, or to the Knowledge of the Corporation any investigation or
consideration of or decision made by any person or entity concerning whether to
undertake or not undertake, any Recalls and (iv) to the knowledge of the
Corporation, there are no material defects in design, manufacturing, materials
or workmanship including, without limitation, any failure to warn, or any breach
of express or implied warranties or representations, which involve any product
manufactured, shipped, sold or delivered by or on behalf of the Corporation
which would have a Material Adverse Effect.
2.22 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 2.22: (a)
neither the Corporation's business nor the operation thereof violates any
applicable Environmental Law in effect as of the date hereof in any material
respect and no condition or Occurrence which, with notice or the passage of time
or both, would constitute a violation of any Environmental Law which would have
a Material Adverse Effect; (b) the Corporation is in possession of all material
Environmental Permits required under any applicable Environmental Law for the
conduct or operation of the Corporation's business (or any part thereof), and
the Corporation is in material compliance with all of the requirements and
limitations included in such Environmental Permits; (c) the Corporation has not
stored or used any pollutants, contaminants or hazardous or toxic wastes,
substances or materials on or at any of its property or facilities except for
inventories of chemicals which are used or to be used in the ordinary course of
the Corporation's business (which inventories have been sorted or used in
material compliance with all applicable Environmental Permits and all
Environmental Laws, including all so-called "Right to Know" laws); (d) the
Corporation has not received any notice from any Authority or any private Person
that the Corporation's business or the operation of any of its facilities is in
violation of any Environmental Law or any Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any of the Corporation's property, or at, on or beneath any land
adjacent thereto or in connection with any waste or contamination site; (e) the
Corporation is not the subject of any Federal, state, local, or private Claim
involving a demand for damages or other potential liability with respect to a
violation of Environmental Laws or under any common law theories relating to
operations or the condition of any facilities or property (including underlying
groundwater) owned, leased, or operated by the Corporation; (f) the Corporation
has not buried, dumped, disposed, spilled or released any pollutants,
contaminants or hazardous or wastes, substances or materials on, beneath or
adjacent to any of its property or any property adjacent thereto which could
result in liability of $5,000 individually or $10,000 in the aggregate; (g) to
Sellers' Knowledge, no property now or previously owned, leased or operated by
the Corporation, is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any other federal or state list of
sites requiring investigation or clean-up; (h) to Sellers' Knowledge, there are
no underground storage tanks, active or abandoned, including petroleum storage
tanks, on or under any property now or previously owned, leased or operated by
the Corporation; (i) the Corporation has not directly transported or directly
arranged
-16-
<PAGE> 23
for the transportation of any Hazardous Material to any location which is listed
or proposed for listing on the National Priorities List pursuant to CERCLA, on
the CERCLIS or on any federal or state list or which is the subject of federal,
state or local enforcement actions or other investigations which may lead to
material Claims against the Corporation for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA; and (j) to the
knowledge of the Corporation there are no polychlorinated biphenyls, radioactive
materials or friable asbestos present at any property now or previously owned or
leased by the Corporation. The Corporation has timely filed all reports required
to be filed with respect to all of its property and facilities and has generated
and maintained all required data, documentation and records under all applicable
Environmental Laws.
2.23 CAPITAL EXPENDITURES AND INVESTMENTS. The Corporation has
outstanding Contracts for capital expenditures and investments as set forth in
SCHEDULE 2.23 hereto which includes a schedule of all monies disbursed on
account of capital expenditures and investments made by the Corporation since
the Financial Statement Date.
2.24 DEALINGS WITH AFFILIATES. SCHEDULE 2.24 hereto sets forth a
complete and accurate list, including the parties, of all material oral or
written Contracts to which the Corporation is, will be or has been a party, at
any time from December 31, 1995 to the Closing Date, and to which any one or
more Affiliates or Sellers is also a party. Except as set forth in SCHEDULE
2.24, since December 31, 1995, the Corporation has not made any material
payments, loaned any funds or property or made any credit arrangement with any
Seller, Affiliate or employee of the Corporation except for the payment of
employee salaries and director compensation in the ordinary course of business.
2.25 INSURANCE. All of the Policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid or accrued therefor, and no notice of cancellation
or termination has been received with respect to any Policy currently in effect.
SCHEDULE 2.25 hereto sets forth a complete and accurate list of all Policies,
including name of insurer and the type and amount of coverage. To the Knowledge
of the Corporation, the Corporation has not breached or otherwise failed to
perform in any material respect its obligations under any of the Policies nor
has the Corporation received any adverse notice or communication from any of the
insurers party to the Policies with respect to any such alleged breach or
failure in connection with any of the Policies. All Policies are sufficient for
compliance with all Regulations and all Contracts to which the Corporation is
subject; are to the Corporation's knowledge valid, outstanding, collectible and
enforceable policies; and will not in any way be affected by, or terminate or
lapse by reason of, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth in
SCHEDULE 2.25, all of the Policies are scheduled to remain in full force and
effect through 30 days after the Closing Date.
2.26 ACCOUNTS RECEIVABLE; INVENTORIES. The accounts receivable of the
Corporation reflected in the Financial Statements and such additional accounts
receivable as are reflected on the books of the Corporation on the date hereof
are good and to the knowledge of the Corporation collectible except to the
extent reserved against thereon (which reserves have been determined based upon
actual prior experience and are consistent with prior practices). All such
-17-
<PAGE> 24
accounts receivable (except to the extent so reserved against) are valid,
genuine and subsisting, arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions and are not subject to
defenses, set-offs or counterclaims. The inventories reflected on the Financial
Statements (net of reserves) and held by the Corporation on the date hereof do
not include any material amount of items which are not usable or saleable in the
ordinary course of business of the Corporation or are obsolete or discounted
items. Such inventories have been reflected on such balance sheets at the lower
of cost or market value (taking into account the usability or salability
thereof). All such inventories are owned free and clear and are not subject to
any Lien except to the extent reserved against or reflected in the Financial
Statements. Since the Financial Statement Date, inventories have been purchased
by the Corporation consistent with historical seasonal requirements, and the
volumes of purchases thereof and orders therefor have not been materially
reduced or otherwise changed in anticipation of the transactions contemplated by
this Agreement.
2.27 BROKERAGE. Except as set forth in SCHEDULE 2.27 hereto, there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Corporation.
2.28 CUSTOMERS AND SUPPLIERS. No purchase order or commitment of the
Corporation is in excess of past practice, nor are prices provided therein in
excess of past practice for the products or services to be provided thereunder.
No material supplier of the Corporation has advised the Corporation in writing
since January 1, 1997, that it will stop, or materially decrease the rate of,
supplying materials, products, or services to the Corporation and no material
customer of the Corporation has advised the Corporation in writing within the
past year that it will stop, or materially decrease the rate of, buying
materials, products or services from the Corporation. SCHEDULE 2.28 sets forth a
list of each supplier that is the sole supplier of any material product or
component to the Corporation.
2.29 PERMITS. The Permits listed on SCHEDULE 2.29 are the only Permits
that are required for the Corporation to conduct its business as presently
conducted, except for those the absence of which would not have any Material
Adverse Effect. Each such Permit is in full force and effect and, to the best of
the knowledge of the Corporation, no suspension or cancellation of any such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration.
2.30 ACQUISITIONS. Set forth on SCHEDULE 2.30 is a list of all
acquisitions of other entities that the Corporation has effected, whether
through a business combination, the purchase of stock or assets, or any other
means. Except as set forth in SCHEDULE 2.30, the Corporation does not have any
Indebtedness, obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, known or unknown to the Corporation, whether due or
to become due) arising out of any such acquisition subsequent to January 1,
1993.
2.31 IMPROPER AND OTHER PAYMENTS. Except as set forth on SCHEDULE 2.31
hereto, to the Corporation's knowledge, (a) neither the Corporation, any
director, officer, employee thereof, nor any agent or representative of the
Corporation nor any Person acting on behalf of any of them,
-18-
<PAGE> 25
has made, paid or received any unlawful bribes, kickbacks or other similar
payments to or from any Person or Authority, (b) no contributions have been
made, directly or indirectly, to a domestic for foreign political party or
candidate, (c) no improper foreign payment (as defined in the Foreign Corrupt
Practices Act) has been made, and (d) the internal accounting controls of the
Corporation are believed by the Corporation's management to be adequate to
detect any of the foregoing under current circumstances.
2.32 DISCLOSURE. Neither this Article II nor any of the schedules
attached hereto and prepared by or on behalf of the Corporation or the Sellers
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading.
2.33 INDEBTEDNESS. The Corporation has no outstanding Indebtedness.
2.34 SECURITIES LAWS MATTERS. Each Seller is acquiring LTC Shares
hereunder for his own account for investment and not with a view to, or for the
sale in connection with, any "distribution" of the LTC Shares, as such term is
used in Section 2(11) of the Securities Act. Each Seller has had the opportunity
to discuss the transactions contemplated hereby with the Purchaser and has been
afforded, prior to execution of this Agreement, the opportunity to ask questions
of, and receive answers from the Purchaser and to obtain any additional
information relating to the transactions contemplated hereby as such Seller has
requested. Each Seller acknowledges receiving and reviewing the Purchaser's
prospectus, dated November 24, 1997 (the "Prospectus"). Each Seller is an
"ACCREDITED INVESTOR" within the meaning of Regulation D promulgated under the
Securities Act and has such knowledge and experience in business or financial
matters that he is capable of evaluating the merits and risks of an investment
in the LTC Shares. Each Seller can bear the economic risk of losing his
investment in the LTC Shares and has adequate means for providing for his
current financial needs and contingencies. Each Seller acknowledges and agrees
that the LTC Shares will be restricted securities within the meaning of Rule 144
and will not be sold or otherwise disposed of, except (a) pursuant to an
exemption from the registration requirements under applicable state securities
laws and the Securities Act, (b) in accordance with Rule 144 or (c) pursuant to
an effective registration statement filed by the Purchaser with the Securities
and Exchange Commission under applicable state securities laws and the
Securities Act. Each Seller is a resident of Georgia. The Sellers acknowledge
and agree that the Purchaser may, unless a registration statement is in effect
covering such LTC Shares or unless the holders thereof comply with Rule 144,
place stop transfer orders with its transfer agent with respect to such
certificates in accordance with federal securities laws.
2.35 LEGENDS. The certificates representing LTC Shares issued pursuant
to this Agreement shall bear a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933
-19-
<PAGE> 26
AND ANY APPLICABLE STATE LAW, (2) COMPLIANCE WITH RULE 144
UNDER THE SECURITIES ACT OF 1933 OR (3) AT HOLDER'S EXPENSE,
AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL
(SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED.
2.36 AMENDMENTS TO DISCLOSURE SCHEDULES. From the date hereof through
four (4) business days prior to the Closing Date, the Sellers, acting reasonably
and in good faith, may amend or supplement SCHEDULES 2.1(A) through 2.31 hereto
by providing the Purchaser a copy of the amendments by Federal Express or hand
delivery; provided, however, if such amendments (a) relate to any fact or
circumstance that occurred prior to the date hereof, then the Sellers shall
remain liable to the Purchaser for any Purchaser Losses that may result from
such facts or circumstances pursuant to Article XII hereof, (b) relate to any
fact or circumstance that occurs after the date hereof, the Purchaser shall have
the right to accept or reject such amendments. If such amendments (i) are NOT
accepted by the Purchaser, the Purchaser may terminate this Agreement pursuant
to SECTION 11.1(D) hereof, or (ii) are accepted by the Purchaser in writing,
such amendments shall thereafter be deemed to be disclosed as of the date of
this Agreement.
2.37 PRE-CLOSING COVENANTS. Since January 2, 1998, the Sellers have
complied with the covenants set forth in ARTICLE IV.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows as of
the date hereof and as of the Closing Date:
3.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business and is in corporate and tax good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, or
the execution of, and performance of the transactions contemplated by, this
Agreement, require it to be so qualified or licensed.
3.2 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate action
by the Purchaser is necessary to authorize the execution and delivery of this
Agreement by the Purchaser and the performance by the Purchaser of its
obligations hereunder. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.
-20-
<PAGE> 27
3.3 NO VIOLATION. Except for filing under the Hart-Scott-Rodino Act,
the execution, delivery and performance by the Purchaser of this Agreement, and
all other agreements contemplated hereby, and the fulfillment of and compliance
with the respective terms hereof and thereof by the Purchaser, do not and will
not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) result in a violation of, or (c) require any authorization,
consent, approval, exemption or other action by, or notice to, or filing with
any court or Authority pursuant to, the charter or bylaws of the Purchaser or,
to the best knowledge of the Purchaser, any applicable Regulation (including,
without limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976), or Order to which the Purchaser, or its properties
are subject. The Purchaser will comply in all material respects with all
applicable Regulations and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.4 INVESTMENT INTENT. The Purchaser represents and warrants to the
Sellers that it is purchasing the Shares for investment purposes and not with a
view to distribution thereof and agrees that it shall not make any sale,
transfer or other disposition of the Shares in violation of any applicable
securities law.
3.5 REPORTS AND FINANCIAL STATEMENTS. Except where failure to have done
so did not and would not have a Material Adverse Effect on the Purchaser, the
Purchaser has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the SEC under the
Securities Act and the Exchange Act, including, but not limited to Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements (collectively, the "LTC Reports"). As
of their respective dates (but taking into account any amendments filed prior to
Closing Date), (i) the LTC Reports complied in all material respects with the
Securities Act, the Exchange Act and all the rules and regulations promulgated
by the SEC and (ii) none of the LTC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Purchaser
included in the LTC Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied during the periods presented (except, as noted therein, or,
in the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal
audit adjustments) the financial position of the Purchaser and its consolidated
subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Since July 31, 1997, there have not
been any circumstances, state of facts or matters which might reasonably be
expected to have a Material Adverse Effect in respect of the Purchaser's
business, operations, properties, assets or financial condition taken as a
whole.
-21-
<PAGE> 28
ARTICLE IV
COVENANTS OF THE SELLERS
During the period from January 2, 1998 until the Closing Date, except
as otherwise consented to or approved by the Purchaser in writing, the Sellers
agree that they shall act, or refrain from acting where required hereinafter
(and have so acted or refrained from acting), to comply (and to cause each
Corporation to comply) with the following:
4.1 REGULAR COURSE OF BUSINESS. The Corporation shall operate its
business in good faith, consistent with past management practices; shall
maintain all of its properties in customary repair, order and condition,
reasonable wear and tear excepted; shall maintain (except for expiration due to
lapse of time) all leases and material Contracts in effect without change except
as expressly provided herein; shall comply in all material respects with the
provisions of all Regulations and Orders applicable to the Corporation and the
conduct of its business; shall not cancel, release, waive or compromise any
debt, Claim or right in its favor having a value in excess of $5,000 other than
in connection with returns for credit or replacement in the ordinary course of
business; shall not alter the rate or basis of compensation of any of its
officers, directors or employees other than in the ordinary course of business;
and shall maintain insurance coverage through the Closing Date with the coverage
and in the amounts set forth in SCHEDULE 2.25 hereto.
4.2 AMENDMENTS. Except as required for the transactions contemplated in
this Agreement, no change or amendment shall be made in the charter or Bylaws of
the Corporation. The Corporation shall not merge into or consolidate with any
other Person or change the character of its business. The Corporation shall not
acquire (including, without limitation, for cash or shares of stock, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets, or make any investment either by purchase of shares or securities,
contributions of capital or property transfer, or, except in the ordinary course
of business, consistent with past practice, purchase any property or assets of
any other Person.
4.3 CAPITAL CHANGES; PLEDGES. The Corporation shall not issue or sell
any shares of its capital stock of any class or issue or sell any securities
convertible into, or Options to subscribe for any shares of its capital stock
and the Corporation shall not pledge or otherwise encumber any shares of its
capital stock or authorize any of the foregoing. In addition, the Corporation
shall not allow the transfer of any Shares of its Capital Stock on the stock
transfer ledger or other books and records.
4.4 DIVIDENDS. The Corporation shall not (i) declare, pay or set aside
for payment any dividend or other distribution in respect of its capital stock
other than as set forth on SCHEDULE 2.11 or as contemplated in SECTION 6.10
hereof, (ii) directly or indirectly, reclassify, combine, split, subdivide,
redeem, purchase or otherwise acquire any shares of its capital stock, or (iii)
pay any bonus to any Seller, in each case, without the prior written consent of
the Purchaser.
4.5 CAPITAL AND OTHER EXPENDITURES. The Corporation shall not make any
capital expenditures, or commitments with respect thereto in excess of $25,000
in the aggregate. The
-22-
<PAGE> 29
Corporation shall not make any loan or advance to, or enter into any other
transaction with, any Affiliate and shall collect in full on or prior to the
Closing Date any amounts outstanding now due from any Affiliate.
4.6 LEASES. The Corporation shall pay all rent and other amounts due
and payable with respect to each of its real and personal property leases which
are due and payable on or prior to the Closing Date.
4.7 ASSETS. The Corporation shall not, effect any sale, lease, or any
other disposition or distribution of any of its assets or properties, now or
hereafter owned by it, except transactions in the ordinary and regular course of
business or as otherwise consented to by the Purchaser.
4.8 ACCOUNTS PAYABLE. The Corporation shall pay, in the ordinary course
of business and consistent with past practice, all accounts payable, other
current liabilities and capitalized lease obligations as they become due and
payable.
4.9 ACCOUNTING POLICIES. The Corporation shall not take any action with
respect to accounting policies or procedures other than in the ordinary course
of business and in a manner consistent with past practices.
4.10 BORROWING. The Corporation shall not incur, assume or Guarantee
any Indebtedness not reflected on the Financial Statements.
4.11 FULL ACCESS AND DISCLOSURE.
(a) Subject to the provisions of the Confidentiality
Agreement, the Corporation shall afford to the Purchaser and its
counsel, accountants, agents and other authorized representatives and
to financial institutions specified by the Purchaser reasonable access
upon reasonable notice during business hours to the Corporation's
properties, books and records in order that the Purchaser may have full
opportunity to make such reasonable investigations as it shall desire
to make of the affairs of the Corporation; and the Corporation shall
cause its officers, employees and auditors to furnish such additional
financial and operating data and other information as the Purchaser
shall from time to time reasonably request including, without
limitation, any internal control recommendations made by its
independent auditors in connection with any audit of the Corporation.
(b) From time to time prior to the Closing Date, the Sellers
shall promptly supplement or amend information previously delivered to
the Purchaser with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth or disclosed; provided, however, that such
supplemental information shall not be deemed to be an amendment to any
schedule or exhibit hereto for purposes of SECTION 7.1.
4.12 TAX MATTERS. The Sellers shall make all
payments of their tax liability and file all Tax Returns required to be filed in
respect of the Corporation's earnings pursuant to, and shall
-23-
<PAGE> 30
otherwise comply and cause the Corporation to comply with all other applicable
requirements of, Subchapter S of the Code and corresponding provisions under
applicable state and local laws.
4.13 CERTAIN OPERATIONAL MATTERS. The Corporation shall not take any of
the following actions without the consent of the Purchaser: (i) open any store,
(ii) terminate the employment of any officer, director or key employee set forth
on SCHEDULE 2.10, or (iii) amend the terms of either of the Corporations'
agreements with BellSouth Mobility, Bell Atlantic Nynex and Cell Star.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Sellers that:
5.1 CONFIDENTIALITY. Except as required by law or by the rules of the
National Association of Securities Dealers or the United States Securities and
Exchange Commission (in which case, so far as possible, the Purchaser shall
consult with the Sellers prior to any disclosure), the Purchaser agrees that
unless and until the transactions contemplated hereby have been consummated, the
Purchaser and its representatives and its Affiliates and their representatives
and advisors will hold in strict confidence all data and information obtained
from the Sellers, the Corporations or any of their Affiliates in connection with
the transactions contemplated hereby, except any of the same which (i) was, is
now, or becomes generally available to the public (but not as a result of a
breach of any duty of confidentiality by which the Purchaser and its
representatives and its Affiliates and their representatives and advisors is
bound); (ii) was known to the Purchaser prior to its disclosure to the Purchaser
as demonstrated by Purchaser's written records; or (iii) is disclosed to the
Purchaser by a third party not subject to any duty of confidentiality to the
Sellers, the Corporations or any of their Affiliates prior to its disclosure to
the Purchaser by the Sellers, the Corporations or any of their Affiliates. The
Purchaser will use such data and information solely for the specific purpose of
evaluating the transactions contemplated hereby. If this Agreement is
terminated, the Purchaser and its Affiliates and their representatives and
advisors will promptly return to the Sellers all such data, information and
other written material (including all copies thereof) which has been obtained by
the Purchaser, and the Purchaser will make no further use whatsoever of any of
such or the information and knowledge contained therein or derived therefrom.
5.2 BOARD MEMBERSHIP. The Purchaser agrees to use its best efforts to
cause the appointment of Mr. Sosebee to the Purchaser's Board of Directors
within 30 days of the Closing Date and to nominate Mr. Sosebee for election to
the Purchaser's Board of Directors at the first annual meeting of the
Purchaser's Shareholders following the Closing Date.
5.3 DIRECTOR INDEMNIFICATION. Mr. Sosebee shall be entitled to the same
rights to indemnification and advancement of expenses existing in favor of the
existing directors of the Purchaser under the Purchaser's articles of
incorporation, bylaws and indemnification agreements in effect from time to
time.
-24-
<PAGE> 31
ARTICLE VI
OTHER AGREEMENTS
The parties further agree as follows (and the Sellers agree to cause
the Corporations to comply with the following):
6.1 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation of the nature specified in SECTION 7.5 or SECTION 8.3 hereof is
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
6.2 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, the parties hereto shall (and the Sellers shall cause the
Corporations to) use their best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Regulations to consummate and make effective as
promptly as possible the transactions contemplated by this Agreement, and to
cooperate with each other in connection with the foregoing, including without
limitation using all reasonable efforts (a) to obtain all necessary waivers,
consents, and approvals from other parties to loan agreements, leases, mortgages
and other material Contracts, (b) to obtain all necessary Permits, consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign Regulations, (c) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, (d) to effect all necessary
registrations and filings including, but not limited to, filings under the
Hart-Scott-Rodino Act and submissions of information requested by Authorities,
and (e) to fulfill all conditions to the obligations of the parties under this
Agreement. Each of the Purchaser and the Sellers further covenants and agrees
that it shall (and the Sellers shall cause the Corporations to) use its
respective best efforts to prevent, with respect to a threatened or pending
preliminary or permanent injunction or other Regulation or Order the entry,
enactment or promulgation thereof, as the case may be.
6.3 NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement is
terminated, neither the Sellers nor the Corporations shall, and shall use its
best efforts to cause its directors, officers, employees, representatives,
agents, advisors, accountants and attorneys not to, initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to, or engage in negotiations concerning, or provide any confidential
information or data to any Person with respect to, or have any discussions with
any Person relating to, any acquisition, business combination or purchase of all
or any significant asset of, or any equity interest in, directly or indirectly,
either Corporation or otherwise facilitate any effort or attempt to do or seek
any of the foregoing, and shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
6.4 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
DISSOLUTION, ETC. Each Seller specifically agrees that the obligations of such
Seller hereunder, including, without
-25-
<PAGE> 32
limitation, obligations pursuant to Article XII shall not be terminated by
operation of law or by the death or incapacity of any individual Seller.
6.5 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Purchaser's request and without expense to the Corporations and without
further consideration from the Purchaser or the Corporations, the Sellers shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as the Purchaser reasonably may require to convey, transfer to
and vest in the Purchaser and to put the Purchaser in possession of any rights
or property to be sold, conveyed, transferred and delivered hereunder.
6.6 NON-COMPETITION. During the "RESTRICTED PERIOD" (as hereinafter
defined), each Seller agrees not to, directly or indirectly, alone or as a
partner, officer, director, employee, consultant, agent, independent contractor,
member or stockholder of any company or Person, engage in any business activity,
including but not limited to any business activity related to the business of
selling cellular or wireless communications services or products, including,
without limitation, paging, PCS, ESMR and any other form of personal
communications services, in the "RESTRICTED AREA" (as hereinafter defined) which
is directly or indirectly in competition with the products or services being
developed, marketed, sold or otherwise provided by the Corporations or the
Purchaser or which is directly or indirectly detrimental to the business of the
Corporations, the Purchaser or any Subsidiary; provided, however, that the
record or beneficial ownership by a Seller of two percent (2%) or less of the
outstanding publicly traded capital stock of any such company or Person shall
not be deemed to be in violation of this SECTION 6.6 so long as a Seller is not
an officer, director, employee or consultant of such company or Person. The
Sellers further agree that, during the Restricted Period, the Sellers shall not
in any capacity, either separately, jointly or in association with others,
directly or indirectly do any of the following: (a) recruit, solicit, induce or
otherwise influence any of the Corporations', the Purchaser's or any
Subsidiary's employees, consultants, agents, sub-agents, suppliers, customers or
prospects, proprietors, partners, lenders, directors, joint venturers,
investors, lessors, sub-contractors, independent contractors or any other Person
which has a business relationship with either Corporation, the Purchaser or any
Subsidiary, to discontinue, reduce or modify such relationship with either
Corporation, the Purchaser or any Subsidiary; and (b) employ or seek to employ
any Person or agent who is then employed or retained by either Corporation, the
Purchaser or any Subsidiary (or who was so employed or retained at any time
within the two (2) years prior to the date the Seller employs or seeks to employ
such person). The "RESTRICTED PERIOD" shall mean the period beginning on the
Closing Date and ending on the fifth anniversary of the Closing Date. The
"RESTRICTED AREA" shall mean the continental United States. The Sellers
acknowledge and agree that the covenants provided for in this SECTION 6.6 are
reasonable and necessary in terms of time, area and line of business to protect
the Purchaser's legitimate business interests as a buyer of the Shares in
protecting its trade secrets. The Sellers further acknowledge and agree that
such covenants are reasonable and necessary in terms of time, area and line of
business to protect the Purchaser's and the Purchaser's other legitimate
business interests, which include interests in protecting (x) valuable
confidential business information, (y) substantial relationships with specific
customers throughout the United States and (z) customer goodwill associated with
ongoing business by way of marketing throughout the United States using the
trademark "Cellular Warehouse." The Sellers hereby expressly authorize the
enforcement of the covenants provided for in this SECTION 6.6 by the Purchaser,
the Corporations after the Closing, the Purchaser's, either
-26-
<PAGE> 33
Corporation's or any of the Purchaser's permitted assigns and any successors to
the business of the Purchaser, the Corporations or the Purchaser. To the extent
that the covenant provided for in this SECTION 6.6 may later be deemed by a
court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision. The provision as modified shall then be enforced.
6.7 PUBLIC ANNOUNCEMENTS. The form, content and timing of all press
releases, public announcements or publicity statements with respect to this
Agreement and transactions contemplated hereby shall be subject to the prior
approval of both the Sellers and the Purchaser, which approval shall not be
unreasonably withheld. No press releases, public announcements or publicity
statements shall be released by either party without such prior mutual
agreement.
6.8 HART-SCOTT-RODINO ACT. Each of the Parties shall promptly file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, shall use its best
efforts to obtain an early termination of the applicable waiting period, and
shall make any further filings or information submissions pursuant thereto that
may be necessary, proper or advisable.
6.9 TRADING IN LTC COMMON STOCK. Except as otherwise provided herein or
expressly consented to in writing by the Purchaser, from the date of this
Agreement until the Closing Date, neither the Sellers nor any of their
Affiliates will:
(a) acquire, sell (including short sales), offer to acquire or
sell directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any voting
securities of the Purchaser or any subsidiary thereof, or of any
successor to the Purchaser or any assets of the Purchaser or any
subsidiary or division thereof or of any such successor;
(b) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" to vote (as such terms are used in
the rules of the SEC), or seek to advise or influence any person or
entity with respect to the voting of any voting securities of the
Purchaser;
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Purchaser or any of its
securities or assets;
(d) form, join or in any way participate in a "group" as
defined in Section 13(d)(3) of the Exchange Act in connection with any
of the foregoing; or
(e) request the Purchaser or any of their representatives,
directly or indirectly, to amend or waive any provision of this SECTION
6.9.
-27-
<PAGE> 34
6.10 CERTAIN TAX MATTERS.
(a) S CORPORATION TAX RETURNS. After the Closing, the
Purchaser shall cause the Corporations to have all federal and state
income Tax Returns not yet due to be filed for all taxable periods
ending on or before the Closing Date (the "S CORPORATION TAX RETURNS")
prepared by Johnson & Associates at the Corporations' expense in a
manner consistent with such Tax Returns as previously filed by the
Corporations; and the Purchaser shall cause the Corporations to file
such Tax Returns not later than the due dates (taking into account
extensions) thereof. The parties shall cooperate with one another and
provide access to all information, books and records as may be
reasonably required for the preparation of these Tax Returns, any
amendments thereto and any audits or examinations thereof. Prior to the
Closing, each Corporation shall declare a dividend to the Sellers, as
the then record holders of the shares in the Corporations, in an
aggregate amount equal to 45% of the taxable income of the Corporation
for the period commencing January 1, 1998 and ending on the Closing
Date. The Purchaser shall cause the Corporations to pay such dividend
to the Sellers within 30 days after the Closing Date. In the event that
the Corporations do not pay in full such dividend to the Sellers within
such 30 day period, then the Purchaser shall cause the Corporations to
pay to the Sellers interest on the unpaid portion of such amount at a
rate of ten percent (10%) per annum which shall accrue from the 31st
day after the Closing Date to the date of actual payment. If such
dividend distribution received by a Seller exceeds such actual personal
tax liability of that Seller, then that Seller shall, within 30 days
after the filing of the Seller's federal and Georgia state income tax
returns, pay to the Purchaser such excess. In the event that the Seller
does not pay such excess within such 30 day period, then the Seller
shall pay to the Purchaser interest at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment. If such dividend distribution is less than such actual
personal tax liability, then the Purchaser shall pay to the Seller such
shortfall within 30 days of the filing of the Seller's federal and
Georgia state income tax returns. In the event that the Purchaser does
not pay such shortfall within such 30 day period, then the Purchaser
shall pay to the Seller interest at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment.
(b) SECTION 338(H)(10) ELECTION. Notwithstanding SECTION
6.10(A) hereof, at the option of the Purchaser (the exercise of which
option shall be effective upon delivery of written notice to the
Sellers not more than six months after the Closing Date), the Sellers
shall join the Purchaser in making elections under Section 338(h)(10)
of the Code and Treasury Regulations Section 1.338(h)(10)-1(d) (and any
corresponding elections under any applicable state and local Laws)
(collectively, the "338(H)(10) ELECTIONS") with respect to the purchase
and sale of the Shares from the Sellers hereunder. Within 30 days after
the Purchaser's notice to the Sellers of its decision to make such
338(h)(10) Elections, the Sellers and the Purchaser shall exchange
completed and executed copies of IRS Form 8023 and/or Form 8023-A (or
other applicable form), required schedules thereto, and any similar
forms required by any state or local Taxing Authority. The Sellers and
the Purchaser shall in good faith use commercially reasonable efforts
to promptly agree on such forms and the allocation of the "Modified
Adjusted Deemed Sales Price," as defined in Treasury Regulations
ss.1.338(h)(10)-(f), among the assets of the Corporations
-28-
<PAGE> 35
(the "ALLOCATION SCHEDULE"). The Sellers and the Purchaser each agree
to file all Tax Returns in accordance with the Allocation Schedule. The
Purchaser may, in its sole discretion, retain a nationally recognized
independent appraiser acceptable to both the Sellers and the Purchaser
to determine the fair market value of the assets of the Corporations.
The fees and expenses of such appraiser shall be paid by the Purchaser.
The Purchaser shall, promptly upon the filing of the Sellers' federal
and Georgia state income tax returns, reimburse the Sellers for the
additional Taxes payable by the Sellers by reason of the 338(h)(10)
Elections, which, in the case of each Seller, shall be equal to the
excess of (i) Taxes payable by the Seller computed taking the
338(h)(10) Elections into account (including, without limitation, any
incremental Taxes payable by the Sellers as a result of any payment
made to the Sellers pursuant to the provisions of this sentence) OVER
(ii) the Taxes payable by the Seller computed as if the 338(h)(10)
Elections had not been made. In the event that the Purchaser does not
fully reimburse the Sellers for such amounts within 30 days of such
filing, then the Purchaser shall also pay to the Sellers interest on
the unpaid portion of such amounts at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment. The parties acknowledge that the Financial Statements
do not include any provision for Taxes which may be or become payable
as a result of the 338(h)(10) Elections.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Sellers contained in Article II and elsewhere in this
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Sellers, to the Purchaser, shall be true and
correct when made and on the Closing Date as though then made, except as
expressly provided herein. The Corporations and the Sellers shall have performed
and complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them on or prior to the Closing
Date. The president of each Corporation shall have delivered to the Purchaser a
certificate (which shall be addressed to the Purchaser and its lenders), dated
the Closing Date, in the form designated EXHIBIT 7.1 hereto, certifying to the
foregoing.
7.2 CONSENTS AND APPROVALS. The Purchaser, the Sellers and each
Corporation shall have obtained any and all consents, approvals, Orders,
qualifications, licenses, Permits or other authorizations, including compliance
with the Hart-Scott-Rodino Act, required by all applicable Regulations, Orders
and Contracts of such Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of the Agreement and the
conduct of the business of such Corporation in the same manner after the Closing
Date as before the Closing Date the failure to obtain which would have a
Material Adverse Effect.
-29-
<PAGE> 36
7.3 OPINION OF THE SELLERS' COUNSEL. The Purchaser shall have received
an opinion of King & Spalding (which will be addressed to the Purchaser and its
lenders), dated the Closing Date, substantially in the form of EXHIBIT 7.3
hereto.
7.4 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change since the Financial Statement Date. The Purchaser shall have
received certificates (which shall be addressed to the Purchaser and its
lenders), dated the Closing Date, of the president and chief financial officer
of each Corporation, in the form of EXHIBIT 7.4 hereto, certifying to the
foregoing.
7.5 NO PROCEEDING OR LITIGATION. No preliminary or permanent injunction
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
7.6 FINANCING. The Purchaser shall have obtained such financing on
terms and in amounts as shall be satisfactory to the Purchaser to consummate the
transactions provided for herein.
7.7 CARRIER AGREEMENTS. The Corporations shall have entered into a new
agreement with BellSouth Mobility, which agreement shall be in form and
substance acceptable to Purchaser in its sole discretion.
7.8 ACCOUNTING MATTERS. The Purchaser shall have received a
certificate, dated the date hereof, of each Corporation's Chief Financial
Officer in form and substance satisfactory to the Purchaser, as to the accuracy
of all of such Corporation's financial statements for the fiscal years ending
January 2, 1998 and December 31, 1996 and 1995.
7.9 CONDITION OF ASSETS. Neither Corporation's assets and properties
shall have been damaged or destroyed, prior to the Closing Date, by fire or
other casualty, whether or not fully covered by insurance (except for reasonable
deductibles) in an aggregate amount exceeding $100,000.
7.10 TERMINATION OF AFFILIATE CONTRACTS. The Sellers shall have caused
any Contracts between the Sellers and their Affiliates and either Corporation to
terminate at Closing without any further liability to either Corporation, (i)
including, without limitation, the Shareholders Agreement dated March 27, 1997
among the Sellers and Sosebee Enterprises, Inc., and (ii) excluding the real
estate lease for the Corporations' headquarters located at 8611 Roswell Road,
Atlanta, Georgia 30350.
7.11 SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, by the secretary of each Corporation, as to the charter and bylaws
of such Corporation, the resolutions adopted by the directors and stockholders
of such Corporation in connection with this Agreement, the incumbency of certain
officers of such Corporation and the jurisdictions in which such Corporation is
qualified to conduct business in the form of EXHIBIT 7.11 hereto.
-30-
<PAGE> 37
7.12 CERTIFICATES OF GOOD STANDING. At the Closing, each Corporation
shall have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of such Corporation
as of a date not more than fifteen (15) days prior to the Closing Date as a
corporation organized under the laws of the state and as a foreign corporation
authorized to do business under the laws of the jurisdictions listed in SCHEDULE
2.1(A) hereto.
7.13 LEASES. All lessors under each Corporation's real property leases
shall have consented (where such consent is necessary) to the consummation of
the transactions contemplated by this Agreement without requiring material
modification in the rights or obligations thereunder. Subject to the foregoing,
neither Corporation's real property leases shall terminate, be subject to
renegotiation or be limited or restricted in any way as a result of the
transactions contemplated by this Agreement. The Corporations shall have
delivered to the Purchaser estoppel letters from each third-party lessor of real
estate from whom either Corporation leases real estate, substantially in the
form of EXHIBIT 7.13 hereto.
7.14 EMPLOYMENT AGREEMENTS. Messrs. Sosebee and Hill shall have each
executed and delivered an employment agreement substantially in the form of
EXHIBIT 7.14 hereto providing for the continued employment of such persons with
the Corporations and containing certain noncompetition provisions.
7.15 RESIGNATIONS. The Sellers shall have caused each Corporation's
directors to have resigned from the Board of Directors.
7.16 ESCROW AGREEMENT. The Sellers shall have executed the Escrow
Agreement substantially in the form of EXHIBIT 1.2(B).
7.17 LTC COMMON STOCK. The average daily closing price of the LTC
Common Stock on the Nasdaq National Market for the ten days preceding the fifth
day prior to the Closing Date (the "CLOSING Price") shall not be greater than
$20.00 per share.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Sellers:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Purchaser contained in Article III and elsewhere in this
Agreement and all information contained in any schedule hereto delivered by, or
on behalf of, the Purchaser to the Sellers, shall be true and correct when made
and on the Closing Date as though then made, except as expressly provided
herein. The Purchaser shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by it on or prior to the Closing Date. The president of the Purchaser shall
have delivered to
-31-
<PAGE> 38
the Sellers a certificate, dated the Closing Date, in the form designated
EXHIBIT 8.1 hereto, certifying to the foregoing.
8.2 CONSENTS AND APPROVALS. The Sellers and the Corporations shall have
obtained any and all material consents, approvals, orders, qualifications,
licenses, permits or other authorizations, including compliance with the
Hart-Scott-Rodino Act, required by all applicable Regulations, Orders or
material Contracts of the Corporations or binding on its properties and assets,
with respect to the execution, delivery and performance of the Agreement.
8.3 NO PROCEEDING OR LITIGATION. No preliminary or permanent injunction
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
8.4 ESCROW AGREEMENT. The Purchaser shall have executed the Escrow
Agreement in substantially the form of EXHIBIT 1.2(B) hereto.
8.5 EMPLOYMENT AGREEMENTS. Each Corporation shall have executed and
delivered an employment agreement with each of Messrs. Sosebee and Hill
substantially in the form of EXHIBIT 7.11 hereto.
8.6 SECRETARY'S CERTIFICATE. The Sellers shall have received a
certificate, by the secretary of the Purchaser, dated the Closing Date, as to
the charter and bylaws of the Purchaser, the resolutions adopted by the
directors of the Purchaser in connection with this Agreement, the incumbency of
certain officers of the Purchaser and the jurisdictions in which the Purchaser
is qualified to conduct business in the form of EXHIBIT 7.11 hereto.
8.7 LTC COMMON STOCK. The Closing Price shall not be less than $7.00
per share.
ARTICLE IX
REGISTRATION RIGHTS
9.1 "PIGGY BACK" REGISTRATIONS.
(a) If at any time prior to the earlier of (i) the second
anniversary of the Closing Date and (ii) the date on which each Seller
may sell all 450,000 Shares then held by him pursuant to Rule 144 in a
single transaction, the Purchaser shall determine to register the sale
of any LTC Common Stock, either for its own account or the account of a
security holder or holders exercising their registration rights under
the Securities Act (other than pursuant to (x) an acquisition of or
merger with another entity including, without limitation, a purchase of
stock or assets or a transaction described under Rule 145 of the
Securities Act, (y) a transaction registering securities convertible
into LTC Common Stock, (z) Form S-8 or its successor forms) on any
registration form which permits secondary sales and includes
substantially the same information as would be
-32-
<PAGE> 39
required to be included in a registration statement covering the sale
of LTC Shares, the Purchaser shall:
(i) Promptly give to each Seller written notice
thereof (which shall include the number of shares the
Purchaser or other security holder proposes to register and,
if known, the name of the proposed underwriter); and
(ii) Use its reasonable best efforts to include in
such registration all the LTC Shares specified in a written
request or requests made by the Sellers within ten (10) days
after the date of receipt of the written notice from the
Purchaser described in clause (i) above; provided, however,
that prior to the first anniversary of the Closing Date, not
more than an aggregate of 450,000 LTC Shares shall be
requested by the Sellers to be included in all such
registrations pursuant to this Article IX. If the underwriter
advises the Purchaser (A) that marketing considerations
require a limitation on the number of shares offered pursuant
to any registration statement, then the Purchaser may offer
all of the securities it proposes to register for its own
account or the maximum amount that the underwriter considers
saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be
imposed pro rata among all shareholders who are entitled to
include shares in such Registration Statement according to the
number of shares of LTC Common Stock each such shareholder
requested to be included in such registration statement, or
(B) that marketing considerations require a limitation on the
number of shares offered by the management of the Purchaser
pursuant to any registration statement, then such limitation
on any shares that may, in the opinion of the underwriter, be
sold by the management of the Purchaser will be imposed pro
rata among all management shareholders who are entitled to
include such shares in such registration statement according
to the number of shares of LTC Common Stock each such
management shareholder requested to be included in such
registration statement.
(b) Each Seller agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity
securities of the Purchaser, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the 180-day period (or such shorter period as shall be
agreed to by the executive officers of the Purchasers) beginning on the
effective date of any underwritten registration in which LTC Shares are
included pursuant hereto (except as part of such underwritten
registration) unless the underwriters managing the registered public
offering and the Purchaser otherwise agree.
(c) Notwithstanding anything to the contrary in this
Agreement, the Purchaser shall be entitled to delay or withdraw any
such filing and the Sellers' use of the related prospectus for any
reason, including if the Purchaser determines that such filing would
impede, delay, or interfere with any significant financing,
acquisition, or other transaction involving the Purchaser or any
Affiliate, or require disclosure of material information which the
Purchaser has a bona fide business purpose for preserving as
confidential.
-33-
<PAGE> 40
9.2 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
SECTION 9.1 shall be paid by the Purchaser. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the Sellers registered, pro rata on the basis of the number of their
shares so registered.
9.3 REGISTRATION PROCEDURES. In the case of each registration effected
by the Purchaser pursuant to SECTION 9.1, the Purchaser shall keep each Seller
advised in writing as to the initiation of each registration with respect to LTC
Shares held by him and as to the completion thereof. At its expense, the
Purchaser shall do the following for the benefit of such Sellers:
(a) use its reasonable best efforts to keep such registration
effective for a period of one hundred twenty (120) days or until the
Sellers have completed the distribution described in the registration
statement relating thereto, whichever first occurs, and amend or
supplement such registration statement and the prospectus contained
therein from time to time to the extent necessary to comply with the
Securities Act and applicable state securities laws;
(b) use its reasonable best efforts to register or qualify the
LTC Shares covered by such registration under the applicable securities
or "blue sky" laws of such jurisdictions as the Sellers may reasonably
request; provided, that the Purchaser shall not be obligated to qualify
to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified, to take any action which would
subject it to the service of process in suits other than those arising
out of such registration or to subject itself to taxation in any such
jurisdiction;
(c) furnish to each seller of securities such number of copies
of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
securities owned by such seller;
(d) notify each Seller, at any time when a prospectus relating
to LTC Shares is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements
therein not misleading;
(e) cause all such LTC Shares to be listed on each securities
exchange on which the LTC Common Stock is then listed and, if not so
listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to
secure designation of all such securities covered by such registration
statement as a Nasdaq national market security within the meaning of
Rule 11Aa2-1 of the SEC or, failing that, to secure NASDAQ
authorization for such securities and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register
as such with respect to such securities with the NASD;
-34-
<PAGE> 41
(f) provide a transfer agent and registrar for all such
securities not later than the effective date of such registration
statement;
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such securities (including,
without limitation, effecting a stock split or a combination of
shares);
(h) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with
the first day of the Purchaser's first full calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder; and
(i) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any LTC Common Stock included in such
registration statement for sale in any jurisdiction, the Purchaser
shall use its reasonable best efforts promptly to obtain the withdrawal
of such order.
9.4 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Seller may
participate in any registration hereunder which is underwritten unless such
Seller (i) agrees to sell such Seller's LTC Shares on the basis provided in any
underwriting arrangements approved by the Purchaser (ii) completes and executes
all questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
9.5 FURTHER INFORMATION. If LTC Shares owned by a Seller are included
in any registration, then such Seller shall furnish the Purchaser with such
information regarding itself as the Purchaser may reasonably request or as
required by applicable law in connection with any registration qualification or
compliance referred to in this Agreement.
9.6 INDEMNIFICATION.
(a) The Purchaser shall, and hereby does, indemnify each
Seller, with respect to which registration, qualification or compliance
has been effected pursuant to this Article IX, and each underwriter, if
any, and each Person who controls such underwriter within the meaning
of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Purchaser of
the Securities Act or the Exchange Act or the securities act of any
state or any Regulation thereunder
-35-
<PAGE> 42
applicable to the Purchaser and relating to action or inaction required
of the Purchaser in connection with any such registration,
qualification or compliance, and shall reimburse each such Seller, each
such underwriter and each Person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or
action, whether or not resulting in any liability, provided that the
Purchaser will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is
based solely on any untrue statement (or alleged untrue statement) or
omission (or alleged omission) based upon written information furnished
to the Purchaser by such Seller or underwriter and stated to be
specifically for use therein.
(b) Each Seller shall, if LTC Shares held by him are included
in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Purchaser, each of its
directors and officers and each underwriter, if any, of the Purchaser's
securities covered by such a registration statement, each person who
controls the Purchaser or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, and the other
Seller against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Purchaser's
directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability
or action, whether or not resulting in liability, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document
solely in reliance upon and in conformity with written information
furnished to the Purchaser by such Seller and stated to be specifically
for use therein; provided, however, that the obligations of each Seller
hereunder shall be limited to an amount equal to the net proceeds
received by such Seller upon sale of his securities.
(c) Each party entitled to indemnification under this SECTION
9.6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, but the failure of any Indemnifying Party to
give such notice shall not relieve the Indemnifying Party of its
obligations under this SECTION 9.6 (except and to the extent the
Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party shall be entitled to participate in, and to the
extent that it may elect by written notice delivered to the Indemnified
Party promptly after receiving the aforesaid notice from such
Indemnified Party, at its expense to assume, the defense of any such
claim or any litigation resulting therefrom, with counsel reasonably
satisfactory to such Indemnified Party, provided that the Indemnified
Party may participate in such defense at its expense, notwithstanding
the assumption of such defense by the Indemnifying Party, and provided,
further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified
Party
-36-
<PAGE> 43
shall have reasonably concluded that there may be legal defenses
available to it and/or other Indemnified parties which are different
from or additional to those available to the Indemnifying Party, the
Indemnified Party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such Indemnified Party or
parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified
Party shall (i) furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such
claim and litigation resulting therefrom and (ii) shall reasonably
assist the Indemnifying Party in any such defense, provided that the
Indemnified Party shall not be required to expend its funds in
connection with such assistance.
ARTICLE X
CLOSING
10.1 CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article XI hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held on or
prior to April 2, 1998, or on such other date (the "CLOSING DATE") designated by
the Purchaser upon five days notice to the Corporations in the offices of the
Purchaser's lenders' counsel, provided that the Closing shall not occur, in any
event, after April 15, 1998.
10.2 INTERVENING LITIGATION. If prior to the Closing Date any
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any other Authority shall restrain or prohibit this
Agreement or the consummation of the transactions contemplated herein for a
period of fifteen days or longer, the Closing shall be adjourned at the option
of either party for a period of not more than thirty days. If at the end of such
thirty day period such injunction or Order shall not have been favorably
resolved, either party may, by written notice thereof to the other, terminate
this Agreement, without liability or further obligation hereunder.
ARTICLE XI
TERMINATION AND ABANDONMENT
11.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser and the Sellers;
-37-
<PAGE> 44
(b) by the Purchaser or the Sellers if this Agreement is not
consummated on or before April 15, 1998; provided that if any party has
breached or defaulted with respect to its respective obligations under
this Agreement on or before such date, such party may not terminate
this Agreement pursuant to this SECTION 11.1(B), and each other party
to this Agreement shall at its option enforce its rights against such
breaching or defaulting party and seek any remedies against such party,
in either case as provided hereunder and by applicable law; or
(c) by the Purchaser if as of the Closing Date any of the
conditions specified in Article VII hereof have not been satisfied in
any material respect or if the Sellers are otherwise in default in any
material respect under this Agreement;
(d) by the Purchaser if the Purchaser has refused in writing
to accept an amendment to the Sellers' schedules pursuant to SECTION
2.36; or
(e) by the Sellers if as of the Closing Date any of the
conditions specified in Article VIII hereof have not been satisfied in
any material respect or if the Purchaser is otherwise in default in any
material respect under this Agreement.
11.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to SECTION 11.1 hereof, and subject to the proviso
contained in SECTION 11.1(B) this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
(b) all information received by any party hereto with respect
to the business of any other party or the Corporations (other than
information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental
authority) shall not at any time be used for the advantage of, or
disclosed to third parties by, such party to the detriment of the party
furnishing such information; and
(c) other than as provided in SECTION 13.15 no non-breaching
party hereto shall have any liability or further obligation to any
other party to this Agreement.
ARTICLE XII
SURVIVAL OF TERMS; INDEMNIFICATION
12.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
-38-
<PAGE> 45
(including the indemnification provisions set forth in this Article XII) set
forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties, shall survive and continue for, and all claims
with respect thereto shall be made prior to October 31, 1999, except for (i) the
representations and warranties set forth in SECTIONS 2.5, 2.16 and 2.18 which
shall survive until, and all claims with respect thereto shall be made within,
sixty days after the expiration of the applicable statute of limitations, and
(ii) representations and warranties for which an indemnification claim shall be
pending as of the end of the applicable period referred to above, in which event
such indemnities shall survive with respect to such claim until the final
disposition thereof.
12.2 LIMITATIONS.
(a) Notwithstanding any other provision hereof, in the absence
of fraud, the aggregate amount of indemnifiable damages for which the
Sellers shall be liable under this Article XII shall not exceed $12
million, other than with respect to (i) SECTION 12.3(B) and (ii)
breaches of representations and warranties made by the Sellers in
SECTIONS 2.5, 2.16 and 2.18.
(b) Neither party shall be required to indemnify the other
party under SECTIONS 12.3(A), 12.3(E), 12.4(A) and 12.4(B) until the
indemnifiable damages, individually or in the aggregate exceed $100,000
(the "BASKET RATE"), at which point such indemnifying party shall be
responsible for all indemnifiable damages that may arise in excess of
the Basket Rate; and provided that indemnifiable damages shall
accumulate until such time as they exceed the Basket Rate, whereupon
the party to be indemnified shall be entitled to seek indemnification
for the amount of such damages in excess of the Basket Rate.
(c) The Sellers shall be entitled to a credit against any
liability under Article XII to the extent and in the amount of
insurance proceeds actually received by the Corporations pursuant to
the terms of any insurance policy maintained by the Corporations as of
the Closing Date. The Purchaser agrees it will not terminate any such
insurance policy before the end of any period for which such policy has
been fully paid for by the Corporations prior to the Closing Date.
12.3 INDEMNIFICATION BY SELLERS. The Sellers jointly and severally
agree to, and shall, indemnify the Purchaser and its subsidiaries and the
Corporations after the Closing and their respective officers, directors,
employees, shareholders, representatives and agents and hold each of them
harmless at all times after the date of this Agreement, against and in respect
of any and all damage, loss, deficiency, liability, obligation, commitment, cost
or expense (including the fees and expenses of counsel) resulting from, or in
respect of, any of the following ("PURCHASER LOSSES"):
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Corporations prior
to Closing, or the Sellers in this Agreement or the Escrow Agreement.
(b) Any liability of the Corporation for any Tax accruing on
or prior to January 2, 1998, but excluding any Taxes for which (and to
the extent) there is an adequate
-39-
<PAGE> 46
accrual and reserve on the Financial Statements of the Corporation (and
excluding any Taxes payable by reason of the 338(h)(10) Elections
pursuant to SECTION 6.10).
(c) Any failure of any Seller to have good, valid and
marketable title to the issued and outstanding Shares held by such
Seller, free and clear of all Liens.
(d) Any Claim by a stockholder or former stockholder of the
Corporation or any other Person seeking to assert: (i) ownership or
rights to ownership of any shares of capital stock of the Corporation;
(ii) any rights of a stockholder including any Option, preemptive
rights or rights to receive notice or to vote; (iii) any rights under
the Corporation's charter, bylaws or other constituent documents; or
(iv) any Claim that his shares of capital stock were improperly
repurchased by the Corporation.
(e) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any
action, suit, proceeding or Claim incident to any of the foregoing.
The amount of each payment pursuant to this SECTION 12.3 shall be
computed so as to protect the indemnitee from any loss on an after tax basis,
taking into account the deductibility of any payment or loss of the indemnitee
in respect of which payment is made and the deductibility of any payment
pursuant to this SECTION 12.3.
12.4 INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to, and
shall, indemnify the Sellers and hold each of them harmless at all times after
the date of this Agreement, against and in respect of any and all damage, loss,
deficiency, liability, obligation, commitment, cost or expense (including the
fees and expenses of counsel) resulting from, or in respect of, any of the
following:
(a) Any misrepresentation, breach of warranty or
non-fulfillment of any obligation on the part of the Purchaser in this
Agreement or the Escrow Agreement.
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any
action, suit, proceeding or Claim incident to any of the foregoing.
(c) any amounts payable by the Purchaser or any Corporation to
the Sellers pursuant to SECTION 1.3, SECTION 5.3, SECTION 6.10 or
SECTION 9.6(A) hereof.
12.5 THIRD-PARTY CLAIMS.
(a) Except as otherwise provided in this Agreement, the
following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the
party seeking indemnification hereunder (hereinafter referred to as the
"INDEMNITEE") of notice of the commencement of any (a) Tax audit or
proceeding for the assessment of Tax by any Taxing Authority or any
other proceeding likely to result in the imposition of a Tax liability
or obligation or (b) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other
party to this Agreement (hereinafter the
-40-
<PAGE> 47
"INDEMNITOR") is, or may be, required under this Agreement to indemnify
such Indemnitee, the Indemnitee will, if a Claim thereon is to be, or
may be, made against the Indemnitor, notify the Indemnitor in writing
of the commencement or assertion thereof and give the Indemnitor a copy
of such Claim, process and all legal pleadings. The Indemnitor shall
have the right to participate in the defense of such action with
counsel of reputable standing. The Indemnitor shall have the right to
assume the defense of such action unless such action (i) may result in
injunctions or other equitable remedies in respect of the Indemnitee or
its business; (ii) may result in liabilities which, taken with other
then existing Claims under this Article XII, would not be fully
indemnified hereunder; or (iii) may have an adverse impact on the
business or financial condition of the Indemnitee after the Closing
Date (including an effect on the tax liabilities, earnings or ongoing
business relationships of the Indemnitee) or (vi) is for an alleged
amount of less than $25,000. The Indemnitor and the Indemnitee shall
cooperate in the defense of such Claims. In the case that the
Indemnitor shall assume or participate in the defense of such audit,
assessment or other proceeding as provided herein, the Indemnitee shall
make available to the Indemnitor all relevant records and take such
other action and sign such documents as are reasonable necessary to
defend such audit, assessment or other proceeding in a timely manner.
If the Indemnitee shall be required by judgment or a settlement
agreement to pay any amount in respect of any obligation or liability
against which the Indemnitor has agreed to indemnify the Indemnitee
under this Agreement, the Indemnitor shall promptly reimburse the
Indemnitee in an amount equal to the amount of such payment plus all
reasonable expenses (including legal fees and expenses) incurred by
such Indemnitee in connection with such obligation or liability subject
to this Article XII. No Indemnitor, in the defense of any such Claim,
shall, except with the consent of the Indemnitee, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnitee of a release from all liability with respect to such
Claim. In the event that the Indemnitor does not assume the defense of
any matter for which it is entitled to assume such defense as above
provided, the Indemnitee shall have the full right to defend against
any such Claim, and shall be entitled to settle or agree to pay in full
such claim or demand, in its sole discretion. With respect to any
matter as to which the Indemnitor is not entitled to assume the defense
pursuant to the terms of this paragraph, the Indemnitee shall not enter
into any settlement for which an indemnification claim will be made
hereunder without the approval of the Indemnitor, which will not be
unreasonably withheld.
(b) Prior to paying or settling any Claim against which an
Indemnitor is, or may be, obligated under this Agreement to indemnify
an Indemnitee, the Indemnitee must first supply the Indemnitor with a
copy of a final court judgment or decree holding the Indemnitee liable
on such Claim or failing such judgment or decree, must first receive
the written approval of the terms and conditions of such settlement
from the Indemnitor. An Indemnitor or Indemnitee shall have the right
to settle any Claim against it, subject to the prior written approval
of the other, which approval shall not be unreasonably withheld.
(c) An Indemnitee shall have the right to employ its own
counsel in any case, but the fees and expenses of such counsel shall be
at the expense of the Indemnitee unless (a) the employment of such
counsel shall have been authorized in writing by the
-41-
<PAGE> 48
Indemnitor in connection with the defense of such action or claim, (b)
the Indemnitor shall not have employed counsel in the defense of such
action or claim, or (c) such Indemnitee shall have reasonably concluded
based upon the advice of counsel that there may be defenses available
to it which are contrary to, or inconsistent with, those available to
the Indemnitor, in any of which events such fees and expenses of not
more than one additional counsel for the indemnified parties shall be
borne by the Indemnitor; provided that no Indemnitor shall be liable to
pay for more than one separate counsel for all Indemnitees in any
single jurisdiction.
12.6 SECURITY FOR THE INDEMNIFICATION OBLIGATION. Each Seller hereby
agrees that, subject to the following provisions of this SECTION 12.6, any
claims for indemnification by the Purchaser against the Sellers (or any of them)
hereunder may be satisfied by the Purchaser by recourse against the Escrow
Shares pursuant to the terms of the Escrow Agreement. All payments for
indemnifiable damages made pursuant to this Article XII (including the
cancellation of any Escrow Shares) shall be treated as adjustments to the
Purchase Price. If the Escrow Shares are insufficient to set off any claim for
indemnifiable damages made hereunder (or have been delivered to the holders
prior to the making or resolution of such claim), then the Purchaser may take
any action or exercise any remedy available to it against the Sellers by
appropriate legal proceedings to collect such indemnifiable damages. To the
extent the Escrow Shares are sufficient in value to cover all of the Purchaser's
indemnification claims, then the Purchaser agrees to first seek indemnification
against the Escrow Shares prior to seeking redress against any of the Seller's
other assets.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
13.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
13.3 CERTAIN DEFINITIONS.
"338(H)(10) ELECTION" shall have the meaning set forth in
SECTION 6.10(B).
"ACCREDITED INVESTOR" shall have the meaning set forth in
SECTION 2.34.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds, of
record or beneficially,
-42-
<PAGE> 49
five percent or more of the equity or voting securities of such Person,
(d) any Person that, through Contract, relationship or otherwise,
exerts a substantial influence on the management of such person's
affairs, (e) any Person that, through Contract, relationship or
otherwise, is influenced substantially in the management of their
affairs by such Person, or (f) any director, officer, partner or
individual holding a similar position in respect of such Person.
"ALLOCATION SCHEDULE" shall have the meaning set forth in
SECTION 6.10(B).
"AUTHORITY" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or
authority, any court or judicial authority, any public, private or
industry regulatory authority, whether international, national,
federal, state or local.
"BASKET RATE" shall have the meaning set forth in SECTION
12.2(B).
"CERCLA": means Comprehensive Environmental Response
Compensation and Liability Act of 1980.
"CERCLIS" means Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CLAIM" means any action, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation,
proceeding, arbitration, appeals or other dispute, whether civil,
criminal, administrative or otherwise.
"CLOSING" shall have the meaning set forth in SECTION 10.1.
"CLOSING DATE" shall have the meaning set forth in SECTION
10.1.
"CLOSING PRICE" shall have the meaning set forth in SECTION
7.17.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the Regulations thereunder.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement dated as of July 8, 1997 among HIG Capital
Management, Inc. and The Breckenridge Group, Inc., for itself and as
representative of the Corporations.
"CONTESTED ADJUSTMENTS" shall have the meaning set forth in
SECTION 1.3(B).
"CONTESTED ADJUSTMENT NOTICE" shall have the meaning set forth
in SECTION 1.3(B).
"CONTRACT" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
"ENVIRONMENTAL LAW" shall mean any Regulation, Order, consent
decree, settlement agreement or governmental requirement, which relates
to or otherwise imposes
-43-
<PAGE> 50
liability or standards of conduct concerning mining or reclamation of
mined land, discharges, emissions, releases or threatened releases of
noises, odors or any pollutants, contaminants or hazardous or toxic
wastes, substances or materials, whether as matter or energy, into
ambient air, water, or land, or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants,
or hazardous wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act
of 1986, as amended, the Resource Conservation and Recovery Act of
1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean
Water Act of 1977, as amended, any so-called "Superlien" law, and any
other similar Federal, state or local statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Corporation's
business.
"ESCROW AGENT" shall have the meaning set forth in SECTION
1.2(B).
"ESCROW AGREEMENT" shall have the meaning set forth in SECTION
1.2(B).
"ESCROW SHARES" shall have the meaning set forth in SECTION
13.6(A).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" shall have the meaning as set forth in
SECTION 2.9.
"FINANCIAL STATEMENTS DATE" shall have the meaning as set
forth in SECTION 2.9
"FRINGE BENEFIT ARRANGEMENTS" shall have the meaning as set
forth in SECTION 2.18.
"GAAP" means generally accepted accounting principles,
consistently applied, as in existence at the date hereof.
"GROUP" means two or more Persons or entities (or a
combination thereof) acting as a partnership, limited partnership,
syndicate or other form for any of the purposes contemplated in such
section.
"GUARANTEE" means any guarantee or other contingent liability
(other than any endorsement for collection or deposit in the ordinary
course of business), direct or indirect with respect to any obligations
of another Person, through an agreement or otherwise, including,
without limitation, (a) any endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect
similar to a guarantee in respect of any such obligations and (b) any
Contract (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such obligations, (ii) to purchase, sell or lease
property, products, materials or supplies, or transportation or
services, in respect of enabling such other Person to pay any such
obligation or to assure the owner thereof
-44-
<PAGE> 51
against loss regardless of the delivery or nondelivery of the property,
products, materials or supplies or transportation or services or (iii)
to make any loan, advance or capital contribution to or other
investment in, or to otherwise provide funds to or for, such other
Person in respect of enabling such Person to satisfy an obligation
(including any liability for a dividend, stock liquidation payment or
expense) or to assure a minimum equity, working capital or other
balance sheet condition in respect of any such obligation.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the Regulations promulgated thereunder,
as amended from time to time.
"INCOME TAX" means any Tax on or measured by income.
"INDEBTEDNESS" with respect to any Person means any obligation
of such Person for borrowed money, but in any event shall include (a)
any obligation or liabilities incurred for all or any part of the
purchase price of property or other assets or for the cost of property
or other assets constructed or of improvements thereto, other than
accounts payable included in current liabilities and incurred in
respect of property purchased in the ordinary course of business,
(whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent,
unliquidated or otherwise, known or unknown, whether due or to become
due), (b) the face amount of all letters of credit issued for the
account of such Person and all drafts drawn thereunder, (c) obligations
incurred for all or any part of the purchase price of property or other
assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the
ordinary course of business (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens, (d)
capitalized lease obligations, and (e) all Guarantees of such Person.
"INDEMNITEE" shall have the meaning set forth in SECTION 12.5.
"INDEMNITOR" shall have the meaning set forth in SECTION 12.5.
"KNOWLEDGE" means, with respect to each Corporation, the
actual knowledge, after reasonable investigation, of either of Mr.
Sosebee or Mr. Hill.
"LIABILITY POLICIES" means insurance contracts or policies
applicable to the Corporation and the Subsidiaries including workers'
compensation, general liability, property or other insurance policy
that relate to liability or excess liability insurance including the
name of the insurer, the types, dates and amounts of coverages, and any
material coverage exclusions.
"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
"LTC COMMON STOCK" means the common stock, par value $.01 per
share, of the Purchaser.
-45-
<PAGE> 52
"LTC SHARES" shall have the meaning set forth in SECTION 1.2.
"MATERIAL ADVERSE CHANGE" means any developments or changes
which would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which might reasonably be expected to have a material
adverse effect in respect of the Corporations' or Purchaser's (as the
case may be) business, operations, properties, assets or financial
condition taken as a whole.
"NET WORTH" means the amount by which the Corporations' assets
exceed their total liabilities.
"NET WORTH SHORTFALL" means the amount by which the
Corporations' Target Date Net Worth is less than the Target Net Worth.
"NET WORTH SURPLUS" means the amount by which the
Corporations' Target Date Net Worth exceeds the Target Net Worth.
"OCCURRENCE" means any accident, happening or event which
occurs or has occurred at any time prior to the Closing Date which is
caused or allegedly caused by any hazard or defect in manufacture,
design, materials or workmanship including, without limitation, any
failure or alleged failure to warn or any breach or alleged breach of
express or implied warranties or representations with respect to a
product manufactured, shipped, sold or delivered by or on behalf of the
Corporation which results or is alleged to have resulted in injury or
death to any person or damage to or destruction of property (including
damage to or destruction of the product itself) or other consequential
damages, at any time.
"OPTION" means any subscription, option, warrant, right,
security, Contract, commitment, understanding, outstanding or stock
appreciation, phantom stock option, profit participation or arrangement
by which (i) with respect the Corporation, the Corporation is bound to
issue any additional shares of its capital stock or rights pursuant to
which any Person has a right to purchase shares of the Corporation's
capital stock or (ii) with respect to a Seller, the Seller is bound to
sell or allow another Person to vote, encumber or control the
disposition of any shares of the Corporation's capital stock or rights
pursuant to which any Person has a right to purchase, vote, encumber or
control the disposition of shares of the Corporation's capital stock
from the Seller.
"ORDER" means any decree, order, judgment, injunction, rule,
lien, voting right, consent of or by an Authority.
"PERMITS" means all permits, licenses, registrations,
certificates, orders or approvals from any Authority or other Person
(including without limitation those relating to the occupancy or use of
owned or leased real property) issued to or held by the Corporation.
-46-
<PAGE> 53
"PERMITTED LIENS" means (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not materially detract from or
interfere with the present use of the properties or assets subject
thereto or affected thereby, otherwise impair present business
operations at such properties, or do not detract from the value of such
properties and assets, taken as a whole, (iii) Liens reflected in the
Financial Statements or the notes thereto, (iv) the rights of customers
of the Corporation with respect to inventory or work in progress under
orders or contracts entered into by the Corporation in the ordinary
course of business, (v) mechanics', carriers', workers', repairmen's,
warehousemen's, or other similar Liens arising in the ordinary course
of business in respect of obligations not overdue or which are being
contested in good faith and covered by a bond in an amount at least
equal to the amount of the Lien, and (vi) deposits or pledges to secure
workmen's compensation, unemployment insurance, old age benefits or
other social security obligations in connection with, or to secure the
performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or appeal
bonds or other pledges or deposits for purposes of like nature in the
ordinary course of business.
"PERSON" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
"POLICIES" means all Contracts that insure (i) the
Corporation's or any of its Subsidiaries properties, plant and
equipment for loss or damage, and (ii) the Corporation or any of its
Subsidiaries or their officers, directors, employees or agents against
any liabilities, losses or damages (or lost profits) for any reason or
purpose.
"POST-CLOSING DATE PERIOD" means any taxable period ending
after the Closing Date. "PRE-CLOSING DATE PERIOD" means any taxable
period ending on or before the Closing Date.
"PROPORTIONATE SHARE" means, with respect to each Seller, 50%.
"PROPRIETARY RIGHTS" means all (i) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility,
model, certificate of invention and design patents, patent
applications, registrations and applications for registrations, (ii)
trademarks, service marks, trade dress, logos, trade names and
corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software, data and
documentation, (vi) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production processes
and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier
lists and information,
-47-
<PAGE> 54
(vii) other proprietary rights relating to any of the foregoing and
(viii) copies and tangible embodiments thereof.
"PROSPECTUS" shall have the meaning set forth in SECTION 2.34.
"PURCHASE PRICE" shall have the meaning set forth in SECTION
1.2.
"PURCHASER LOSSES" shall have the meaning set forth in SECTION
12.3.
"RECALLS" means manufacturer's product recall, rework or
post-sale warning.
"REGISTER" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public
sale of securities.
"REGISTRATION EXPENSES" means all expenses incurred by the
Purchaser in compliance with SECTION 9.1 hereof, including, without
limitation, all registration and filing fees, printing expenses,
transfer taxes, fees and disbursements of counsel for the Purchaser,
blue sky fees and expenses, reasonable fees and disbursements of its
counsel who may act on behalf of the Sellers and other security
holders, and the expense of any special audits incident to or required
by any such registration.
"REGISTRATION STATEMENT" means the Purchaser's registration
statement on Form S-1 (Registration No. 333-34595) in connection with
its initial public offering of LTC Common Stock.
"REGULATION" means any rule, law, code, statute, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
"RESTRICTED AREA" shall have the meaning set forth in SECTION
6.6.
"RESTRICTED PERIOD" shall have the meaning set forth in
SECTION 6.6.
"RULE 144" means Rule 144 under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the sale of LTC Shares by the Seller
pursuant to SECTION 9.1.
"SETTLEMENT AMOUNT CERTIFICATE" shall have the meaning set
forth in SECTION 1.3(B).
"SETTLEMENT DATE" shall have the meaning set forth in SECTION
1.3(C).
"SHARES" shall have the meaning set forth in SECTION 1.1.
"SUBSIDIARY" any Person in which the Corporation has (i) an
ownership interest, (ii) advanced funds or provided financial
accommodations to which, in each case, is
-48-
<PAGE> 55
secured by an ownership interest in or has an Option to acquire an
ownership interest in such Person.
"TARGET DATE" shall have the meaning set forth in SECTION
1.3(A).
"TARGET DATE BALANCE SHEET" shall have the meaning set forth
in SECTION 1.3(A).
"TARGET DATE NET WORTH" of the Corporations shall mean the Net
Worth of the Corporations calculated in a manner consistent with the
calculation of the Corporations' December 31, 1996 and 1995 year end
financial statements and June 27, 1997 balance sheet and based on the
Target Date Balance Sheet.
"TARGET NET WORTH" means Three Million Dollars ($3 million),
which is equal to the Net Worth of the Corporations at June 27, 1997,
less $2,020,779.
"TAX RETURNS" means federal, state, foreign and local tax
reports, returns, information returns and other documents.
"TAX" and "TAXES" means including without limitation income,
gross receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty,
franchise, transfer, license, withholding, payroll, employment,
foreign, fuel, excess profits, occupational and interest equalization,
windfall profits, severance, and other charges (including interest and
penalties).
"TAXING AUTHORITIES" means Internal Revenue Service and any
other Federal, state, or local authority which has the right to impose
Taxes on the Corporation or the Sellers.
"TRANSACTION EXPENSE" shall have the meaning set forth in
SECTION 13.15.
13.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or mailed, first class certified mail
with postage paid or by overnight receipted courier service:
(a) If to the Sellers to: Richard Sosebee
Cellular Warehouse, Inc.
8611 Roswell Road
Atlanta, Georgia 30350
Frederick Hill
Cellular Warehouse, Inc.
8611 Roswell Road
Atlanta, Georgia 30350
-49-
<PAGE> 56
with a copy to: Bivens, Hoffman & Fowler
5040 Roswell Rd.
Atlanta, Georgia 30342
Attn: L. Brown Bivens
or to such other person or address as the Corporation shall furnish by
notice to the Purchaser in writing.
(b) If to the Purchaser, to: Let's Talk Cellular & Wireless, Inc.
800 Brickell Avenue, Suite 400
Miami, Florida 33131
Attn: Nicolas Molina and
Brett Beveridge
HIG Capital Management, Inc.
1001 South Bayshore Drive, Suite 2708
Miami, Florida 33131
Attn: Douglas Berman
with a copy to: White & Case LLP
200 South Biscayne Boulevard
First Union Financial Center
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
or to such other person or address as the Purchaser shall furnish by
notice to the Corporation in writing.
13.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any Affiliate, and may grant Liens or security interests in respect
of its rights and interests hereunder without the prior approval of the Sellers
or the Corporation.
13.6 GOVERNING LAW. The Agreement shall be governed by the law of the
State of Georgia as to all matters, including but not limited to matters of
validity, construction, effect and performance.
13.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-50-
<PAGE> 57
13.8 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.9 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and supersedes all
prior agreements, representations, warranties, promises, covenants,
arrangements, communications and understandings, oral or written, express or
implied, between the parties with respect to such transactions. Except for the
Confidentiality Agreement, there are no agreements, representations, warranties,
promises, covenants, arrangements or understandings between the parties with
respect to such transactions, other than those expressly set forth or referred
to herein.
13.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Corporation, the
Purchaser, each Subsidiary and each of the Sellers hereby irrevocably submit to
the jurisdiction of the state or federal courts located in Fulton County,
Georgia in connection with any suit, action or other proceeding arising out of
or relating to this Agreement and the transactions contemplated hereby, and
hereby agree not to assert, by way of motion, as a defense, or otherwise in any
such suit, action or proceeding that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
by such courts.
13.11 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
13.12 INJUNCTIVE RELIEF. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
13.13 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
-51-
<PAGE> 58
specifically set forth in such writing. All remedies, provided under this
Agreement shall be cumulative and not alternative.
13.14 SEVERABILITY. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
13.15 EXPENSES. The Purchaser shall bear its own expenses, including
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions contemplated hereby. The Sellers shall each bear their own and
the Corporation's expenses, including without limitation, brokerage or finders
fees and legal fees and expenses, with respect to this Agreement and the
transactions contemplated hereby.
13.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY EXHIBIT HERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) RELATING TO THE
FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO
ENTER INTO THIS AGREEMENT.
* * *
-52-
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Amended and Restated Stock Purchase Agreement the date first hereinabove set
forth.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/
---------------------------------
Title: President
------------------------------
THE SELLERS
Number Names and Addresses
of Shares of Sellers
Cellular Warehouse, Inc. - 500 shares By: /s/ Richard J. Sosebee
Sosebee Enterprises, Inc. - 500 shares ---------------------------------
Richard J. Sosebee
------------------------------------
[Address]
Cellular Warehouse, Inc. - 500 shares By: /s/ Frederick L. Hill, III
Sosebee Enterprises, Inc. - 500 shares ---------------------------------
Frederick L. Hill, III
------------------------------------
[Address]
-53-
<PAGE> 1
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
THE CHASE MANHATTAN BANK
(AS LENDER AND AS AGENT)
WITH
LET'S TALK CELLULAR & WIRELESS, INC.
TELEPHONE WAREHOUSE, INC.
CELLULAR WAREHOUSE, INC.
NATIONAL CELLULAR, INCORPORATED
CELLULAR USA
SOSEBEE ENTERPRISES, INC.
(EACH A BORROWER AND, JOINTLY AND SEVERALLY, THE BORROWERS)
April 2, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. DEFINITIONS........................................................................................1
1.1. ACCOUNTING TERMS..........................................................................1
1.2. GENERAL TERMS.............................................................................1
1.3. UNIFORM COMMERCIAL CODE TERMS............................................................20
1.4. CERTAIN MATTERS OF CONSTRUCTION..........................................................20
II. ADVANCES, PAYMENTS................................................................................20
2.1. REVOLVING ADVANCES.......................................................................20
2.2. PROCEDURE FOR REVOLVING ADVANCE BORROWING................................................21
2.3. DISBURSEMENT OF ADVANCE PROCEEDS.........................................................23
2.4. TERM LOAN................................................................................24
2.5. REPAYMENT OF ADVANCES....................................................................25
2.6. REPAYMENT OF EXCESS ADVANCES.............................................................25
2.7. STATEMENT OF ACCOUNT.....................................................................25
2.8. ADDITIONAL PAYMENTS......................................................................26
2.9. MANNER OF BORROWING AND PAYMENT..........................................................26
2.10. MANDATORY AND OPTIONAL PREPAYMENTS.......................................................28
(a) MANDATORY PREPAYMENT.....................................................................28
(b) OPTIONAL PREPAYMENTS.....................................................................29
2.12. DEFAULTING LENDER........................................................................30
III. INTEREST AND FEES.................................................................................31
3.1. INTEREST.................................................................................31
3.2. UNUSED LINE FEE..........................................................................31
3.3. FEE LETTER...............................................................................31
3.4. FIELD EXAMINATION EXPENSES...............................................................31
3.5. COMPUTATION OF INTEREST AND FEES.........................................................32
3.6. MAXIMUM CHARGES..........................................................................32
3.7. INCREASED COSTS..........................................................................32
3.8. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.................................33
3.9. CAPITAL ADEQUACY.........................................................................33
IV. COLLATERAL: GENERAL TERMS........................................................................34
4.1. SECURITY INTEREST IN THE COLLATERAL......................................................34
4.2. PERFECTION OF SECURITY INTEREST..........................................................34
4.3. DISPOSITION OF COLLATERAL................................................................35
4.4. PRESERVATION OF COLLATERAL...............................................................35
4.5. OWNERSHIP OF COLLATERAL..................................................................35
4.6. DEFENSE OF AGENT'S AND LENDERS' INTERESTS................................................35
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.7. BOOKS AND RECORDS........................................................................36
4.8. FINANCIAL DISCLOSURE.....................................................................36
4.9. COMPLIANCE WITH LAWS.....................................................................36
4.10. INSPECTION OF PREMISES; APPRAISAL........................................................37
4.11. INSURANCE................................................................................37
4.12. FAILURE TO PAY INSURANCE.................................................................38
4.13. PAYMENT OF TAXES.........................................................................38
4.14. PAYMENT OF LEASEHOLD OBLIGATIONS.........................................................39
4.15. RECEIVABLES..............................................................................39
(a) NATURE OF RECEIVABLES...........................................................39
(b) SOLVENCY OF CUSTOMERS...........................................................39
(c) LOCATIONS OF BORROWERS..........................................................39
(d) COLLECTION OF RECEIVABLES.......................................................39
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES.......................................40
(f) POWER OF AGENT TO ACT ON BORROWERS' BEHALF......................................40
(g) NO LIABILITY....................................................................41
(h) ESTABLISHMENT OF A LOCKBOX ACCOUNT, DOMINION ACCOUNT............................41
(i) ADJUSTMENTS.....................................................................41
4.16. INVENTORY................................................................................42
4.17. MAINTENANCE OF EQUIPMENT.................................................................42
4.18. EXCULPATION OF LIABILITY.................................................................42
4.19. FINANCING STATEMENTS.....................................................................42
V. REPRESENTATIONS AND WARRANTIES....................................................................42
5.1. AUTHORITY................................................................................42
5.2. FORMATION AND QUALIFICATION..............................................................43
5.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES...............................................43
5.4. TAX RETURNS..............................................................................43
5.5. FINANCIAL STATEMENTS.....................................................................43
5.6. CORPORATE NAME...........................................................................44
5.7. O.S.H.A. AND ENVIRONMENTAL COMPLIANCE....................................................44
5.8. SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT..............................45
5.9. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.............................................47
5.10. LICENSES AND PERMITS.....................................................................47
5.11. DEFAULT OF INDEBTEDNESS..................................................................47
5.12. NO DEFAULT...............................................................................47
5.13. NO BURDENSOME RESTRICTIONS...............................................................47
5.14. NO LABOR DISPUTES........................................................................47
5.15. MARGIN REGULATIONS.......................................................................47
5.16. INVESTMENT COMPANY ACT...................................................................47
5.17. DISCLOSURE...............................................................................47
5.18. DELIVERY OF ACQUISITION AGREEMENT........................................................47
5.19. SWAPS....................................................................................48
5.20. CONFLICTING AGREEMENTS...................................................................48
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
5.21. APPLICATION OF CERTAIN LAWS AND REGULATIONS..............................................48
5.22. BUSINESS AND PROPERTY OF BORROWERS.......................................................48
VI. AFFIRMATIVE COVENANTS.............................................................................48
6.1. PAYMENT OF FEES..........................................................................48
6.2. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS..............................48
6.3. VIOLATIONS...............................................................................49
6.4. GOVERNMENT RECEIVABLES...................................................................49
6.5. EXECUTION OF SUPPLEMENTAL INSTRUMENTS....................................................49
6.6. PAYMENT OF INDEBTEDNESS..................................................................49
6.7. STANDARDS OF FINANCIAL STATEMENTS........................................................49
6.8. SUBSIDIARY GUARANTY AND SECURITY AGREEMENT...............................................49
6.9. LANDLORD WAIVERS.........................................................................50
6.10. INTEREST RATE PROTECTION.................................................................50
6.11. ENVIRONMENTAL MATTERS....................................................................50
6.12. EVIDENCE OF RENTAL PAYMENTS..............................................................52
VII. NEGATIVE COVENANTS................................................................................52
7.1. MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS....................................52
7.2. CREATION OF LIENS........................................................................52
7.3. GUARANTEES...............................................................................52
7.4. INVESTMENTS..............................................................................52
7.5. LOANS....................................................................................53
7.6. CAPITAL EXPENDITURES.....................................................................53
7.7. DIVIDENDS; MANAGEMENT FEES...............................................................53
7.8. INDEBTEDNESS.............................................................................53
7.9. NATURE OF BUSINESS.......................................................................53
7.10. TRANSACTIONS WITH AFFILIATES.............................................................53
7.11. INTENTIONALLY OMITTED....................................................................53
7.12. SUBSIDIARIES.............................................................................53
7.13. FISCAL YEAR AND ACCOUNTING CHANGES.......................................................54
7.14. PLEDGE OF CREDIT.........................................................................54
7.15. AMENDMENT OF ARTICLES OF INCORPORATION, BY-LAWS..........................................54
7.16. COMPLIANCE WITH ERISA....................................................................54
7.17. PREPAYMENT OF INDEBTEDNESS...............................................................54
7.18. OTHER AGREEMENTS.........................................................................54
7.19. FIXED CHARGE COVERAGE RATIO..............................................................54
7.20. MINIMUM EBITDA...........................................................................55
7.21. LEVERAGE RATIO...........................................................................55
7.22. INTEREST COVERAGE RATIO..................................................................55
7.23. KOONSMAN NOTE............................................................................55
VIII. CONDITIONS PRECEDENT..............................................................................55
8.1. CONDITIONS TO INITIAL ADVANCES...........................................................55
(a) NOTES...........................................................................55
(b) FILINGS, REGISTRATIONS AND RECORDINGS...........................................55
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
(c) CORPORATE PROCEEDINGS OF BORROWERS..............................................56
(d) INCUMBENCY CERTIFICATES OF BORROWERS............................................56
(e) CERTIFICATES....................................................................56
(f) GOOD STANDING CERTIFICATES......................................................56
(g) LEGAL OPINION...................................................................56
(h) NO LITIGATION...................................................................56
(i) FINANCIAL CONDITION CERTIFICATES................................................57
(j) COLLATERAL EXAMINATION; APPRAISALS..............................................57
(k) FEES............................................................................57
(l) FINANCIAL STATEMENTS; PRO FORMA FINANCIAL STATEMENTS............................57
(m) ACQUISITION DOCUMENTS...........................................................57
(n) GUARANTY; GUARANTOR SECURITY AGREEMENT; PLEDGE AGREEMENT; OTHER DOCUMENTS.......57
(o) INSURANCE.......................................................................57
(p) UNDRAWN AVAILABILITY; BORROWING BASE............................................58
(q) PAYMENT INSTRUCTIONS............................................................58
(r) BLOCKED ACCOUNTS................................................................58
(s) CONSENTS........................................................................58
(t) NO ADVERSE MATERIAL CHANGE......................................................58
(u) LEASEHOLD AGREEMENTS............................................................58
(v) CONTRACT REVIEW.................................................................58
(w) CLOSING CERTIFICATE.............................................................58
(x) CUSTOMERS AND SUPPLIERS.........................................................59
(y) CASH MANAGEMENT.................................................................59
(z) SCHEDULE OF AFFILIATES AND SUBSIDIARIES.........................................59
(aa) OTHER...........................................................................59
8.2. CONDITIONS TO EACH ADVANCE...............................................................59
(a) REPRESENTATIONS AND WARRANTIES..................................................59
(b) NO DEFAULT......................................................................59
(c) MAXIMUM ADVANCES................................................................59
IX. INFORMATION AS TO BORROWERS.......................................................................59
9.1. DISCLOSURE OF MATERIAL MATTERS...........................................................60
9.2. SCHEDULES................................................................................60
9.3. ENVIRONMENTAL REPORTS....................................................................60
9.4. LITIGATION...............................................................................60
9.5. MATERIAL OCCURRENCES.....................................................................60
9.6. GOVERNMENT RECEIVABLES...................................................................61
9.7. ANNUAL FINANCIAL STATEMENTS..............................................................61
9.8. QUARTERLY FINANCIAL STATEMENTS...........................................................61
9.9. MONTHLY FINANCIAL STATEMENTS.............................................................62
9.10. OTHER REPORTS............................................................................62
9.11. ADDITIONAL INFORMATION...................................................................62
9.12. PROJECTED OPERATING BUDGET...............................................................62
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
9.13. VARIANCES FROM OPERATING BUDGET..........................................................63
9.14. NOTICE OF SUITS, ADVERSE EVENTS..........................................................63
9.15. ERISA NOTICES AND REQUESTS...............................................................63
9.16. ADDITIONAL DOCUMENTS.....................................................................64
9.17 SEC FILINGS..............................................................................64
X. EVENTS OF DEFAULT.................................................................................64
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT........................................................66
11.1. RIGHTS AND REMEDIES......................................................................66
11.2. AGENT'S DISCRETION.......................................................................67
11.3. SETOFF...................................................................................67
11.4. RIGHTS AND REMEDIES NOT EXCLUSIVE........................................................67
XII WAIVERS AND JUDICIAL PROCEEDINGS..................................................................68
12.1. WAIVER OF NOTICE.........................................................................68
12.2. DELAY....................................................................................68
12.3. JURY WAIVER..............................................................................68
XIII. EFFECTIVE DATE AND TERMINATION....................................................................68
13.1. TERM.....................................................................................68
13.2. TERMINATION..............................................................................68
XIV. REGARDING AGENT...................................................................................69
14.1. APPOINTMENT..............................................................................69
14.2. NATURE OF DUTIES.........................................................................69
14.3. LACK OF RELIANCE ON AGENT AND RESIGNATION................................................70
14.4. CERTAIN RIGHTS OF AGENT..................................................................70
14.5. RELIANCE.................................................................................71
14.6. NOTICE OF DEFAULT........................................................................71
14.7. INDEMNIFICATION..........................................................................71
14.8. AGENT IN ITS INDIVIDUAL CAPACITY.........................................................71
14.9. DELIVERY OF DOCUMENTS....................................................................71
14.10. BORROWERS' UNDERTAKING TO AGENT..........................................................71
XV. BORROWING AGENCY..................................................................................72
15.1. BORROWING AGENCY PROVISIONS..............................................................72
15.2. WAIVER OF SUBROGATION....................................................................72
XVI. MISCELLANEOUS.....................................................................................73
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
16.1. GOVERNING LAW............................................................................73
16.2. ENTIRE UNDERSTANDING.....................................................................73
16.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS......................................74
16.4. APPLICATION OF PAYMENTS..................................................................76
16.5. INDEMNITY................................................................................76
16.6. NOTICE...................................................................................76
16.7. SURVIVAL.................................................................................77
16.8. SEVERABILITY.............................................................................77
16.9. EXPENSES.................................................................................77
16.10. INJUNCTIVE RELIEF........................................................................78
16.11. CONSEQUENTIAL DAMAGES....................................................................78
16.12. CAPTIONS.................................................................................78
16.13. COUNTERPARTS; TELECOPIED SIGNATURES......................................................78
16.14. CONSTRUCTION.............................................................................78
16.15. CONFIDENTIALITY..........................................................................78
</TABLE>
vi
<PAGE> 8
SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit 1.2(A) Form of Borrowing Base Certificate
Exhibit 2.1 Form of Revolving Credit Note
Exhibit 2.4(a) Form of Term Note
Exhibit 5.5(b) Monthly Profit and Loss Statements, Balance Sheets and
Cash Flow Projections
Exhibit 8.1(i) Form of Financial Condition Certificate
Exhibit 16.3 Form of Commitment Transfer Supplement
SCHEDULES
Schedule 1.2(A) Financing Statements
Schedule 1.2(B) Liens
Schedule 1.2(C) Subsidiary Stock
Schedule 4.5 Collateral Locations
Schedule 4.15(c) Locations of Borrower
Schedule 5.2(a) Formation and Qualification
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Numbers
Schedule 5.6(a) Corporate Names
Schedule 5.6(b) Prior Consolidations, Mergers, etc.
Schedule 5.8(b) Litigation
Schedule 5.9 Patents, Trademarks, Copyrights and Licenses
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 6.11 Real Property
Schedule 7.3 Guarantees
i
<PAGE> 9
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement dated as of April 2, 1998 among LET'S TALK
CELLULAR & WIRELESS, INC., a corporation organized under the laws of the State
of Florida ("LTC"), TELEPHONE WAREHOUSE, INC., a corporation organized under the
laws of the State of Texas ("TWI"), CELLULAR WAREHOUSE INC., a corporation
organized under the laws of the State of Georgia ("CWI"), NATIONAL CELLULAR,
INCORPORATED, a corporation organized under the laws of the State of Texas
("NCI"), CELLULAR USA, a corporation organized under the laws of the State of
Nevada ("USA") and SOSEBEE ENTERPRISES, INC., a corporation organized under the
laws of the State of Georgia ("SEI") (LTC, TWI, CWI, NCI, USA and SEI, each a
Borrower and, jointly and severally, the "Borrowers"), the undersigned financial
institutions and the various financial institutions which, in accordance with
Section 16.3(c), become Purchasing Lenders (collectively, the "Lenders" and
individually a "Lender") and THE CHASE MANHATTAN BANK ("Chase"), a corporation
organized under the laws of the State of New York, as agent for the Lenders
(Chase, in such capacity, the "Agent").
BACKGROUND
Pursuant to the terms of the Acquisition Agreement (as herein defined),
LTC is purchasing the stock of CWI and SEI. LTC has requested that Agent and
Lenders finance the cash portion of the purchase price of such acquisition, as
well as provide for a line of credit to the Borrowers. Agent and Lenders are
willing to provide such financing, establish a revolving credit facility for
Borrowers of up to $11,000,000 and make a term loan to Borrowers of $24,000,000
on the terms and conditions set forth below.
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, each Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. ACCOUNTING TERMS. As used in this Agreement, the Notes or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; PROVIDED,
HOWEVER, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP applied in preparation of the audited
financial statements of Borrowers for the fiscal year ended July 31, 1997.
1.2. GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
<PAGE> 10
"ACQUISITION AGREEMENT" shall mean the Stock Purchase
Agreement including all exhibits and schedules thereto dated as of February 1,
1998 between Seller and LTC, as buyer, as amended by an Amended and Restated
Stock Purchase Agreement including all exhibits and schedules thereto dated as
of March 1, 1998.
"ADVANCES" shall mean and include the Revolving Advances and
the Term Loan.
"ADVANCE RATES" shall have the meaning set forth in Section
2.1 hereof.
"AFFILIATE" of any Person shall mean (a) any Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"AGENT" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"AGREEMENT" shall mean this Loan and Security Agreement, as
amended, supplemented or modified from time to time.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1%, or (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. If for any reason Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any
reason, including, the inability or failure of Agent to obtain sufficient
quotations in accordance with the terms hereof, the Alternate Base Rate shall be
determined without regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective
Rate, respectively.
"APPRAISER" shall mean an independent appraisal company
acceptable to Agent.
"APPLICABLE MARGIN" shall mean initially, .75% with respect to
Domestic Rate Loans and 2.50% with respect to Eurodollar Rate Loans, and
thereafter for any fiscal quarter commencing with the fiscal quarter ending July
31, 1998 shall be determined by the Leverage Ratio at the end of the most recent
fiscal quarter with respect to the four fiscal quarters then ended and shall be
subject to adjustment from time to time as set forth in Section 3.1. If any
Borrower shall complete a Permitted Acquisition, the EBITDA of such Permitted
Acquisition
2
<PAGE> 11
shall be included on a proforma basis for the four (4) fiscal quarters then
being tested when calculating the Leverage Ratio for the purposes of determining
the Applicable Margin. The Applicable Margin with respect to Eurodollar Rate
Loans and Domestic Rate Loans, as the case may be, shall be the percentage set
forth below as corresponds to the applicable ratio set forth below:
<TABLE>
<CAPTION>
LEVERAGE DOMESTIC EURODOLLAR
RATIO RATE MARGIN RATE MARGIN
----- ----------- -----------
<S> <C> <C>
Equal to or greater than 1.00% 2.75%
1.75 to 1.00
Equal to or greater than 1.50 to 1.00 .75% 2.50%
but less than 1.74 to 1.00
Equal to or greater than 1.25 to 1.00 .50% 2.25%
but less than 1.49 to 1.00
Less than 1.25 to 1.00 .25% 2.00%
</TABLE>
"ASSESSMENT RATE" shall mean the annual assessment rate (net
of refunds and rounded upwards, if necessary, to the next 1/16 of 1%) estimated
by Agent (in good faith, but in no event in excess of statutory or regulatory
maximums) to be payable by Agent to the Federal Deposit Insurance Corporation
(or any successor) for insurance by such corporation (or such successor) of time
deposits made in Dollars at Agent's domestic offices during the current calendar
year.
"AUTHORITY" shall have the meaning set forth in Section
6.11(d).
"BASE CD RATE" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
"BELL SOUTH" shall mean Bell South Cellular Corp.
"BLOCKED ACCOUNTS" shall have the meaning set forth in Section
4.15(h).
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"BORROWER" or "BORROWERS" shall have the meaning set forth in
the preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"BORROWER'S ACCOUNT" shall have the meaning set forth in
Section 2.7.
"BORROWERS ON A CONSOLIDATED BASIS" shall mean the
consolidation in accordance with GAAP of the accounts or other items of
Borrowers and their Subsidiaries.
3
<PAGE> 12
"BORROWING AGENT" shall mean LTC.
"BORROWING BASE CERTIFICATE" shall mean a certificate duly
executed by an authorized officer of Borrowing Agent appropriately completed and
in substantially the form of EXHIBIT 1.2(A).
"BUSINESS DAY" shall mean with respect to Eurodollar Rate
Loans, any day on which commercial banks are open for domestic and international
business, including dealings in Dollar deposits in London, England and New York,
New York and with respect to Domestic Rate Loans, any day other than a day on
which commercial banks in New York are authorized or required by law to close.
"CAPITAL STOCK" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"CHANGE OF CONTROL" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
who, at the time of the execution of this Agreement, does not own 5% or more of
Capital Stock of a Borrower, becomes the ultimate "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Stock representing more than 50%
of the total voting power of the Voting Stock of such Borrower on a fully
diluted basis, (ii) the current officers, directors and/or employees of HIG do
not constitute at least two (2) members of the board of directors of LTC, or
(iii) the merger or consolidation of any Borrower with or into another Person,
or the merger or consolidation of another Person with and into any Borrower,
with the effect that, immediately after such transaction, the stockholders of
such Borrower immediately prior to such transaction hold less than 50% of the
Voting Stock of the Person surviving such merger or consolidation.
"CHARGES" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens, claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, any
Borrower or any of their Affiliates.
"CLOSING DATE" shall mean April 2, 1998 or such other date as
may be agreed to by the parties hereto.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
4
<PAGE> 13
"COLLATERAL" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock;
(f) all Real Property;
(g) all of each Borrower's right, title and
interest in and to (i) its respective goods and other property including, but
not limited to all merchandise returned or rejected by Customers, relating to or
securing any of the Receivables; (ii) all of such Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to such Borrower from any Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of such Borrower's
contract rights, rights of payment which have been earned under a contract
right, instruments, documents, chattel paper, warehouse receipts, deposit
accounts, money, securities and investment property; (vi) if and when obtained
by such Borrower, all real and personal property of third parties in which such
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which such Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and such Borrower;
(h) all of each Borrower's ledger sheets, ledger
cards, files, correspondence, records, books of account, business papers,
computers (whether owned by such Borrower or in which it has an interest),
computer software, computer programs (owned by such Borrower), tapes, disks and
documents relating to (a), (b), (c), (d), (e), (f) or (g) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c),
(d), (e), (f), (g) and (h) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of
money, chattel paper, security agreements, documents, eminent domain proceeds,
condemnation proceeds and tort claim proceeds.
"COLLATERAL ASSIGNMENT" shall mean collectively, (i) the
collateral assignment of rights executed by LTC and Seller in favor of Agent
pursuant to which the rights of LTC under
5
<PAGE> 14
the Acquisition Agreement are assigned to Agent and (ii) the collateral
assignment of rights in favor of Agent of each of Borrowers' supply agreements.
"COMMITMENT PERCENTAGE" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b)
hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a document in the
form of EXHIBIT 16.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under this
Agreement.
"CONSENTS" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
"CONTRACT RATE" shall mean, as applicable, (a) so long as no
Event of Default shall have occurred (i) an interest rate per annum equal to (x)
the sum of the Alternate Base Rate plus the Applicable Margin with respect to
Domestic Rate Loans or (y) the sum of the Eurodollar Rate plus the Applicable
Margin with respect to Eurodollar Rate Loans or (b) following the occurrence and
during the continuance of an Event of Default, the Default Rate.
"CONTROLLED GROUP" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"CURRENT ASSETS" at a particular date, shall mean all cash,
cash equivalents, accounts and inventory of Borrowers on a Consolidated Basis
and all other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of Borrower as at such date; PROVIDED,
HOWEVER, that such amounts shall not include (a) any amounts for any
Indebtedness owing by an Affiliate of a Borrower, unless such Indebtedness arose
in connection with the sale of goods or rendition of services in the ordinary
course of business on an arm's length basis and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of a Borrower, or (c) the cash surrender value of any life insurance
policy.
"CURRENT LIABILITIES" at a particular date, shall mean all
amounts which would, in conformity with GAAP, be included under current
liabilities on a balance sheet of Borrowers on a Consolidated Basis, as at such
date, but in any event including, without limitation, the amounts of (a) all
Indebtedness of any Borrower payable on demand, or, at the option of the Person
to whom such Indebtedness is owed, not more than twelve (12) months after such
date, (b) any payments in respect of any Indebtedness of any Borrower (whether
installment, serial maturity, sinking fund payment or otherwise) required to be
made not more than twelve (12) months after such date, (c) all reserves in
respect of liabilities or Indebtedness payable on demand or, at the option of
the Person to whom such Indebtedness is owed, not
6
<PAGE> 15
more than twelve (12) months after such date, the validity of which is not
contested at such date, (d) all accounts payable (whether current or past due)
and (e) all accruals for federal or other taxes measured by income payable
within a twelve (12) month period.
"CUSTOMER" shall mean and include the account debtor with
respect to any Receivable and/or the purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into any
contract or other arrangement with any Borrower, pursuant to which such Borrower
is to deliver any personal property or perform any services.
"DEFAULT" shall mean an event which, with the giving of notice
or passage of time or both, would constitute an Event of Default.
"DEFAULT RATE" shall mean an interest rate per annum equal to
the sum of (i) the Alternate Base Rate PLUS (ii) the highest Applicable Margin
with respect to Domestic Rate Loans PLUS (iii) two percent (2%) per annum.
"DEFAULTING LENDER" shall have the meaning set forth in
Section 2.16(a) hereof.
"DEPOSITORY ACCOUNTS" shall have the meaning set forth in
Section 4.15(h) hereof.
"DOLLARS" and the sign "$" shall mean lawful money of the
United States of America.
"DOMESTIC RATE LOAN" shall mean any Advance that bears
interest based upon the Alternate Base Rate.
"EARNINGS BEFORE INTEREST AND TAXES" shall mean for any period
the sum of (i) net income (or loss) of Borrowers on a Consolidated Basis for
such period, PLUS (ii) all interest expense of Borrowers on a Consolidated Basis
for such period, PLUS (iii) all charges against the income of Borrowers on a
Consolidated Basis for such period for federal, state and local taxes.
"EBITDA" shall mean for any period the sum of (i) Earnings
Before Interest and Taxes of Borrowers on a Consolidated Basis for such period,
PLUS (ii) depreciation expenses of Borrowers on a Consolidated Basis for such
period, PLUS (iii) amortization expenses of Borrowers on a Consolidated Basis
for such period.
"EBITDAR" shall mean for any period the sum of EBITDA PLUS
rent expenses of Borrowers on a Consolidated Basis for such period.
"ELIGIBLE INVENTORY" with respect to each Borrower shall mean
and include finished goods Inventory (and shall exclude raw materials, work in
process, labels, materials and supplies), valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent's
reasonable opinion exercised in good faith and in a commercially reasonable
manner, obsolete, slow moving, unmerchantable, returned, damaged, to be used for
promotional purposes or goods which are not first quality and which Agent, in
its reasonable
7
<PAGE> 16
discretion exercised in good faith and in a commercially reasonable manner,
shall not deem ineligible Inventory, based on such considerations as Agent may
from time to time deem appropriate including, without limitation, whether the
Inventory is located in a facility in the United States that is owned or leased
by a Borrower, subject to a perfected, first priority security interest in favor
of Agent and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof. No Inventory shall be
deemed Eligible Inventory unless (i) it is located at a facility owned or leased
by a Borrower and (ii) if it is located at a Primary Location and Agent has
received executed landlord, mortgagee or warehousing agreements with respect to
such facility in form and substance satisfactory to Agent.
"ELIGIBLE RECEIVABLES" shall mean and include with respect to
each Borrower each Receivable of a Borrower arising in the ordinary course of
such Borrower's business and which Agent, in its reasonable credit judgment
exercised in good faith and in a commercially reasonable manner, shall deem to
be an Eligible Receivable, based on such considerations as Agent may from time
to time reasonably deem appropriate. A Receivable shall not be deemed eligible
unless such Receivable is subject to Agent's first priority perfected security
interest and no other Lien (other than Permitted Encumbrances), and is evidenced
by an invoice, bill of lading or other documentary evidence reasonably
satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:
(a) it arises out of a sale made by any Borrower to an
Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original invoice date;
(c) as respects a particular Customer, fifty percent (50%) or
more of the Receivables from the applicable Customer are not deemed Eligible
Receivables as a result of the criteria set forth in clause (b) above;
(d) (i) the Receivables of the Customer (other than Bell
South) exceed thirty-five percent (35%) of all Receivables or (ii) the
Receivables of Bell South exceed (x) forty percent (40%) of all Receivables from
the Closing Date through July 31, 1999, and (y) thereafter, thirty five percent
(35%) of all Receivables, in each case to the extent such Receivables exceed
such limit;
(e) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(f) the Customer is an individual, a creditor or supplier of
any Borrower, or the Customer has disputed any liability to or with respect to a
Borrower (but only to the extent of such dispute), or the Customer has any right
of offset, deduction, defense, dispute, chargeback or counterclaim with respect
to such Receivable (but only to the extent of any such claim), or the Receivable
otherwise is subject to any right of setoff in whole or in part by the Customer;
8
<PAGE> 17
(g) the Customer shall (i) apply for, suffer, or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(h) the sale is to a Customer outside the United States of
America, unless the sale is on letter of credit, guaranty or acceptance, in each
case acceptable to Agent in its reasonable discretion exercised in good faith;
(i) the sale to the Customer is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(j) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless the applicable
Borrower effectuates an assignment of its right to payment of such Receivable to
Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 ET SEQ. and 41 U.S.C. Sub-Section 15 ET SEQ.) or has otherwise
complied with other applicable statutes or ordinances;
(k) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by the applicable Borrower and
accepted by the Customer or the Receivable otherwise does not represent a final
sale;
(l) the applicable Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;
(m) shipment of the merchandise or the rendition of services
has not been completed;
(n) any return, rejection or repossession of the merchandise
has occurred; or
(o) such Receivable is not payable to a Borrower.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in
Section 6.11(d) hereof.
9
<PAGE> 18
"ENVIRONMENTAL LAWS" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"EQUIPMENT" shall mean and include as to each Borrower all of
such Borrower's goods (excluding Inventory) whether now owned or hereafter
acquired and wherever located including, without limitation, all equipment,
machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations promulgated
thereunder.
"EURODOLLAR RATE LOAN" shall mean an Advance at any time that
bears interest based on the Eurodollar Rate.
"EURODOLLAR RATE" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto the rate per annum (such
Eurodollar Rate to be adjusted to the next higher 1/100 of one (1%) percent)
equal to the quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus
the aggregate of the rates (expressed as a decimal) of reserve requirements
current on the day that is two Business Days prior to the beginning of the
Interest Period (including without limitation basic, supplemental, marginal and
emergency reserves) under any regulation promulgated by the Board of Governors
of the Federal Reserve System (or any other governmental authority having
jurisdiction over Chase) as in effect from time to time, dealing with reserve
requirements prescribed for Eurocurrency funding including any reserve
requirements with respect to "Eurocurrency liabilities" under Regulation D of
the Board of Governors of the Federal Reserve System.
"EVENT OF DEFAULT" shall mean the occurrence and continuance
of any of the events set forth in Article X hereof.
"EXCESS CASH FLOW" shall mean for any fiscal year (a) the sum
of (i) net income of Borrowers on a Consolidated Basis for such fiscal year,
plus (ii) depreciation expenses of Borrowers on a Consolidated Basis for such
fiscal year, plus (iii) amortization expenses of Borrowers on a Consolidated
Basis for such fiscal year, plus (iv) all non-cash charges to the net income of
Borrowers on a Consolidated Basis for such fiscal year minus (b) (i) permitted
capital expenditures actually made by Borrowers on a Consolidated Basis during
such fiscal year (excluding Indebtedness incurred to finance such expenditures),
minus (ii) regularly scheduled principal payments made on the Term Loan made by
Borrowers on a Consolidated Basis during such fiscal year, minus (iii)
capitalized lease payments permitted pursuant to Section 7.6 and 7.11 hereof and
actually made by Borrowers on a Consolidated Basis in such fiscal year, minus
(iv) cash actually spent by Borrowers on a Consolidated Basis in connection with
Permitted
10
<PAGE> 19
Acquisitions during such fiscal year and (v) plus decreases and/or minus
increases in Working Capital for such fiscal year, as the case may be.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by Agent
from three Federal funds brokers of recognized standing selected by it.
"FEE LETTER" shall mean the fee letter dated February 18, 1998
between LTC, HIG and Agent.
"FIXED CHARGE COVERAGE RATIO" for any period shall mean the
ratio of (i) (a) EBITDAR for such period minus (b) capital expenditures made by
Borrowers on a Consolidated Basis during such period minus (c) all taxes paid by
Borrowers on a Consolidated Basis during such period to (ii) (a) scheduled
payments of principal and interest with respect to all Indebtedness of Borrowers
on a Consolidated Basis plus (b) rent payments actually made by Borrowers on a
Consolidated Basis during such period.
"FORMULA AMOUNT" shall have the meaning set forth in Section
2.1(a).
"FUNDED INDEBTEDNESS" shall mean with respect to any Person as
of the date of determination thereof, all Indebtedness (other than Indebtedness
relating to operating leases) of such Person and its Subsidiaries on a
consolidated basis outstanding at such time which by its terms matures more than
one year after the date of calculation, and any such Indebtedness maturing
within one year from such date of calculation which is renewable or extendable
at the option of the obligor to a date more than one year from such date and
including in any event the Revolving Advances.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"GENERAL INTANGIBLES" shall mean and include as to each
Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
11
<PAGE> 20
"GOVERNMENTAL BODY" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"GUARANTOR" shall mean each Person who executes and delivers a
Guaranty to Agent for the benefit of Lenders.
"GUARANTOR SECURITY AGREEMENT" shall mean each security
agreement executed by a Guarantor granting Agent a security interest in all of
such Guarantor's personal property for the benefit of Lenders.
"GUARANTY OR GUARANTIES" shall mean individually and
collectively, the guaranties of the obligations of Borrowers executed by a
Guarantor in favor of Agent for the benefit of Lenders.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in
Section 6.11(d) hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, methane, hazardous materials,
Hazardous Wastes, hazardous or toxic substances or related materials as defined
in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, ET SEQ.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.
"HAZARDOUS WASTES" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"HIG" shall mean HIG Capital Management, Inc.
"INDEBTEDNESS" shall mean, with respect to any Person, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest charges
are customarily paid, (c) all obligations of such Person for the deferred
purchase price of property of services, except current accounts payable arising
in the ordinary course of business and not overdue beyond such period as is
commercially reasonable for such Person's business, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person and all Capitalized Lease Obligations, (e) all
payment obligations of such Person with respect to interest rate or currency
protection agreements, all obligations of such Person as an account party under
any letter of credit or in respect of bankers' acceptance, (g) all obligations
of any third party secured by property or assets of such Person (regardless of
whether or not such Person is liable for repayment of such obligations, (h) all
guarantees of such Person and (i) the redemption price of all redeemable
preferred stock of such Person but only to the extent that such stock is
redeemable
12
<PAGE> 21
at the option of the holder or requires sinking fund or similar payments at any
time prior to the Termination Date.
"INTEREST COVERAGE RATIO" for any period shall mean the ratio
of (i)(a) EBITDA for such period MINUS (b) capital expenditures made by
Borrowers on a Consolidated Basis during such period to (ii) cash interest
payments made by Borrowers on a Consolidated Basis during such period.
"INTEREST PERIOD" shall mean the period provided for any
Eurodollar Rate Loan pursuant to Section 2.2(b).
"INVENTORY" shall mean and include as to each Borrower all of
such Borrower's now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"INVENTORY ADVANCE RATE" shall have the meaning set forth in
Section 2.1(y)(ii) hereof.
"KOONSMAN NOTE" shall mean the promissory note dated as of
June 27, 1997 issued by Let's Talk Cellular, Inc. to Texas Cellular Partners,
L.P. in the original principal sum of $3,585,000.
"LENDER" AND "LENDERS" shall have the meaning ascribed to such
term in the preamble to this Agreement and shall include each Person which is a
transferee, successor or assign of any Lender.
"LEVERAGE RATIO" for any period shall mean the ratio of (a)
Funded Indebtedness at the end of such period to (b) EBITDA for such period.
"LIBOR" shall mean, with respect to any Eurodollar Rate Loan
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the rate at which dollar deposits
approximately equal in principal amount to the Eurodollar Rate Loan of the Agent
and for a maturity equal to the applicable Interest Period are offered in
immediately available funds to the London branch of the Agent by leading banks
in the London interbank market for Eurodollars at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the first day of such Interest
Period.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially
13
<PAGE> 22
the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement and
the Other Documents.
"MANDATORY RESERVE" shall have the meaning set forth in
Section 2.10(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (i) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (ii) any Borrower's ability to pay the Obligations
in accordance with the terms thereof, (iii) the value of the Collateral, or the
Liens on the Collateral or the priority of any such Lien, or (iv) the practical
realization of the benefits of Agent's and Lenders' rights and remedies under
this Agreement and the Other Documents.
"MAXIMUM REVOLVING ADVANCE AMOUNT" shall mean $13,500,000.
"MONTHLY LEASE PAYMENT" for any Primary Lease shall mean, for
any calendar month, the installment of the rent required to be paid under such
Primary Lease, plus any amount with respect to taxes required to be paid under
such Primary Lease plus any other charge, payment or reimbursement required to
be paid under such Primary Lease.
"MORTGAGES" shall mean any mortgages in favor of Agent on the
Real Property together with all extensions, renewals, amendments, supplements,
modifications, substitutions and replacements thereto and thereof.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001 (a)(3) of ERISA.
"NET PROCEEDS" shall mean the aggregate gross proceeds
received by any Borrower or any Subsidiary of any Borrower in respect of (a) the
sale of Capital Stock in a Public Offering, (b) any sale or disposition of any
property or assets of such Borrower, or (c) any cash payments received in
respect of promissory notes delivered to such Borrower or such Subsidiary in
respect of any sale or disposition of property or assets of such Borrower; in
each case net of (without duplication) (A) the amount required to repay any
Permitted Encumbrance (other than Advances) secured by a Lien on any assets of
the such Borrower or a Subsidiary of such Borrower that are collateral for any
such Indebtedness, (B) the reasonable expenses (including legal fees and
brokers' and underwriters' commissions, lenders fees or credit enhancement fees,
in any case, paid to third parties or, to the extent specifically permitted
hereby, Affiliates) incurred in effecting such issuance or sale and (C) any
taxes reasonably attributable to such issuance or sale.
"NET WORTH" at a particular date, shall mean all amounts which
would be included under shareholders' equity on a balance sheet of Borrowers on
a Consolidated Basis determined in accordance with GAAP as at such date.
14
<PAGE> 23
"NOTE RESERVE" shall mean $2,000,000.
"NOTES" shall mean collectively, the Term Note and the
Revolving Credit Note.
"OBLIGATIONS" shall mean and include any and all of Borrowers'
Indebtedness and/or liabilities to Agent or the Lenders of every kind, nature
and description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated, relating
to any and all of any Borrower's Indebtedness and/or liabilities under this
Agreement, the Other Documents or under any other agreement between Agent or the
Lenders and any Borrower and all obligations of any Borrower to Agent or the
Lenders to perform acts or refrain from taking any action.
"OTHER DOCUMENTS" shall mean the Mortgages, the Notes, the
Guaranties, the Guarantor Security Agreements, the Collateral Assignment, the
Pledge Agreement, the Questionnaire and any and all other agreements,
instruments and documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore, now or
hereafter executed by any Borrower and/or delivered to Agent or any Lender in
respect of the transactions contemplated by this Agreement.
"PARENT" of any Person shall mean a corporation or other
entity owning, directly or indirectly at least 50% of the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"PARTICIPANT" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
"PAYMENT OFFICE" shall mean initially 200 Jericho Quadrangle,
Jericho, New York 11753; thereafter, such other office of Agent, if any, which
it may designate by notice to Borrowing Agent and each Lender to be the Payment
Office.
"PERMITTED ACQUISITION" shall have the meaning set forth in
Section 7.1(a) hereof.
"PERMITTED ENCUMBRANCES" shall mean (a) Liens in favor of
Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent, or, being contested in good faith and
by appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; PROVIDED, THAT, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary
15
<PAGE> 24
course of any Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics', warehousemans', workers', materialmen's or other like
Liens arising in the ordinary course of any Borrower's business with respect to
obligations which are not due or which are being contested in good faith by the
applicable Borrower; (g) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof, provided that (x) any such lien
shall not encumber any other property of Borrowers and (y) the aggregate amount
of Indebtedness secured by such Liens incurred as a result of such purchases
during any fiscal year shall not exceed the amount provided for in Section 7.6
and 7.8; and (h) Liens disclosed on SCHEDULE 1.2(B).
"PERSON" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"PLAN" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA, maintained for employees of Borrowers or any member of
the Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement dated the
Closing Date by and between LTC and Agent, pursuant to which LTC shall pledge to
Agent all Subsidiary Stock.
"PRIMARY LEASES" shall mean each real property lease entered
into by a Borrower for a Primary Location and for each leased location of the
Borrower where the applicable landlord has a Lien in any Collateral that is
senior to the Lien granted to Agent hereunder (the "Mall Locations"). At such
time as Agent has received, in form and substance satisfactory to Agent in its
sole discretion, (i) a landlord waiver for any Primary Location, the lease for
such location shall no longer constitute a "Primary Lease" and (ii) UCC-3
termination statements or a subordination agreement with respect to any Liens
for any Mall Location, the lease for such Mall Location shall no longer
constitute a "Primary Lease".
"PRIMARY LOCATION" shall mean any location which is used by
any Borrower as a distribution center or a warehouse or any location where any
Borrower keeps books and records.
"PRIME RATE" shall mean the prime commercial lending rate of
Chase as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by Chase as a
means of pricing some loans to its customers and is neither tied to any external
rate of interest or index nor does it necessarily reflect the lowest rate of
interest actually charged by Chase to any particular class or category of
customers of Chase.
"PRO FORMA BALANCE SHEET" shall have the meaning set forth in
Section 5.5(a) hereof.
16
<PAGE> 25
"PRO FORMA FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 5.5(b) hereof.
"PROJECTIONS" shall have the meaning set forth in Section
5.5(b) hereof.
"PURCHASE PERIOD" shall have the meaning set forth in Section
2.10(a) hereof.
"PURCHASING LENDER" shall have the meaning set forth in
Section 16.3(c) hereof.
"PUBLIC OFFERING" shall mean any sale after the Closing Date
by any Borrower or any Subsidiary of any Borrower through a public offering of
its Capital Stock pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended.
"QUESTIONNAIRE" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrowers and delivered to
Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. ss.ss. 6901 ET SEQ., as same may be amended from time to time.
"REAL PROPERTY" shall mean all of Borrowers' right, title and
interest in and to the owned and leased premises identified on SCHEDULE 6.11
hereto.
"RECEIVABLES" shall mean and include as to each Borrower all
of such Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrowers by their Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to such Borrower arising out of or in
connection with the sale or lease of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to the Agent hereunder.
"RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(y)(i) hereof.
"RELEASE" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"RENT RESERVE" shall mean, in the aggregate, an amount equal
to three (3) Monthly Lease Payments for all Primary Leases.
"REPORTABLE EVENT" shall mean a reportable event described in
Section 4043(b) of ERISA or of the regulations promulgated thereunder.
"REQUIRED LENDERS" shall mean Lenders holding at least
fifty-one percent (51%) of the Advances then outstanding or if no such Advances
are outstanding, Lenders whose Commitment Percentages aggregate more than
fifty-one percent (51%) of the aggregate Commitment Percentages.
17
<PAGE> 26
"RESERVE PERCENTAGE" shall mean a fraction (expressed as a
decimal), the numerator of which is one and the denominator of which is one
minus the aggregate of the reserve percentages (expressed as a decimal)
established at the time of calculation by the Board of Governors of the Federal
Reserve System (or any other governmental authority having jurisdiction over the
Bank) for negotiable certificates of deposit in amounts comparable to the amount
of such Domestic Rate Loan, with a maturity comparable to the Interest Period
therefor, including, without limitation, Regulation D promulgated by the Board
of Governors of the Federal Reserve System.
"REVOLVING ADVANCE COMMITMENT PERIOD" shall mean the period
from and including the Closing Date to but not including the Revolving Advance
Termination Date.
"REVOLVING ADVANCE TERMINATION DATE" shall mean April 1,
2002.
"REVOLVING ADVANCES" shall mean Advances made other than the
Term Loan.
"REVOLVING CREDIT NOTE" shall mean the promissory note
referred to in Section 2.1 hereof.
"SELLER" shall mean collectively, the shareholders of CWI and
SEI listed on the signature pages of the Acquisition Agreement.
"SETTLEMENT DATE" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"STATUTORY RESERVES" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal, established
by the Board and any other banking authority to which Agent is subject with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"SUBSIDIARY" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"SUBSIDIARY STOCK" shall mean all of the issued and
outstanding shares of stock owned by Borrowers of each of their Subsidiaries
identified on SCHEDULE 1.2(C) hereto.
"TANGIBLE NET WORTH" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrowers on a Consolidated Basis as may be
properly classified as such in
18
<PAGE> 27
accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of the Borrowers on a Consolidated Basis.
"TERM LOAN" shall mean the Advances made pursuant to Section
2.4(a) hereof.
"TERM LOAN TERMINATION DATE" shall mean April 1, 2004.
"TERM NOTE" shall mean the promissory note described in
Section 2.4(a) hereof.
"TERMINATION DATE" shall have the meaning set forth in Section
13.1 hereof.
"TERMINATION EVENT" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower
or any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group
from a Multiemployer Plan.
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
succeeding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next succeeding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next succeeding Business Day) by Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
"TOXIC SUBSTANCE" shall mean and include any material present
on the Real Property which is subject to regulation under the Toxic Substances
Control Act (TSCA), 15 U.S.C. ss.ss. 2601 ET SEQ., applicable state law, or any
other applicable Federal or state laws now in force or hereafter enacted
relating to toxic substances. "Toxic Substance" includes but is not limited to
asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"TRANSACTIONS" shall have the meaning set forth in Section
5.5(a) hereof.
"TRANSFEREE" shall have the meaning set forth in Section
15.3(b) hereof.
19
<PAGE> 28
"UNDRAWN AVAILABILITY" at a particular date with respect to
all Borrowers shall mean an amount equal to (a) the lesser of (i) the Formula
Amount or (ii) the Maximum Revolving Advance Amount, MINUS (b) all accruals,
outstanding fees, interest or other amounts owed to Agent or Lenders, MINUS (c)
the outstanding amount of Advances (other than the Term Loan).
"VOTING STOCK" shall mean, with respect to any Person, capital
stock of any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the governing body of such
Person.
"WEEK" shall mean the time period commencing with a Wednesday
and ending on the following Tuesday.
"WORKING CAPITAL" at a particular date, shall mean the excess,
if any, of Current Assets (other than cash and cash equivalents) over Current
Liabilities (other than the current portion of long term Indebtedness) at such
date.
1.3. UNIFORM COMMERCIAL CODE TERMS. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York shall have
the meaning given therein unless otherwise defined herein.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and VICE VERSA. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements to which Agent is a party, including, without
limitation, references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. REVOLVING ADVANCES. Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrowers during the Revolving Advance Commitment Period in
aggregate amounts outstanding at any time not greater than such Lender's
Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount
or (y) an amount equal to the sum of:
(i) up to 85% ("Receivables Advance Rate") of
Eligible Receivables, PLUS
(ii) up to the lesser of (A) 50% ("Inventory Advance
Rate") of the value of the Eligible Inventory (the Receivables
Advance Rate and the Inventory Advance Rate shall be referred
to collectively, as the "Advance Rates") or (B) $6,000,000 in
the aggregate at any one time, MINUS
20
<PAGE> 29
(iii) such reserves as Agent in its good faith
judgment may reasonably deem proper and necessary from time to
time in its reasonable discretion, including, without
limitation, the Rent Reserve and the Note Reserve.
The sum of the amounts derived from Sections 2.1(y)(i) and (ii) minus
(iii) at any time and from time to time shall be referred to as the "Formula
Amount". The Revolving Advances shall be evidenced by one or more secured
promissory notes (collectively, "Revolving Credit Note") substantially in the
form attached hereto as EXHIBIT 2.1.
2.2. PROCEDURE FOR REVOLVING ADVANCE BORROWING.
(a) Borrowing Agent on behalf of any Borrower may notify Agent
prior to 11:00 a.m. on a Business Day of a Borrower's request to incur, on that
day, a Revolving Advance hereunder. Should any amount required to be paid as
interest hereunder, or as fees or other charges under this Agreement or any
other agreement with Agent or Lenders, or with respect to any other Obligation,
become due, same shall be deemed a request for a Revolving Advance as of the
date such payment is due, in the amount required to pay in full such interest,
fee, charge or Obligation under this Agreement or any other agreement with Agent
or Lenders, and such request shall be irrevocable. Agent and Lenders will not
make any Advance pursuant to any notice unless Agent has received the most
recent Borrowing Base Certificate required under Section 9.2 hereof.
(b) Notwithstanding the provisions of (a) above, in the event
any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall
give Agent at least three (3) Business Days' prior written notice; specifying
(i) the date of the proposed borrowing (which shall be a Business Day), (ii) the
type of borrowing and the amount on the date of such Advance to be borrowed,
which amount shall be in a minimum amount of $500,000 and integral multiples of
$100,000 in excess thereof, and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two,
three or six months (each such period an "Interest Period"). No Advance shall be
made as a Eurodollar Rate Loan for the first sixty (60) days following the
Closing Date unless the Advances have been syndicated to Chase's satisfaction
and the new Lenders have funded the Advances. Thereafter, no Advance shall be
made as a Eurodollar Rate Loan having an Interest Period greater than one (1)
month until the earlier of (x) one hundred twenty one (121) days following the
Closing Date and (y) the date on which the Advances have been syndicated to
Chase's satisfaction and the new Lenders have funded the Advances.
(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrowing Agent may elect as set forth in (b)(iii) above provided that:
(i) any Interest Period which would otherwise end on a
day which is not a Business Day shall be the next preceding or succeeding
Business Day as is Chase's custom in the market to which such Eurodollar Rate
Loan relates;
21
<PAGE> 30
(ii) no Interest Period shall end after the last day of (1)
the Revolving Advance Termination Date, with respect to Revolving Advances or
(2) the Term Loan Termination Date, with respect to the Term Loan;
(iii) any Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end, shall (subject to clause (i) above) end on the
last day of such calendar month; and
(iv) no Borrower nor Borrowing Agent may select an Interest
Period with respect to any portion of the Term Loan which extends beyond an
installment payment date for the Term Loan unless after giving effect to such
election, the portion of the Term Loan not subject to the Interest Periods
ending after such installment payment date is equal to or greater than the
principal due on such installment payment date.
Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowing Agent,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and
be continuing, a Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan or Domestic
Rate Loan convert any such loan into a loan of another type in the same
aggregate principal amount provided that any conversion of a Eurodollar Rate
Loan shall be made only on the last Business Day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If a Borrower desires to convert
a loan, Borrowing Agent shall give Agent not less than three (3) Business Days'
prior written notice, specifying the date of such conversion, the loans to be
converted and if the conversion is from a Domestic Rate Loan to any other type
of loan, the duration of the first Interest Period therefor. After giving effect
to each such conversion, there shall not be outstanding more than five (5)
Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior
written notice, any Borrower may prepay any Eurodollar Rate Loan in whole with
accrued interest on the principal being prepaid to the date of such repayment.
In the event that any prepayment of a Eurodollar Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, such Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 2.2(f) hereof. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
Agent or any Lender to such Borrower shall be conclusive absent manifest error.
(f) Each Borrower shall indemnify Agent and Lenders and hold
Agent and Lenders harmless from and against any and all losses or expenses that
Agent and Lenders may
22
<PAGE> 31
sustain or incur as a consequence of any prepayment, conversion of or any
default by any Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including (but not limited to) any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of the Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrowers shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
Agent, convert such affected Eurodollar Rate Loans into loans of another type.
If any such payment or conversion of any Eurodollar Rate Loan is made on a day
that is not applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent,
upon Agent's request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by such Lender to Borrowing Agent shall be
conclusive absent manifest error.
2.3. DISBURSEMENT OF ADVANCE PROCEEDS. (a) All Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Borrowers to Agent or
Lenders, shall be charged to the applicable Borrower's Account on Agent's books.
During the Revolving Advance Commitment Period, Borrowers may use the Revolving
Advances by borrowing, prepaying and reborrowing, all in accordance with the
terms and conditions of this Agreement. The proceeds of each Revolving Advance
requested by Borrowers or deemed to have been requested by Borrowers under
Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the
extent the Lenders make such Revolving Advances, be made available to the
applicable Borrower on the day so requested by way of credit to such Borrower's
operating account at Chase or such other bank as Borrowing Agent may designate
following notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
(b) If on any day on which a check issued by a Borrower is
presented for payment against any controlled disbursement account with Chase,
then to the extent of any Undrawn Availability then existing, and provided that
no Event of Default shall have occurred and be continuing, Agent shall credit
said account in an amount sufficient to permit Agent to honor such check,
irrespective of the satisfaction, as of such date, of the conditions set forth
in
23
<PAGE> 32
Article II hereof. Each credit by Agent to said account pursuant to this section
shall be deemed to constitute a Revolving Advance for a Domestic Rate Loan under
this Agreement.
2.4. TERM LOAN. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrowers in
the sum equal to such Lender's Commitment Percentage of $21,500,000. The Term
Loan shall be advanced on the Closing Date, and shall be, with respect to
principal, payable in consecutive quarterly installments as follows, with the
remaining unpaid principal balance due and payable in full on the Term Loan
Termination Date subject to acceleration upon the occurrence of an Event of
Default or earlier termination of this Agreement:
PAYMENT DATE AMOUNT
------------ ------
July 31, 1998 $ 375,000
October 31, 1998 $ 375,000
January 31, 1999 $ 375,000
April 30, 1999 $ 375,000
July 31, 1999 $ 750,000
October 31, 1999 $ 750,000
January 31, 2000 $ 750,000
April 30, 2000 $ 750,000
July 31, 2000 $1,000,000
October 31, 2000 $1,000,000
January 31, 2001 $1,000,000
April 30, 2001 $1,000,000
July 31, 2001 $1,000,000
October 31, 2001 $1,000,000
January 31, 2002 $1,000,000
April 30, 2002 $1,000,000
July 31, 2002 $1,250,000
October 31, 2002 $1,250,000
January 31, 2003 $1,250,000
April 30, 2003 $1,250,000
July 31, 2003 $1,250,000
October 31, 2003 $ 916,666.66
January 31, 2004 $ 916,666.67
April __, 2004 $ 916,666.67
The Term Loan shall otherwise be evidenced by and subject to the terms and
conditions set forth in one or more secured promissory notes (collectively,
"Term Note") attached hereto as EXHIBIT 2.4(A).
24
<PAGE> 33
2.5. REPAYMENT OF ADVANCES.
(a) The Revolving Advances shall be due and payable in full on
the Revolving Advance Termination Date subject to earlier prepayment as herein
provided. The Term Loan shall be due and payable as provided in Section 2.4(a)
hereof and in the Term Note.
(b) Each Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or proceeds
of Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit the applicable
Borrower's Account as of the Business Day on which Agent receives those checks,
notes, drafts or other items of payment, such Borrower agrees that, in computing
the charges under this Agreement, all items of payment shall be deemed applied
by Agent on account of the Obligations two (2) Business Days after confirmation
to Agent by the Blocked Account bank or the Depositary Account bank (as provided
for in Section 4.15(h) hereof) that such items of payment have been collected in
good funds and finally credited to Agent's account, provided, however, that if
Chase is the Blocked Account Bank, all items of payment shall be deemed applied
by Agent on account of the Obligations two (2) Business Days after such items
have been collected in good funds. Agent is not required to credit such
Borrower's Account for the amount of any item of payment which is unsatisfactory
to Agent and Agent may charge such Borrower's Account for the amount of any item
of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to Agent
at the Payment Office not later than 1:00 P.M. (New York Time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging the applicable Borrower's Account or by making Advances as provided in
Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other
amounts payable hereunder, or under any Other Documents, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.6. REPAYMENT OF EXCESS ADVANCES. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.7. STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with its
customary procedures, loan accounts in the name of each Borrower (each, a
"Borrower's Account") in which shall be recorded the date and amount of each
Advance made by Lenders and the date and amount of each payment in respect
thereof; PROVIDED, HOWEVER, the failure by Agent to record the date and amount
of any Advance or payment shall not adversely affect Agent or any Lender. For
each month, Agent shall send to Borrowing Agent a statement showing the
accounting for the Advances made, payments made or credited in respect thereof,
and other transactions between Lenders and Borrowers, during such month. The
monthly statements shall be deemed correct
25
<PAGE> 34
and binding upon Borrowers in the absence of manifest error and shall constitute
an account stated between Lenders and Borrowers. The records of Agent with
respect to the loan account shall be PRIMA FACIE evidence of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.8. ADDITIONAL PAYMENTS. Any sums expended by Agent or any Lender due
to any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to the applicable Borrower's Account as a Revolving Advance and added to
the Obligations. Agent shall promptly give notice to Borrowing Agent upon
charging any Borrower's Account under this Section 2.8.
2.9. MANNER OF BORROWING AND PAYMENT.
(a) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of the Lenders. The Term Loan shall be
advanced according to the Commitment Percentages of the Lenders.
(b) Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Revolving Credit Note, shall be
applied to the Revolving Advances, pro rata according to the Commitment
Percentages of the Lenders. Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the Term Note, shall be
applied to that portion of the Term Loan evidenced by the Term Note pro rata
according to the Commitment Percentages of the Lenders. Except as expressly
provided herein, all payments (including prepayments) to be made by Borrowers on
account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to Agent on behalf of the Lenders to the Payment
Office, in each case on or prior to 1:00 P.M., New York time, in Dollars and in
immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.9(a) and (b) hereof, commencing with the first Business Day following
the Closing Date, each borrowing of Revolving Advances shall be advanced by
Agent and each payment by any Borrower on account of Revolving Advances shall be
applied first to those Revolving Advances made by Agent. On or before 1:00 P.M.,
New York time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and the Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with its Commitment Percentage of the difference between (y) such
repayments and (z) such Revolving Advances
26
<PAGE> 35
(ii) Each Lender shall be entitled to earn interest at the
Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Transferee (a "benefited Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or benefits
of such Collateral or proceeds ratably with each of the Lenders; PROVIDED,
HOWEVER, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent and, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowers of its receipt of any such notice from a Lender. If
such amount is made available to Agent on a date after a Settlement Date, such
Lender shall pay to Agent on demand an amount equal to the product of (i) the
daily average Federal Funds Rate (computed on the basis of a year of 360 days)
during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; PROVIDED, HOWEVER, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
27
<PAGE> 36
2.10. MANDATORY AND OPTIONAL PREPAYMENTS.
(a) MANDATORY PREPAYMENT.
(i) When any Borrower sells or otherwise disposes of any
Collateral having a fair market value in excess of $100,000 individually, or in
the aggregate for all Borrowers, in any fiscal year (other than Inventory in the
ordinary course of business), Borrowers shall repay the Advances to the extent
the aggregate Net Proceeds for all such sales in any fiscal year exceeds
$100,000 in an amount equal to such Net Proceeds in excess of $100,000. Such
repayments shall be made promptly but in no event more than one (1) Business Day
following receipt of such Net Proceeds, and until the date of payment, such Net
Proceeds shall be held in trust for Agent. The foregoing shall not be deemed to
be implied consent to any such sale otherwise prohibited by the terms and
conditions hereof. Such repayments shall be applied first, pro-rata to the
outstanding principal installments of the Term Loan and second, to the remaining
Advances in such order as Agent may determine, subject to Borrowers' ability to
reborrow Revolving Advances in accordance with the terms hereof. Notwithstanding
the foregoing, unless and until an Event of Default has occurred and is
continuing, Borrowers may sell or otherwise dispose of Collateral (excluding for
purposes of this sentence Inventory in the ordinary course of business) having a
fair market value in excess of $100,000 in the aggregate in any fiscal year and
utilize such Net Proceeds solely to acquire replacement Collateral without
making a mandatory prepayment hereunder so long as (a) the acquired Collateral
is purchased by Borrowers within one hundred eighty (180) days of the sale of
the Collateral (the "Purchase Period"), (b) the proceeds of such sale are
remitted to Agent and applied by Agent to reduce the outstanding amount of
Revolving Advances in accordance with the first sentence of this subsection
2.10(a)(i), (c) a reserve equal to the amount of such proceeds shall be
established by Agent (the "Mandatory Reserve"), which reserve shall continue
until the earlier to occur of (i) the date when payment for such replacement
Collateral is made and the other conditions set forth in this subsection 2.10(i)
are met to the reasonable satisfaction of Agent or (ii) the expiration of the
Purchase Period, (d) the acquired Collateral shall be deemed to be acceptable
Collateral by Agent in its reasonable discretion and (e) the acquired Collateral
shall be subject to Agent's first priority security interest created hereunder.
If Borrowers fail to meet the conditions set forth in clauses (a) through and
including (e) above, Borrowers hereby authorize Agent and Lenders to make a
Revolving Advance in an amount equal to the applicable Mandatory Reserve to be
applied as a prepayment of the Term Loan, in the manner set forth above.
Immediately, thereafter, the applicable Mandatory Reserve shall be reduced to
$0. If Borrowers meet the conditions set forth in clauses (a) through and
including (e) above to the reasonable satisfaction of Agent, Agent shall, upon
Borrowing Agent's request, make a Revolving Advance to the applicable Borrower
in the amount of the applicable Mandatory Reserve to be used by the applicable
Borrower to (i) purchase the replacement Collateral and (ii) be applied as a
prepayment of the Term Loan, in the manner set forth above to the extent the
purchase price of the replacement Collateral is less than the amount of such
Revolving Advance and the applicable Mandatory Reserve shall be reduced.
28
<PAGE> 37
(ii) Borrowers shall prepay the outstanding amount of the
Advances in an amount equal to 75% of Excess Cash Flow for each fiscal year
commencing on or after July 31, 1998 payable upon delivery of the financial
statements to Agent referred to in and required by Section 9.7 for such fiscal
year but in any event not later than ninety (90) days after the end of each such
fiscal year, which amount shall be applied first, to the outstanding principal
installments of the Term Loan in the inverse order of the maturities thereof
and, second, to the remaining Advances in such order as Agent may determine
subject to Borrowers' ability to reborrow Revolving Advances in accordance with
the terms hereof. In the event that the financial statement is not so delivered,
then a calculation based upon estimated amounts shall be made by Agent upon
which calculation Borrowers shall make the prepayment required by this Section
2.10(b), subject to adjustment when the financial statement is delivered to
Agent as required hereby. The calculation made by Agent shall not be deemed a
waiver of any rights Agent or Lenders may have as a result of the failure by
Borrowers to deliver such financial statement.
(iii) Upon the completion of a Public Offering, Borrowers
shall repay the Advances in an amount equal to fifty percent (50%) of the Net
Proceeds of such Public Offering, such repayments to be made promptly but in no
event more then one (1) Business Day following receipt of such Net Proceeds, and
until the date of payment, such Net Proceeds shall be held in trust for Agent.
Such repayment shall be applied first, pro rata to the outstanding principal
installments of the Term Loan and second, to the remaining Advances in such
order as Agent may determine, subject to Borrowers' ability to reborrow
Revolving Advances in accordance with the terms hereof.
(b) OPTIONAL PREPAYMENTS.
(i) Borrowers, upon three (3) days prior written notice to
Agent, may, at any time and from time to time, prepay the Term Loan in whole or
in part. Any such prepayments shall be in a minimum principal amount equal to
the lesser of (A) $100,000, or integral multiples of $100,000 in excess thereof
and (B) the aggregate unpaid principal amount of the Term Loan.
(ii) Borrowers, upon three (3) days prior written notice to
Agent, may, at any time and from time to time, permanently reduce the Maximum
Revolving Advance Amount. Such reductions shall be in a minimum principal amount
of $100,000 or integral multiples of $100,000 in excess thereof.
2.11. USE OF PROCEEDS. Borrowers shall apply the proceeds of the Term
Loan to (i) repay existing indebtedness owed to NationsCredit Commercial Corp.,
(ii) pay a portion of the purchase price under the Acquisition Agreement and
(iii) pay fees and expenses relating to the Transactions. Borrowers shall apply
the proceeds of Revolving Advances to (i) repay existing indebtedness owed to
NationsCredit Commercial Corp., (ii) pay fees and expenses relating to the
Transactions, (iii) repay the subordinated note in the original principal amount
of $2,000,000 in favor of Ronald Koonsman, and (iv) provide for its working
capital needs and general corporate purposes
29
<PAGE> 38
2.12. DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrowing Agent that it
does not intend to make available its portion of any Advance (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "Lender Default"), all rights and obligations hereunder of
such Lender (a "Defaulting Lender") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this Section 2.12 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.12,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.12 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
30
<PAGE> 39
III. INTEREST AND FEES.
3.1. INTEREST. Interest on Advances shall be payable in arrears on the
last day of each quarter in arrears with respect to Domestic Rate Loans and,
with respect to Eurodollar Rate Loans subject to the limitations set forth in
Section 2.2(b), at the end of each Interest Period or, for Eurodollar Rate Loans
with an Interest Period in excess of three months, at the earlier of (a) each
three months on the anniversary date of the commencement of such Eurodollar Rate
Loan or (b) the end of the Interest Period. Interest charges shall be computed
on the actual principal of Advances outstanding during the quarter at a rate per
annum equal to the Contract Rate. Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the Contract Rate
for Domestic Rate Loans shall be similarly changed without notice or demand of
any kind by an amount equal to the amount of such change in the Alternate Base
Rate during the time such change or changes remain in effect. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
Obligations shall bear interest at the Default Rate. So long as no Default or
Event of Default shall have occurred and be continuing, the Applicable Margin
shall be increased or decreased, as the case may be, as of the fifth day after
receipt of the financial statements delivered pursuant to Section 9.8 hereof,
commencing with fiscal quarter ending July 31, 1998, based upon the Leverage
Ratio with respect to the four (4) fiscal quarters then ended as reported upon
in the applicable financial statements; PROVIDED, HOWEVER, if such statements
are not timely delivered, the Applicable Margin shall be the highest percentage
set forth in the definition of "Applicable Margin" until the time of delivery.
3.2. UNUSED LINE FEE. If, for any quarter during the Revolving Advance
Commitment Period, the average daily unpaid balance of Revolving Advances for
each day of such quarter does not equal the Maximum Revolving Advance Amount,
then Borrowers shall pay to Agent a fee for the ratable benefit of Lenders at a
per annum rate equal to three-eighths of one percent (.375%) on the amount by
which the Maximum Revolving Advance Amount exceeds such average daily unpaid
balance. Such fee shall be payable quarterly in arrears on the last day of each
calendar quarter, commencing with April 30, 1998 and on the last day of each
July, October, January and April thereafter.
3.3. FEE LETTER. Borrowers shall pay to Agent the fees set forth in the
Fee Letter at the times and on the terms and conditions set forth therein.
3.4. FIELD EXAMINATION EXPENSES. Borrowers shall pay to Agent on the
first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's and Lenders' benefit - a
collateral monitoring fee in an amount equal to $650 per day for each person
employed to perform such monitoring, plus all costs and disbursements incurred
by Agent in the performance of such examination or analysis; provided, however,
so long as no Default or Event of Default has occurred, Borrowers shall not be
obligated to reimburse Agent for more than (i) two collateral monitorings for
the period from the Closing Date though the first anniversary of the Closing
Date and (ii) one collateral monitoring in any year thereafter.
31
<PAGE> 40
3.5. COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
Contract Rate for Domestic Rate Loans during such extension.
3.6. MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event Agent or any Lender has received interest and other charges
hereunder in excess of the highest rate applicable hereto, such excess amount
shall be first applied to any unpaid principal balance owed by Borrowers, and if
the then remaining excess amount is greater than the previously unpaid principal
balance, the Lenders shall promptly refund such excess amount to Borrowers and
the provisions hereof shall be deemed amended to provide for such permissible
rate.
3.7. INCREASED COSTS. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Eurodollar Rate Loan or change
the basis of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any
Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement, any Other
Documents or any Eurodollar Rate Loan; and the result of any of the foregoing is
to increase the cost to Agent or any Lender of making, renewing or maintaining
its Advances hereunder by an amount that Agent or such Lender deems to be
material or to reduce the amount of any payment (whether of principal, interest
or otherwise) in respect of any of the Advances by an amount that Agent or such
Lender deems to be material, then, in any case Borrowers shall promptly pay
Agent or such Lender, upon its demand, such additional amount as will compensate
Agent or such Lender for such additional cost or such reduction, as the case may
be, provided that the foregoing shall not apply to increased costs which are
reflected in the Eurodollar Rate, as the case may be. Agent or such Lender shall
certify the amount of such additional cost or reduced amount to Borrowers, and
such certification shall be conclusive absent manifest error.
32
<PAGE> 41
3.8. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest
Period;
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank Eurodollar market,
with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate
Loan;
(c) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank eurodollar market
with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate
Loan, Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall
notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the last Business Day of the then current Interest Period
applicable to such affected Eurodollar Rate Loan, such affected Eurodollar Rate
Loan shall be converted into an unaffected type of Eurodollar Rate Loan on the
last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, the Lenders shall
have no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and no Borrower shall have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.
3.9. CAPITAL ADEQUACY.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.9, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender and
33
<PAGE> 42
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender's capital as a consequence of its
obligations hereunder to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
3.9 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.9(a) hereof when delivered to Borrowers shall be conclusive
absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN THE COLLATERAL. To secure the prompt payment
and performance to Agent and each Lender of the Obligations, each Borrower
hereby assigns, pledges and grants to Agent for the ratable benefit of each
Lender a continuing security interest in and to all of its Collateral, whether
now owned or existing or hereafter acquired or arising and wheresoever located.
Each Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. PERFECTION OF SECURITY INTEREST. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers for the
Primary Locations, (iii) delivering to Agent, endorsed or accompanied by such
instruments of assignment as Agent may specify, and stamping or marking, in such
manner as Agent may specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to Agent, and (v) executing and delivering financing
statements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent's security interest
under the Uniform Commercial Code or other applicable law. Agent is hereby
authorized to file financing statements signed by Agent instead of Borrowers in
accordance with Section 9-402(2) of the Uniform Commercial Code as adopted in
the State of New York. All charges, expenses and fees Agent may incur in doing
any of the foregoing, and any local taxes
34
<PAGE> 43
relating thereto, shall be charged to the applicable Borrower's Account as a
Revolving Advance and added to the Obligations, or, at Agent's option, shall be
paid to Agent for the ratable benefit of the Lenders immediately upon demand.
4.3. DISPOSITION OF COLLATERAL. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory in
the ordinary course of business and (b) as permitted in Section 2.10(a) hereof.
4.4. PRESERVATION OF COLLATERAL. Following the occurrence and during
the continuance of an Event of Default, in addition to the rights and remedies
set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral; (b) may employ and maintain at any Borrower's premises a custodian
who shall have full authority to do all acts necessary to protect Agent's
interests in the Collateral; (c) may lease warehouse facilities to which Agent
may move all or part of the Collateral; (d) may use any Borrower's owned or
leased lifts, hoists, trucks and other facilities or equipment for handling or
removing the Collateral; and (e) shall have, and is hereby granted, a right of
ingress and egress to the places where the Collateral is located, and may
proceed over and through any Borrower's owned or leased property. Each Borrower
shall cooperate fully with all of Agent's efforts to preserve the Collateral and
will take such actions to preserve the Collateral as Agent may direct. All of
Agent's expenses of preserving the Collateral, including any expenses relating
to the bonding of a custodian, shall be charged to the applicable Borrower's
Account as a Revolving Advance and added to the Obligations.
4.5. OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the
time the Collateral becomes subject to Agent's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (c) all signatures and endorsements
of each Borrower that appear on such documents and agreements shall be genuine
and each Borrower shall have full capacity to execute same; and (d) each
Borrower's Equipment and Inventory shall be located as set forth on SCHEDULE 4.5
and shall not be removed from such location(s) without the prior written consent
of Agent except with respect to the sale of Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof.
4.6. DEFENSE OF AGENT'S AND LENDERS' INTERESTS. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following a
35
<PAGE> 44
Default and demand by Agent for payment of all Obligations, Agent shall have the
right to take possession of the indicia of the Collateral and the Collateral in
whatever physical form contained. If Agent exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and the
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Agent's trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.
4.7. BOOKS AND RECORDS. Each Borrower shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers and who shall
be acceptable to Agent in its reasonable discretion.
4.8. FINANCIAL DISCLOSURE. Each Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by such Borrower at any time
prior to the Term Loan Termination Date to exhibit and deliver to Agent and each
Lender copies of any of the Borrower's financial statements, trial balances or
other accounting records of any sort in the accountant's or auditor's possession
accompanied by such accounting or auditing firm's management letter, and to
disclose to Agent and each Lender any information such accountants may have
concerning such Borrower's financial status and business operations. Each
Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Borrower, whether made by such Borrower or otherwise; however, Agent and
each Lender will attempt to obtain such information or materials directly from
such Borrower prior to obtaining such information or materials from such
accountants or such authorities.
4.9. COMPLIANCE WITH LAWS. Each Borrower shall comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to its respective Collateral or any part thereof or
to the operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect. Each Borrower may,
however, contest or dispute any acts, rules, regulations, orders and directions
of those bodies or officials in any reasonable manner, provided that any related
Lien is
36
<PAGE> 45
inchoate or stayed and sufficient reserves are established to the reasonable
satisfaction of Agent to protect Agent's Lien on or security interest in the
Collateral. The assets of Borrowers at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the Collateral so that such insurance shall remain in
full force and effect.
4.10. INSPECTION OF PREMISES; APPRAISAL. Upon notice to Borrowing
Agent, at all reasonable times Agent and any Lender shall have full access to
and the right to audit, check, inspect and make abstracts and copies from each
Borrower's books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of each Borrower's business. Agent and any
Lender (with Agent's prior written consent) and their agents may enter upon any
Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business. Upon an Event of Default, Agent shall have the right in its
discretion to hire an Appraiser at Borrowers' cost and expense to conduct
appraisals of the Inventory.
4.11. INSURANCE. Each Borrower shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which such
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower including, without limitation, business
interruption insurance; (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(e) maintain liability insurance in favor of such Borrower's officers and
directors in an amount satisfactory to Agent; (f) furnish Agent with (i) copies
of all policies and evidence of the maintenance of such policies by the renewal
thereof at least thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee for the benefit of Lenders as
its interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall
be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days' prior written notice is given to
Agent. In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and the applicable Borrower to make payment for such loss
to Agent (in its capacity as Agent hereunder) and not to such Borrower and Agent
jointly. If any insurance losses are paid by check, draft or other instrument
payable to any Borrower and Agent jointly, Agent may endorse such Borrower's
name thereon and do such
37
<PAGE> 46
other things as Agent may deem advisable to reduce the same to cash. Agent is
hereby authorized to adjust and compromise claims under insurance coverage
referred to in clauses (a) and (b) above. All loss recoveries received by Agent
upon any such insurance may be applied to the Obligations, first, pro-rata to
the outstanding principal installments of the Term Loan, and second, to the
remaining Advances in such order as Agent in its reasonable discretion shall
determine. Any surplus shall be paid by Agent to Borrowers or applied as may be
otherwise required by law. Anything hereinabove to the contrary notwithstanding,
and subject to the fulfillment of the conditions set forth below, Agent shall
remit to Borrowers insurance proceeds received by Agent during any fiscal year
under insurance policies procured and maintained by Borrowers which insure
Borrowers' insurable properties to the extent such insurance proceeds do not
exceed $250,000 in the aggregate during such fiscal year. In the event the
amount of insurance proceeds received by Agent for any occurrence exceeds
$250,000 then Agent shall not be obligated to remit the insurance proceeds to
Borrowers unless Borrowers shall provide Agent with evidence reasonably
satisfactory to Agent that the insurance proceeds will be used by Borrowers to
repair, replace or restore the insured property which was the subject of the
insurable loss. In the event Borrowers have previously received (or, after
giving effect to any proposed remittance by Agent to Borrowers would receive)
insurance proceeds which equal or exceed $250,000 in the aggregate during any
fiscal year, then Agent may, in its sole discretion, either remit the insurance
proceeds to Borrowers upon Borrowers providing Agent with evidence reasonably
satisfactory to Agent that the insurance proceeds will be used by Borrowers to
repair, replace or restore the insured property which was the subject of the
insurable loss, or apply the proceeds to the Obligations, as aforesaid. The
agreement of Agent to remit insurance proceeds in the manner above provided
shall be subject in each instance to satisfaction of each of the following
conditions: (x) No Event of Default or Default shall then have occurred, and (y)
Borrowers shall use such insurance proceeds to repair, replace or restore the
insurable property which was the subject of the insurable loss and for no other
purpose.
4.12. FAILURE TO PAY INSURANCE. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor for such
Borrower's Account, and charge such Borrower's Account therefor and such
expenses so paid shall be part of the Obligations.
4.13. PAYMENT OF TAXES. Each Borrower will pay and will cause each of
their Subsidiaries to pay, when due, all taxes, assessments and other Charges
lawfully levied or assessed upon such Borrower or any of the Collateral
including, without limitation, real and personal property taxes, assessments and
charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes and each Borrower shall have the right, subject to
the provisions of this Section 4.13, to contest or dispute any charges. If any
Charge by any governmental authority is or may be imposed on or as a result of
any transaction between any Borrower and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any Charges remain unpaid after
the date fixed for their payment, or if any claim shall be made which, in
Agent's or any Lender's opinion, may possibly create a valid Lien on the
Collateral, Agent may without notice to Borrowers pay the Charges and each
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. Agent will not pay any Charges to the extent that any Borrower has
contested or disputed those Charges in good
38
<PAGE> 47
faith, by expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related Lien is stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent's security
interest in or Lien on the Collateral. The amount of any payment by Agent under
this Section 4.13 shall be charged to the applicable Borrower's Account as a
Revolving Advance and added to the Obligations and, until Borrowers shall
furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to Borrowers' credit and
Agent shall retain its security interest in any and all Collateral held by
Agent.
4.14. PAYMENT OF LEASEHOLD OBLIGATIONS. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request, will provide evidence of having done so; provided, however,
that any Borrower may contest its rental obligations under a lease in good faith
provided that any related Lien is stayed and sufficient reserves are established
to the reasonable satisfaction of Agent to protect Agent's security interest in
or Lien on the Collateral.
4.15. RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
(b) SOLVENCY OF CUSTOMERS. Each Customer, to the best of each
Borrower's knowledge, as of the date each Receivable is created, is solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of any Borrower who are not solvent such
Borrower has set up on its books and in its financial records bad debt reserves
adequate to cover such Receivables.
(c) LOCATIONS OF BORROWERS. Each Borrower's chief executive
office is located at the locations set forth on SCHEDULE 4.15(C). Until written
notice is given to Agent by Borrowing Agent of any other office at which it
keeps its records pertaining to Receivables, all such records shall be kept at
such executive office.
(d) COLLECTION OF RECEIVABLES. Until any Borrower's authority
to do so is terminated by Agent (which notice Agent may give at any time
following the occurrence and during the continuance of an Event of Default),
each Borrower will, at such Borrower's sole cost and expense, but on Agent's
behalf and for Agent's account, collect as Agent's property and in trust for
Agent all amounts received on Receivables, and shall not commingle such
collections
39
<PAGE> 48
with any Borrower's funds or use the same except to pay Obligations. Each
Borrower shall, upon request, deliver to Agent the Blocked Account or the
Depositary Account in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness except that such Borrower may maintain base cash amounts at retail
store locations in the ordinary course of business consistent with past
practices and in any event not to exceed (i) $600,000 in the aggregate at any
time during the months of January through and including October of each calendar
year and (ii) $1,200,000 in the aggregate at any time during the months of
November and December of each calendar year.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES. At any time
following the occurrence and during the continuance of an Event of Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to the applicable Borrower's Account and added to the
Obligations.
(f) POWER OF AGENT TO ACT ON BORROWERS' BEHALF. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or any Borrower any and all checks, drafts and other instruments for the payment
of money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) upon the occurrence and during the continuance of an Event of
Default to sign such Borrower's name on any invoice or bill of lading relating
to any of the Receivables, drafts against Customers and assignments of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv)
upon the occurrence and during the continuance of an Event of Default to sign
such Borrower's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent's interest in the Collateral and to file same; (v) upon the
occurrence and during the continuance of an Event of Default to demand payment
of the Receivables; (vi) upon the occurrence and during the continuance of an
Event of Default to enforce payment of the Receivables by legal proceedings or
otherwise; (vii) upon the occurrence and during the continuance of an Event of
Default to exercise all of Borrowers' rights and remedies with respect to the
collection of the Receivables and any other Collateral; (viii) upon the
occurrence and during the continuance of an Event of Default to settle, adjust,
compromise, extend or renew the Receivables; (ix) upon the occurrence and during
the continuance of an Event of Default to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (x) upon the occurrence and during
the continuance of an Event of Default to prepare, file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) upon the occurrence and during the continuance of an Event of Default to
prepare, file and sign such Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said
40
<PAGE> 49
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the occurrence and during the continuance of an
Event of Default to change the address for delivery of mail addressed to any
Borrower to such address as Agent may designate and to receive, open and dispose
of all mail addressed to any Borrower.
(g) NO LIABILITY. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom except for liability arising from Agent's
or such Lender's gross (not mere) negligence or willful misconduct. Following
the occurrence and during the continuance of an Event of Default, Agent may,
without notice or consent from any Borrower, sue upon or otherwise collect,
extend the time of payment of, compromise or settle for cash, credit or upon any
terms any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Agent is authorized and
empowered to accept following the occurrence and during the continuance of an
Event of Default the return of the goods represented by any of the Receivables,
without notice to or consent by any Borrower, all without discharging or in any
way affecting any Borrower's liability hereunder.
(h) ESTABLISHMENT OF A LOCKBOX ACCOUNT, DOMINION ACCOUNT. All
proceeds of Collateral shall, at the direction of Agent, be deposited by each
Borrower into a lockbox account, dominion account or such other blocked account
(each, a "Blocked Account") as Agent may require pursuant to an arrangement with
such bank as may be selected by each Borrower and be acceptable to Agent. Each
Borrower shall issue to any such bank, an irrevocable letter of instruction
directing said bank to transfer such funds so deposited to Agent, either to any
account maintained by Agent at said bank or by wire transfer to appropriate
account(s) of Agent. All funds deposited in such Blocked Account shall
immediately become the property of Agent and such Borrower shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Agent assumes no responsibility for such Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively, Agent
may establish depository accounts ("Depository Accounts") in the name of Agent
at a bank or banks for the deposit of such funds and such Borrower shall deposit
all proceeds of Collateral or cause same to be deposited, in kind, in such
Depository Accounts of Agent in lieu of depositing same to such Borrower's
Blocked Account.
(i) ADJUSTMENTS. No Borrower will, without Agent's consent,
compromise or adjust any of the Receivables (or extend the time for payment
thereof) or accept any returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the business of such Borrower.
41
<PAGE> 50
4.16. INVENTORY. All Inventory, to the extent produced by Borrowers,
has been and will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17. MAINTENANCE OF EQUIPMENT. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment taken as a whole shall be maintained
and preserved. No Borrower shall use or operate the Equipment in material
violation of any law, statute, ordinance, code, rule or regulation. Each
Borrower shall have the right to sell Equipment to the extent set forth in
Section 4.3 hereof.
4.18. EXCULPATION OF LIABILITY. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof
except for any of the foregoing which arises out of Agent's or such Lender's
gross (not mere) negligence or willful misconduct. Neither Agent nor any Lender,
whether by anything herein or in any assignment or otherwise, assume any
Borrower's obligations under any contract or agreement assigned to Agent or such
Lender, and neither Agent nor any Lender shall be responsible in any way for the
performance by any Borrower of any of the terms and conditions thereof.
4.19. FINANCING STATEMENTS. Except as respects the financing statements
filed by Agent and the financing statements described on SCHEDULE 1.2(A) and
continuation statements relating thereto, no financing statement covering any of
the Collateral or any proceeds thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. AUTHORITY. Each Borrower has full power, authority and legal right
to enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, articles of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower is a party or by which it or its property may be bound.
42
<PAGE> 51
5.2. FORMATION AND QUALIFICATION.
(a) Each Borrower is duly incorporated and in good standing
under the laws of the states set forth on SCHEDULE 5.2(A). Each Borrower is
qualified to do business and is in good standing in the states listed on
SCHEDULE 5.2(A) which constitute all states in which qualification and good
standing are necessary for such Borrower to conduct its business and own its
property except where the failure to so qualify could not have a Material
Adverse Effect on such Borrower. Each Borrower has delivered to Agent true and
complete copies of its articles of incorporation and by-laws and will promptly
notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
SCHEDULE 5.2(B).
5.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of each Borrower contained in this Agreement and the Other
Documents shall be true at the time of such Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
5.4. TAX RETURNS. Each Borrower's federal tax identification number is
set forth on Schedule 5.4. Each Borrower has filed all federal, state and local
tax returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending 1991. The provision for taxes on the books of each Borrower
are adequate for all years not closed by applicable statutes, and for its
current fiscal year, and no Borrower has knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5. FINANCIAL STATEMENTS.
(a) The pro forma balance sheet of Borrowers on a Consolidated
Basis (the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date
reflects the consummation of the transactions contemplated by the Acquisition
Agreement and under this Agreement (the "Transactions") and is complete and
fairly presents the financial condition of Borrowers on a Consolidated Basis as
of the Closing Date after giving effect to the Transactions, and has been
prepared in accordance with GAAP, consistently applied. The Pro Forma Balance
Sheet of Borrowers on a Consolidated Basis has been certified as accurate,
complete and correct in all material respects by the President and Chief
Financial Officer of Borrowing Agent. All financial statements referred to in
this subsection 5.5(a), including the related schedules and notes thereto, have
been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(b) The monthly profit and loss statements, balance sheets and
cash flow projections of Borrowers on a Consolidated Basis, copies of which are
annexed hereto as EXHIBIT 5.5(B) prepared (i) on a quarterly basis for fiscal
years 1998 and 1999 and (ii) on an annual basis for fiscal years 2000, 2001,
2002, 2003 and 2004 (the "Projections") were prepared by the Chief
43
<PAGE> 52
Financial Officer of each Borrower, are in sufficient detail to determine
revenue from each material business category, fixed and variable costs and are
based on underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrowers' judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period. The cash flow Projections together with the Pro Forma Balance
Sheet, are referred to as the "Pro Forma Financial Statements".
(c) The consolidated and consolidating balance sheets of LTC,
its Subsidiaries and such other Persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of July 31, 1997, the consolidated and
consolidating balance sheets of TWI, its Subsidiaries and such other persons
described therein (including the accounts of all Subsidiaries for the respective
periods during which a subsidiary relationship existed) as of December 31, 1996,
and the consolidated and consolidating nine month certified balance sheets of
CWI, its Subsidiaries and such other persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of September 30, 1997 and in each case the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such dates, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur and fairly present the financial position of
Borrowers and their Subsidiaries at such dates and the results of their
operations for such period. Since July 31, 1997 with respect to LTC, December
31, 1996 with respect to TWI and September 30, 1997 with respect to CWI there
has been no change in the condition, financial or otherwise, of the applicable
Borrower or its Subsidiaries as shown on the consolidated balance sheet as of
such date and no material change in the aggregate value of machinery, equipment
and Real Property owned by such Borrower and its Subsidiaries, except changes in
the ordinary course of business, none of which individually or in the aggregate
has been materially adverse.
5.6. CORPORATE NAME. No Borrower has been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on SCHEDULE 5.6(A), nor has any Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years except as disclosed
on SCHEDULE 5.6(B).
5.7. O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Each Borrower has duly complied with in all material
respects, and its facilities, business, assets, property, leaseholds and
Equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Environmental Protection Act,
RCRA and all other Environmental Laws; there have been no outstanding citations,
notices or orders of non-compliance issued to any Borrower or relating to its
business, assets, property, leaseholds or Equipment under any such laws, rules
or regulations.
(b) Each Borrower has been issued all required material
federal, state and local licenses, certificates or permits relating to all
applicable Environmental Laws.
44
<PAGE> 53
(c) To the best of each Borrower's knowledge (i) There are no
visible signs of releases, spills, discharges, leaks or disposal (collectively
referred to as "Releases") of Hazardous Substances at, upon, under or within any
Real Property or any premises leased by any Borrower; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Real Property or
any premises leased by any Borrower; (iii) neither the Real Property nor any
premises leased by any Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any other premises leased by any Borrower,
excepting such quantities as are handled in accordance with all applicable
manufacturer's instructions and governmental regulations and in proper storage
containers and as are necessary for the operation of the commercial business of
any Borrower or of its tenants.
5.8. SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) After giving effect to the Transactions, Borrowers will be
solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and (i) as of the Closing Date, the fair present saleable value of its assets,
calculated on a going concern basis, is in excess of the amount of their
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
their assets (calculated on a going concern basis) will be in excess of the
amount of its liabilities.
(b) Except as disclosed in SCHEDULE 5.8(B), no Borrower has
(i) pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on such Borrower,
and (ii) any liabilities nor indebtedness other than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect on Borrowers, nor is any Borrower in violation of
any order of any court, governmental authority or arbitration board or tribunal.
(d) No Borrower or any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
material "accumulated funding deficiency," as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code, whether or not waived, and each Borrower
and each member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower or any member of the Controlled Group has incurred any liability to the
PBGC other than for the payment of premiums, and there are no premium payments
which have become due which are unpaid, (iv) no Plan has been terminated by the
plan administrator thereof or by the PBGC, and there is no occurrence which
would cause the PBGC to institute proceedings under Title IV of ERISA to
terminate any Plan, (v) at this time, the current value of the assets of
45
<PAGE> 54
each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower or any member of the Controlled Group
knows of any facts or circumstances which would materially decrease the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower or any
member of the Controlled Group has breached any of the material
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Plan, (vii) no Borrower or any member of a Controlled Group has incurred any
such material liability for any excise tax arising under Section 4972 or 4980B
of the Code, and no fact exists which could give rise to any such material
liability, (viii) no Borrower or any member of the Controlled Group or any
fiduciary of, or any trustee to, any Plan, has engaged in a "prohibited
transaction" described in Section 406 of the ERISA or Section 4975 of the Code
or taken any action which would constitute or result in a Termination Event with
respect to any such Plan which is subject to ERISA, (ix) each Borrower and each
member of the Controlled Group has made all material contributions due and
payable with respect to each Plan, (x) there exists no event described in
Section 4043(b) of ERISA, for which the thirty (30) day notice period contained
in 29 CFR ss.2615.3 has not been waived, (xi) no Borrower or any member of the
Controlled Group has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than employees or former
employees of any Borrower and any member of the Controlled Group, and (xii) no
Borrower or any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980.
5.9. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned by any Borrower are set forth on
SCHEDULE 5.9, are valid and have been duly registered or filed with all
appropriate governmental authorities and constitute all of the material
intellectual property rights which are necessary for the operation of its
business; to each Borrower's knowledge, there is no objection to or pending
challenge to the validity of any such patent, trademark, copyright, design
right, tradename, trade secret or license and no Borrower is aware of any
grounds for any challenge, except as set forth in SCHEDULE 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark license,
design right, copyright, copyright application and copyright license owned or
held by any Borrower and all trade secrets used by any Borrower consists of
original material or property developed by such Borrower or was lawfully
acquired by such Borrower from the proper and lawful owner thereof. Each of such
items has been maintained so as to preserve the value thereof from the date of
creation or acquisition thereof. With respect to all software used by any
Borrower, such Borrower is in possession of all source and object codes related
to each piece of such software or is the beneficiary of a source code escrow
agreement.
5.10. LICENSES AND PERMITS. Except as set forth in SCHEDULE 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting and where the failure to procure such
licenses or permits could have a Material Adverse Effect on Borrowers taken as a
whole.
46
<PAGE> 55
5.11. DEFAULT OF INDEBTEDNESS. No Borrower is in default in the payment
of the principal of or interest on any Indebtedness in excess of $100,000 or
under any instrument or agreement under or subject to which any such
Indebtedness has been issued and no event has occurred under the provisions of
any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default
thereunder.
5.12. NO DEFAULT. No Borrower is in default in the payment or
performance of any of its contractual obligations in excess of $100,000 and no
Default has occurred.
5.13. NO BURDENSOME RESTRICTIONS. No Borrower is party to any contract
or agreement the performance of which could have a Material Adverse Effect on
such Borrower. No Borrower has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14. NO LABOR DISPUTES. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire prior to the Term Loan Termination Date other than as set forth on
SCHEDULE 5.14 hereto.
5.15. MARGIN REGULATIONS. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. INVESTMENT COMPANY ACT. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. DISCLOSURE. No representation or warranty made by any Borrower in
this Agreement or in the Acquisition Agreement, or in any financial statement,
report, certificate or any other document furnished in connection herewith or
therewith contains any untrue statement of fact or omits to state any fact
necessary to make the statements herein or therein not misleading. There is no
fact known to any Borrower or which reasonably should be known to any Borrower
which Borrowers have not disclosed to Agent in writing with respect to the
transactions contemplated by the Acquisition Agreement, or this Agreement which
could have a Material Adverse Effect on any Borrower.
5.18. DELIVERY OF ACQUISITION AGREEMENT. Agent has received complete
copies of the Acquisition Agreement (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and
47
<PAGE> 56
agreements has been amended or supplemented, nor have any of the provisions
thereof been waived, except pursuant to a written agreement or instrument which
has heretofore been delivered to Agent.
5.19. SWAPS. No Borrower is a party to, nor will it be a party to, any
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.20. CONFLICTING AGREEMENTS. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.21. APPLICATION OF CERTAIN LAWS AND REGULATIONS. No Borrower or any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22. BUSINESS AND PROPERTY OF BORROWERS. Upon and after the Closing
Date, Borrowers do not propose to engage in any business other than distribution
and retail of cellular, wireless, paging and internet related products and
services and activities necessary to conduct same. On the Closing Date, each
Borrower will own all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. PAYMENT OF FEES. Pay to Agent on demand all usual and customary
fees and expenses including all fees required in the Fee Letter or in this
Agreement which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge the account of Borrowers for all such fees and expenses.
6.2. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
including, without limitation, all material licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and
48
<PAGE> 57
protect the validity of any material intellectual property right or other right
included in the Collateral; (b) keep in full force and effect its existence and
comply in all material respects with the laws and regulations governing the
conduct of its business; and (c) make all such reports and pay all such
franchise and other taxes and license fees and do all such other acts and things
as may be lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof.
6.3. VIOLATIONS. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could have a Material Adverse
Effect on any Borrower.
6.4. GOVERNMENT RECEIVABLES. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.6. PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the amount or validity thereof
is currently being contested in good faith by appropriate proceedings and each
Borrower shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lenders.
6.7. STANDARDS OF FINANCIAL STATEMENTS. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to those to
which GAAP is applicable to be complete in all material respects and fairly
present the financial condition of Borrowers on a Consolidated Basis (subject,
in the case of interim financial statements, to normal year-end audit
adjustments and the absence of footnotes) and to be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein).
6.8. SUBSIDIARY GUARANTY AND SECURITY AGREEMENT. Cause all of its
direct or indirect subsidiaries to (i) enter into guaranty agreements in form
and substance satisfactory to Agent and its counsel pursuant to which each such
subsidiary unconditionally guarantees the Obligations, (ii) enter into security
agreements in form and substance satisfactory to Agent and its counsel, and
(iii) deliver to Agent all documents, including legal opinions, it may
reasonably require to establish compliance with the foregoing requirement.
49
<PAGE> 58
6.9. LANDLORD WAIVERS. Promptly deliver to Agent with respect to any
new Primary Location where Collateral will be located a landlord, mortgagee or
warehouseman agreement satisfactory to Agent.
6.10. INTEREST RATE PROTECTION. Within sixty (60) days of the Closing
Date, Borrowers shall have entered into an interest rate protection agreement
with a financial institution reasonably satisfactory to Agent with respect to an
amount equal to at least $15,000,000 and for a period not less than thirty-six
months.
6.11. ENVIRONMENTAL MATTERS. (a) Shall ensure that the Real Property
remains in material compliance with all Environmental Laws and they shall not
place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.
(b) Intentionally omitted.
(c) Shall dispose of any and all Hazardous Waste generated at
the Real Property only at facilities and with carriers that maintain valid
permits under RCRA and any other applicable Environmental Laws. Borrowers shall
use their best efforts to obtain certificates of disposal, such as hazardous
waste manifest receipts, from all treatment, transport, storage or disposal
facilities or operators employed by Borrowers in connection with the transport
or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or any Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person or entity, including any
state agency responsible in whole or in part for environmental matters in the
state in which the Real Property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the "Authority"), then
Borrowing Agent shall, within five (5) Business Days, give written notice of
same to Agent detailing facts and circumstances of which any Borrower is aware
giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Agent to protect its security interest in
the Real Property and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between any Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and
50
<PAGE> 59
reports concerning a Hazardous Discharge at the Real Property that any Borrower
is required to file under any Environmental Laws. Such information is to be
provided solely to allow Agent to protect Agent's security interest in the Real
Property and the Collateral.
(f) Shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of the
Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and the Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent from time to
time following the occurrence of an Event of Default, Borrowers shall provide
Agent, at Borrowers' expense, with an environmental site assessment or
environmental audit report prepared by an environmental engineering firm
acceptable in the reasonable opinion of Agent, to assess with a reasonable
degree of certainty the existence of a Hazardous Discharge and the potential
costs in connection with abatement, cleanup and removal of any Hazardous
Substances found on, under, at or within the Real Property. Any report or
investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrowers
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.
(h) Shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, Affiliates, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or the Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrowers'
obligations under this Section 6.11 shall arise upon the discovery of the
presence of any
51
<PAGE> 60
Hazardous Substances at the Real Property, whether or not any federal, state, or
local environmental agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Borrowers' obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
(i) For purposes of Section 5.7 and 6.11, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises.
6.12. EVIDENCE OF RENTAL PAYMENTS. Promptly deliver to Agent, when
paid, evidence that each Borrower has paid its rent and other obligations due to
its landlords on all Primary Locations and all premises located in the States of
Alabama, Delaware, Tennessee, Pennsylvania and in Washington, D.C.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it, provided, however, Borrowers may make
investments or acquire stock or assets so long as the investment or acquisition
is paid solely with (i) the stock of LTC and/or (ii) cash up to $2,000,000
individually and in the aggregate for all Borrowers during the term of this
Agreement (a "Permitted Acquisition").
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets (including, without limitation, any promissory notes
payable to any Borrower), except in the ordinary course of its business and
except as permitted in Sections 2.10(a) and 4.3 hereof.
7.2. CREATION OF LIENS. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on SCHEDULE 7.3 and (b) the endorsement of checks in the
ordinary course of business.
7.4. INVESTMENTS. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a
52
<PAGE> 61
holding company of which it is a Subsidiary, are rated not less than A (or the
equivalent rating) by a nationally recognized investment rating agency; (d) U.S.
money market funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof; and (e) any investment permitted
under Section 7.1(a) above.
7.5. LOANS. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate.
7.6. CAPITAL EXPENDITURES. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) in any fiscal year in an amount in excess of $6,000,000 in the aggregate
for all Borrowers in Fiscal Year 1998 and $8,000,000 in the aggregate for all
Borrowers in each Fiscal Year thereafter.
7.7. DIVIDENDS; MANAGEMENT FEES. Declare, pay or make any dividend or
distribution on any shares of the common stock or preferred stock of such
Borrower (other than dividends or distributions payable in its stock, or
split-ups or reclassifications of its stock) or apply any of its funds, property
or assets to the purchase, redemption or other retirement of any common or
preferred stock, or of any options to purchase or acquire any such shares of
common or preferred stock of such Borrower or pay any management fees except
fees to HIG in an amount not to exceed 2% of any purchase price payable by such
Borrower for a Permitted Acquisition.
7.8. INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof; (iii) Indebtedness assumed under the Acquisition Agreement
and (iv) Indebtedness not to exceed $250,000 in the aggregate for all Borrowers
outstanding at any time.
7.9. NATURE OF BUSINESS. Substantially change the nature of the
business in which it is presently engaged.
7.10. TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions conducted in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.11. INTENTIONALLY OMITTED.
7.12. SUBSIDIARIES.
(a) Form any Subsidiary unless (i) such Subsidiary enters into
a guaranty agreement in form and substance satisfactory to Agent and its counsel
pursuant to which such Subsidiary unconditionally guarantees the Obligations and
(ii) Agent shall have received all documents, including legal opinions, it may
reasonably require to establish compliance with each of the foregoing
conditions.
53
<PAGE> 62
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year from
July 31 or make any change in accounting treatment and reporting practices
except as required by GAAP.
7.14. PLEDGE OF CREDIT. Pledge Agent's or any Lender's credit on any
purchases or for any purpose whatsoever or use any portion of any Advance in or
for any business other than such Borrower's business as conducted on the date of
this Agreement.
7.15. AMENDMENT OF ARTICLES OF INCORPORATION, BY-LAWS. Unless required
by law, amend, modify or waive any term or material provision of its Articles of
Incorporation or By-Laws if any such amendment, modification or waiver could, in
Agent's reasonable judgment have a Material Adverse Effect on any Borrower.
7.16. COMPLIANCE WITH ERISA. (i) (x) Maintain, or permit any member of
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on SCHEDULE 5.8(D); (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction," as that term is defined in section 406 of ERISA and
Section 4975 of the Code; (iii) incur, or permit any member of the Controlled
Group to incur, any material "accumulated funding deficiency," as that term is
defined in Section 302 of ERISA or Section 412 of the Code; (iv) terminate, or
permit any member of the Controlled Group to terminate, any Plan where such
event could result in any liability of any Borrower or any member of the
Controlled Group or the imposition of a lien on the property of any Borrower or
any member of the Controlled Group pursuant to Section 4068 of ERISA; (v)
assume, or permit any member of the Controlled Group to assume, any obligation
to contribute to any Multiemployer Plan not disclosed on SCHEDULE 5.8(D); (vi)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the
occurrence of any Termination Event; (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or the
Code or other applicable laws in respect of any Plan; (ix) fail to meet, or
permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.
7.17. PREPAYMENT OF INDEBTEDNESS. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower.
7.18. OTHER AGREEMENTS. Enter into any material amendment, waiver or
modification of the Acquisition Agreement or any related agreements.
7.19. FIXED CHARGE COVERAGE RATIO. Permit Fixed Charge Coverage Ratio
(i) at the end of the fiscal quarters ending January 31, 1999 and April 30, 1999
with respect to the immediately preceding four fiscal quarter period (ending on
the last day of the last of such fiscal quarters) to be less than 1.05 to 1.00
and (ii) at the end of each fiscal quarter thereafter, with respect to the
54
<PAGE> 63
immediately preceding four fiscal quarter period (ending on the last day of the
last of such fiscal quarters) to be less than 1.10 to 1.00.
7.20. MINIMUM EBITDA. Permit EBITDA at the end of (i) the fiscal
quarter ended July 31, 1998 with respect to the immediately preceding two fiscal
quarter period (ending on the last day of such fiscal quarter) to be less than
$5,400,000 and (ii) the fiscal quarter ended October 31, 1998 with respect to
the immediately preceding three fiscal quarter period (ending on the last day of
such fiscal quarter) to be less than $9,000,000.
7.21. LEVERAGE RATIO. Permit Leverage Ratio at the end of (i) the
fiscal quarter ended January 31, 1999 and each fiscal quarter thereafter through
and including the fiscal quarter ended July 31, 1999, in each case with respect
to the immediately preceding four fiscal quarter period (ending on the last day
of the last of such fiscal quarters) to be more than 2.50 to 1.00 and (ii) the
fiscal quarter ended October 31, 1999 and each fiscal quarter thereafter with
respect to the immediately preceding four fiscal quarter period (ending on the
last day of such fiscal quarters) to be more than 2.00 to 1.00.
7.22. INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio at
the end of (i) the fiscal quarter ended July 31, 1998 with respect to the
immediately preceding two fiscal quarter period (ending on the last day of such
fiscal quarters) to be less than 2.50 to 1.00 and (ii) the fiscal quarter ended
October 31, 1998 with respect to the immediately preceding three fiscal quarter
period (ending on the last day of such fiscal quarters) to be less than 2.25 to
1.00.
7.23. KOONSMAN NOTE. At any time following the occurrence of a Default
or an Event of Default, directly or indirectly, make any payment of principal or
interest on the Koonsman Note.
VIII. CONDITIONS PRECEDENT.
8.1. CONDITIONS TO INITIAL ADVANCES. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) NOTES. Agent shall have received the Notes duly executed
and delivered by an authorized officer of each Borrower.
(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any Other Document or under law or reasonably
requested by Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto.
55
<PAGE> 64
(c) CORPORATE PROCEEDINGS OF BORROWERS. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of each Borrower authorizing (i) the
execution, delivery and performance of the Loan Documents and the Acquisition
Agreement and (ii) the granting by each Borrower of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of each Borrower as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate.
(d) INCUMBENCY CERTIFICATES OF BORROWERS. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(e) CERTIFICATES. Agent shall have received a copy of the
Articles of Incorporation of each Borrower and each Guarantor, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws of each Borrower and each Guarantor.
(f) GOOD STANDING CERTIFICATES. Agent shall have received good
standing certificates for each Borrower and each Guarantor dated not more than
ten days prior to the Closing Date, issued by the Secretary of State or other
appropriate official of each Borrower's and each Guarantor's jurisdiction of
incorporation and each jurisdiction where the conduct of each Borrower's and
each Guarantor's business activities or the ownership of its properties
necessitates qualification.
(g) LEGAL OPINION. Agent shall have received the executed
legal opinion of White & Case LLP and other legal counsel in form and substance
satisfactory to the Agent which shall cover such matters incident to the
transactions contemplated by the Loan Documents as Agent may reasonably require
and each Borrower hereby authorizes and directs such counsel to deliver such
opinions to Agent and each Lender.
(h) NO LITIGATION. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Loan Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which if adversely determined, could, in the reasonable opinion
of Agent, have a Material Adverse Effect on any Borrower; and (ii) no
injunction, writ, restraining order or other order of any nature materially
adverse to any Borrower or the conduct of its business or inconsistent with the
due consummation of the Transactions shall have been issued by any Governmental
Body.
56
<PAGE> 65
(i) FINANCIAL CONDITION CERTIFICATES. Agent shall have
received an executed Financial Condition Certificate substantially in the form
of EXHIBIT 8.1(I) hereof, together with all required attachments.
(j) COLLATERAL EXAMINATION; APPRAISALS. Agent shall have
completed a Collateral examination the results of which shall be satisfactory in
form and substance to the Lenders, of the Receivables, Inventory, General
Intangibles, Real Property and Equipment of each Borrower and all books and
records in connection therewith.
(k) FEES. Agent shall have received all fees payable to Agent
and the Lenders on or prior to the Closing Date, including legal fees, costs and
disbursements, fees pursuant to Article III hereof and fees payable pursuant to
the Fee Letter.
(l) FINANCIAL STATEMENTS; PRO FORMA FINANCIAL STATEMENTS.
Agent shall have received copies of
(i) the Pro Forma Financial Statements which shall be
reasonably satisfactory in all respects to Agent;
(ii) certified financial statements of Borrowers on a
Consolidated Basis by Ernst & Young or another independent certified public
accountant satisfactory to the Agent for the three fiscal years immediately
preceding the Closing Date, together with all written materials, reports and/or
management letters prepared by such independent certified public accountants,
each of which shall be in form and substance satisfactory to Agent; and
(iii) certified financial statements of CWI audited by Ernst
& Young satisfactory to Agent for the fiscal year ending December 31, 1997,
together with all written materials, reports and management letters prepared by
Ernst & Young, each of which shall be in form and substance satisfactory to
Agent.
(m) ACQUISITION DOCUMENTS. Agent shall have received final
executed copies of the Acquisition Agreement and all related agreements,
documents and instruments as in effect on the Closing Date, the terms and
conditions of such documentation shall be satisfactory to Agent and the
transactions contemplated by such documentation shall be consummated
concurrently with the making of the initial Advance, including, without
limitation, evidence that total cash portion of the purchase price is not
greater than $19,500,000 (including expenses).
(n) GUARANTY; GUARANTOR SECURITY AGREEMENT; PLEDGE AGREEMENT;
OTHER DOCUMENTS. Agent shall have received executed Guaranties, Guarantor
Security Agreements, Pledge Agreement, the Collateral Assignment and all Other
Documents, each in form and substance satisfactory to Lenders.
(o) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee,
57
<PAGE> 66
and certified copies of Borrowers' liability insurance policies and directions
and officers insurance, together with endorsements naming Agent as a co-insured.
(p) UNDRAWN AVAILABILITY; BORROWING BASE. After giving effect
to the initial Advances, Borrowers shall have collective Undrawn Availability of
not less than $7,000,000. Agent shall have received evidence from each Borrower
that the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount requested by
each Borrower on the Closing Date.
(q) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrowing Agent directing the application of proceeds of the
initial Advances made pursuant to this Agreement.
(r) BLOCKED ACCOUNTS. Agent shall have received duly executed
agreements establishing the Blocked Accounts with financial institutions
acceptable to Agent for the collection or servicing of the Receivables and
proceeds of the Collateral.
(s) CONSENTS. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary.
(t) NO ADVERSE MATERIAL CHANGE. (i) Since July 31, 1997 as
respects LTC, December 31, 1996 as respects TWI and September 30, 1997 as
respects CWI, there shall not have occurred (x) any material adverse change in
the condition, financial or otherwise, operations, properties or prospects of
such Borrower, (y) any material damage or destruction to any of the Collateral
nor any material depreciation in the value thereof and (z) any event, condition
or state of facts which could have a Material Adverse Effect on such Borrower
and (ii) no representations made or information supplied to Agent or any Lender
shall have been proven to be inaccurate or misleading in any material respect.
(u) LEASEHOLD AGREEMENTS. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to the
Primary Locations.
(v) CONTRACT REVIEW. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, employee contracts, vendor supply contracts, license agreements
and distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent.
(w) CLOSING CERTIFICATE. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing.
58
<PAGE> 67
(x) CUSTOMERS AND SUPPLIERS. Agent shall have conducted and be
satisfied with the results of its customer and supplier checks.
(y) CASH MANAGEMENT. Agent shall be reasonably satisfied with
each Borrower's cash management and management information systems.
(z) SCHEDULE OF AFFILIATES AND SUBSIDIARIES. Agent shall have
received a schedule of Affiliates and Subsidiaries of each Borrower.
(aa) OTHER. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent, the Lenders
and their counsel.
8.2. CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, its
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) NO DEFAULT. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date and, in the case of the initial
Advance, after giving effect to the consummation of the transactions
contemplated by the Acquisition Agreement; PROVIDED, HOWEVER that Lenders in
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances requested to
be made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
59
<PAGE> 68
9.1. DISCLOSURE OF MATERIAL MATTERS. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectability of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
or disputes asserted by any Customer or other obligor regarding a material
amount of goods or claims. No Borrower will, without Agent's consent, compromise
or adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of such Borrower.
9.2. SCHEDULES. Deliver to Agent on or before the fifteenth (15th) day
of each month as and for the prior month (a) accounts receivable ageings, (b)
Inventory reports, (c) accounts payable ageings and (d) reconciliations with
respect to each of foregoing. Borrower shall deliver to Agent on or before the
fifteenth (15th) day of each month as and for the prior month accounts payable
ageings and reconciliations, lockbox statements and such copies of sales,
collection, debit and credit adjustment schedules as Agent may request.
Borrowing Agent shall deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month a Borrowing Base Certificate. Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by each
Borrower and delivered to Agent from time to time solely for Agent's convenience
in maintaining records of the Collateral, and any Borrower's failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent's Lien with respect to the Collateral.
9.3. ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7, 9.8 and 9.9,
with a certificate signed by the President or Chief Financial Officer of
Borrowing Agent stating, to the best of his knowledge, that each Borrower is in
compliance in all material respects with all federal, state and local laws
relating to environmental protection and control and occupational safety and
health. To the extent any Borrower is not in compliance with the foregoing laws,
the certificate shall set forth with specificity all areas of non-compliance and
the proposed action such Borrower will implement in order to achieve full
compliance.
9.4. LITIGATION. Promptly notify Agent in writing of any litigation,
suit or administrative proceeding, investigation, tax audits affecting any
Borrower, whether or not the claim is covered by insurance, and of any suit or
administrative proceeding, which may have a Material Adverse Effect on any
Borrower.
9.5. MATERIAL OCCURRENCES. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Acquisition Agreement; (c) any event which with the giving of notice
or lapse of time, or both, would constitute an event of default under the
Acquisition Agreement; (d) any event, development or circumstance whereby any
financial statements or other reports furnished to Agent fail in any material
respect to present fairly, in accordance with GAAP consistently applied, the
financial condition or operating results of any Borrower as of the date of such
statements; (e) any accumulated
60
<PAGE> 69
retirement plan funding deficiency which, if such deficiency continued for two
plan years and was not corrected as provided in Section 4971 of the Code, could
subject any Borrower to a tax imposed by Section 4971 of the Code; (f) each and
every default by any Borrower which might result in the acceleration of the
maturity of any Indebtedness in excess of $100,000, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (g) any other development
in the business or affairs of any Borrower which might have a Material Adverse
Effect; in each case describing the nature thereof and the action Borrowers
propose to take with respect thereto.
9.6. GOVERNMENT RECEIVABLES. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. ANNUAL FINANCIAL STATEMENTS. Furnish Agent after the end of each
fiscal year upon the filing thereof with the Securities and Exchange Commission,
but in no event later than ninety (90) days after the end of each fiscal year of
Borrowers, financial statements of Borrowers on a Consolidated Basis and on a
consolidating basis including, but not limited to, statements of income and
stockholders' equity and cash flow and same store sales from the beginning of
the current fiscal year to the end of such fiscal year and the balance sheet as
at the end of such fiscal year, all prepared in accordance with GAAP applied on
a basis consistent with prior practices, and in reasonable detail and reported
upon without qualification by an independent certified public accounting firm
selected by Borrowers and reasonably satisfactory to Agent (the "Accountants").
The report of the Accountants shall be accompanied by a statement of the
Accountants certifying that (i) they have caused the Loan Agreement to be
reviewed, (ii) in making the examination upon which such report was based either
no information came to their attention which to their knowledge constituted an
Event of Default or a Default under this Agreement or any Other Document or, if
such information came to their attention, specifying any such Default or Event
of Default, its nature, when it occurred and whether it is continuing, and such
report shall contain or have appended thereto calculations which set forth
Borrowers' computations and compliance with the requirements or restrictions
imposed by Sections 7.6, 7.8, 7.11, 7.19, 7.20, 7.21 and 7.22. In addition, the
reports shall be accompanied by a certificate of Borrowing Agent's Chief
Financial Officer which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 7.6 and 7.11.
9.8. QUARTERLY FINANCIAL STATEMENTS. Furnish Agent after the end of
each quarter upon the filing thereof with the Securities and Exchange
Commission, but in no event later than forty-five (45) days after the end of
each fiscal quarter, an unaudited balance sheet of Borrowers on a Consolidated
Basis and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers (without footnotes) and same
store sales reflecting results of operations from the beginning of the fiscal
year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and in all
61
<PAGE> 70
material respects and fairly present the financial condition of Borrowers on a
Consolidated Basis, subject to normal year end adjustments and the absence of
footnotes. The reports shall be accompanied by a certificate of Borrowing
Agent's President and/or Chief Financial Officer which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrowers with respect to such default
and, such certificate shall have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Sections
7.6, 7.8, 7.11, 7.19, 7.20, 7.21 and 7.22.
9.9. MONTHLY FINANCIAL STATEMENTS. Furnish Agent within forty-five (45)
days after the end of each month, an unaudited balance sheet of Borrowers on a
Consolidated Basis and consolidating basis and unaudited statements of income
and stockholders' equity and cash flow of Borrowers on a Consolidated Basis and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrowing Agent's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrowers with
respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 7.6, 7.8, 7.11, 7.19, 7.20, 7.21 and 7.22.
9.10. OTHER REPORTS. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders.
9.11. ADDITIONAL INFORMATION. Furnish Agent with additional information
as Agent shall reasonably request in order to enable Agent and Lenders to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Other Documents have been complied with by Borrowers
including, without limitation and without the necessity of any request by Agent,
(a) copies of all environmental audits and reviews, (b) at least twenty (20)
days prior thereto, notice of any Borrower's opening of any new office or place
of business or any Borrower's closing of any existing office or place of
business, and (c) promptly upon any Borrower's learning thereof, of any labor
dispute to which any Borrower may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of any
labor contract to which any Borrower is a party or by which any Borrower is
bound.
9.12. PROJECTED OPERATING BUDGET. Furnish Agent, no later than thirty
(30) days prior to the beginning of each of Borrowers' fiscal years commencing
with fiscal year 1999 a month by month projected operating budget and cash flow
of Borrowers on a Consolidated Basis and consolidating basis for such fiscal
year (including an income statement for each month and a balance sheet as at the
end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by each Borrower's President or President
and/or Chief Financial Officer to the effect that such projections have been
prepared on the basis of sound
62
<PAGE> 71
financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13. VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly and monthly report, a written report summarizing all material
variances from budgets submitted by Borrowers pursuant to Section 9.12 and a
discussion and analysis by management with respect to such variances.
9.14. NOTICE OF SUITS, ADVERSE EVENTS. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to any Borrower by
any Governmental Body or any other Person that is material to the operation of
any Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Agent and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.15. ERISA NOTICES AND REQUESTS. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Service, Department of Labor or PBGC with respect thereto,
(ii) any Borrower or any member of the Controlled Group knows or has reason to
know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975
of the Code) has occurred together with a written statement describing such
transaction and the action which such Borrower or any member of the Controlled
Group has taken, is taking or proposes to take with respect thereto, (iii) a
funding waiver request has been filed with respect to any Plan together with all
communications received by any Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of contributions
to any Plan to which any Borrower or any member of the Controlled Group was not
previously contributing shall occur, (v) any Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Plan or to have a trustee appointed to administer a Plan, together with copies
of each such notice, (vi) any Borrower or any member of the Controlled Group
shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) any Borrower
or any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) any Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; (ix) any Borrower or
any member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer
63
<PAGE> 72
Plan, or (c) the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.
9.16. ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.17 SEC FILINGS. Deliver to Agent as and when filed copies of all
filings made with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or in any Other Document when due;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information when
due or when requested or (ii) permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment for an amount in excess of $100,000 in the aggregate for all
Borrowers which is not stayed, bonded or lifted within thirty (30) days;
10.5. failure or neglect of any Borrower to perform, keep or observe
any term, provision, condition, covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between any
Borrower and any Lender;
10.6. any judgment is rendered or judgment liens filed against any
Borrower or any Guarantor for an amount in excess of $100,000 in the aggregate
which within thirty (30) days of such rendering or filing is not either
satisfied, stayed, bonded or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of
64
<PAGE> 73
creditors, (iii) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
10.8. any Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
10.9. any Subsidiary of any Borrower, or any Guarantor, shall (i) apply
for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. this Agreement or any of the Other Documents shall for any
reason cease to be, or shall be asserted by any Borrower not to be, a legal,
valid and binding obligation of any Borrower, enforceable in accordance with its
terms, or the security interest or Lien purported to be created by any of the
Loan Documents shall for any reason cease to be, or be asserted by any Borrower
not to be, a valid, first priority perfected security interest and Lien in any
Collateral (except to the extent otherwise permitted under this Agreement or any
of the Other Documents);
10.11. any material damage to, or loss, theft or destruction of, any
material Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, natural disaster or public enemy, or other
casualty which causes, for more than thirty (30) consecutive days beyond the
coverage period of any applicable business interruption insurance, the cessation
or substantial curtailment of revenue producing activities at any facility of
any Borrower if any such event or circumstance could have a Material Adverse
Effect on any Borrower;
10.12. an event of default has occurred and been declared under the
Acquisition Agreement which default shall not have been cured or waived within
any applicable grace period and which could have a Material Adverse Effect on
any Borrower;
10.13. a default shall occur with respect to any Indebtedness in an
amount equal to or in excess of $100,000 or when taken together with all other
Indebtedness which are in default shall exceed $250,000 for the Borrowers taken
as a whole which default is not cured within any applicable grace period;
10.14. termination or breach of any Guaranty or similar agreement
executed and delivered to Agent in connection with the Obligations of any
Borrower, or if any Guarantor
65
<PAGE> 74
attempts to terminate, challenges the validity of, or its liability under, any
such Guaranty or similar agreement;
10.15. any Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.17. if (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent, trademark or tradename
of any Borrower, the continuation of which is material to the continuation of
any Borrower's business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (c) schedule or conduct a hearing on the renewal of any license,
permit, trademark, tradename or patent necessary for the continuation of any
Borrower's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, tradename or patent; (ii) any
agreement which is necessary or material to the operation of any Borrower's
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement could have a
Material Adverse Effect on any Borrower;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower which
is the owner of any material portion of the Collateral shall have become the
subject matter of litigation which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents; or
10.19. an event or condition specified in Sections 7.16 or 9.16 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, could have a Material Adverse Effect on any
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. RIGHTS AND REMEDIES. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
any Borrower in any involuntary case under any state or federal bankruptcy laws,
the obligations of Lenders to make Advances hereunder shall be terminated other
than as may be required by an appropriate order of the
66
<PAGE> 75
bankruptcy court having jurisdiction over such Borrower. Upon the occurrence of
any Event of Default, Agent shall have the right to exercise any and all other
rights and remedies provided for herein, under the Uniform Commercial Code and
at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any Borrower's premises or other premises without legal process and
without incurring liability to any Borrower therefor, and Agent may thereupon,
or at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrowers to make the Collateral available to Lenders at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowers at
least five (5) days prior to such sale or sales is reasonable notification. At
any public sale Agent or any Lender may bid for and become the purchaser, and
Agent, any Lender or any other purchaser at any such sale thereafter shall hold
the Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, Agent is granted permission, without charge, to use
all of Borrowers' trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with (a) Inventory for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of unfinished
goods. The proceeds realized from the sale of any Collateral shall be applied as
follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent and Lenders for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second, to interest due upon any of the Obligations; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and the Lenders therefor.
11.2. AGENT'S DISCRETION. Agent shall have the right in its reasonable
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. SETOFF. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence and during the continuance of
an Event of Default hereunder, Agent and such Lender shall have a right to apply
any Borrower's property held by Agent and such Lender or by the Bank to reduce
the Obligations.
11.4. RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
67
<PAGE> 76
XII WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. WAIVER OF NOTICE. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. TERM. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until April ___, 2004 (the "Term")
unless sooner terminated as herein provided. Agent's and Lenders' obligation to
make Revolving Advances shall expire on the Revolving Advance Termination Date
and all outstanding Revolving Advances shall be paid in full at such time.
Borrowers may terminate this Agreement at any time upon ninety (90) days' prior
written notice ("Termination Date") upon payment in full of the Obligations.
13.2. TERMINATION. The termination of the Agreement shall not affect
any Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative
68
<PAGE> 77
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and the Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that any
Borrower's Account may from time to time be temporarily in a zero or credit
position, until all of the Obligations of each Borrower have been paid or
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and the Lenders with an indemnification satisfactory to Agent
and the Lenders with respect thereto. Accordingly, each Borrower waives any
rights which it may have under Section 9-404(1) of the Uniform Commercial Code
to demand the filing of termination statements with respect to the Collateral,
and Agent shall not be required to send such termination statements to each
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations are paid in full in cash. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until all Obligations are repaid or performed in full.
XIV. REGARDING AGENT.
14.1. APPOINTMENT. Each Lender hereby designates Chase to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.4 and in the Fee Letter), charges and collections (without giving effect to
any collection days) received pursuant to this Agreement, for the ratable
benefit of Lenders. Agent may perform any of its duties hereunder by or through
its agents or employees. As to any matters not expressly provided for by this
Agreement (including without limitation, collection of the Note) Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; PROVIDED, HOWEVER, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
69
<PAGE> 78
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
14.3. LACK OF RELIANCE ON AGENT AND RESIGNATION. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Advances or at any time or times thereafter except as shall be
provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Other Documents or the financial condition of any Borrower, or the existence of
any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent. After any Agent's resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
14.4. CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
70
<PAGE> 79
14.5. RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; PROVIDED, THAT, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7. INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; PROVIDED THAT, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. DELIVERY OF DOCUMENTS. To the extent Agent receives financial
statements required under Sections 9.7, 9.8 and 9.9 from any Borrower pursuant
to the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. BORROWERS' UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to the Lenders under the other provisions of this
Agreement, each Borrower hereby undertakes with Agent to pay to Agent from time
to time on demand all amounts from time to time due and payable by it for the
account of Agent or the Lenders or any of them pursuant to this Agreement to the
extent not already paid. Any payment made pursuant to any such demand shall PRO
TANTO satisfy the relevant Borrower's obligations to make payments for the
account of the Lenders or the relevant one or more of them pursuant to this
Agreement.
71
<PAGE> 80
XV. BORROWING AGENCY
15.1. BORROWING AGENCY PROVISIONS.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
to Agent or any Lender to any Borrower, failure of Agent or any Lender to give
any Borrower notice of borrowing or any other notice, any failure of Agent or
any Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
15.2. WAIVER OF SUBROGATION. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement.
72
<PAGE> 81
XVI. MISCELLANEOUS.
16.1. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America. Nothing herein shall affect the right to serve process in any manner
permitted by law or shall limit the right of Agent or any Lender to bring
proceedings against any Borrower in the courts of any other jurisdiction. Each
Borrower waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon FORUM NON CONVENIENS. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the City of New York, State of New York.
16.2. ENTIRE UNDERSTANDING. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between each
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, executed by the party or
parties making such representations, warranties or guarantees. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Each Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement, the Notes or the Other Documents executed by Borrowers, for
the purpose of adding or deleting any provisions or otherwise changing, varying
or waiving in any manner the rights of the Lenders, Agent or Borrowers
thereunder or the conditions, provisions or terms thereof of waiving any Event
of Default
73
<PAGE> 82
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) increase the Maximum Revolving Advance Amount;
(iii) except as otherwise provided herein, increase
the Advance Rate;
(iv) release any Guarantor;
(v) extend the maturity of the due date for any
amount payable hereunder, or decrease the rate of interest or
reduce any fee payable by Borrowers to Lenders pursuant to
this Agreement;
(vi) alter the definition of the term Required
Lenders or alter, amend or modify this Section 16.2(b);
(vii) release any Collateral during any calendar year
having an aggregate value in excess of $2,000,000; and
(viii) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
16.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its
74
<PAGE> 83
Advances or other Obligations payable hereunder to such Transferee had such
Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder and in no event shall Borrowers be required to pay any such
amount arising from the same circumstances and with respect to the same Advances
or other Obligations payable hereunder to both such Lender and such Transferee.
Each Borrower hereby grants to any Transferee a continuing security interest in
any deposits, moneys or other property actually or constructively held by such
Transferee as security for the Transferee's interest in the Advances.
(c) Any Lender may sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording; PROVIDED, HOWEVER, no
Lender shall sell its rights under this Agreement and the Other Documents
without the prior written consent of Agent. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Agent shall receive a fee in the amount of $3,000 payable
by the applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
75
<PAGE> 84
(f) Borrowers authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrowers which has been delivered to such Lender by or on behalf of Borrowers
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrowers.
16.4. APPLICATION OF PAYMENTS. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. INDEMNITY. Each Borrower shall indemnify Agent, each Lender and
each of their respective officers, directors, Affiliates, employees and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct or gross (not mere) negligence of
the party being indemnified.
16.6. NOTICE. Any notice or request hereunder may be given to any
Borrower or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier, (c)
registered or certified mail, return receipt requested, (d) telex or telegram,
subsequently confirmed by registered or certified mail, or (e) telecopy to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with electronic confirmation
of its receipt. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
76
<PAGE> 85
(A) If to Agent or The Chase Manhattan Bank
Chase at: 600 Fifth Avenue, 4th Floor
New York, New York 10020
Attention: Let's Talk Cellular Account Executive
Telephone: (212) 332-4231
Facsimile: (212) 322-4299
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Linda C. Berman, Esq.
Telephone: (212) 736-1000
Facsimile: (212) 594-7167
(B) If to Lender other than Agent, as specified on the signature pages
hereof
(C) If to any Borrower
or Borrowing Agent,
at: Let's Talk Cellular & Wireless, Inc.
800 Brickell Avenue, Suite 400
Miami, Florida 33131
Attention: Nicolas Molina
Telephone: (305) 358-8255
Facsimile: (305) 358-9068
with a copy to: White & Case LLP
200 South Biscayne Boulevard, Suite 4900
Miami, Florida 33131-2352
Attention: Jorge L. Freeland, Esq.
Telephone: (305) 371-2700
Facsimile: (305) 358-5744
16.7. SURVIVAL. The obligations of Borrowers and Lenders under Sections
2.2(f), 3.7, 3.8, 3.9, 6.11(h), 14.7 and 16.5 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
16.8. SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. EXPENSES. All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of the Lenders and the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related
77
<PAGE> 86
agreements, documents and instruments, or (c) in instituting, maintaining,
preserving, enforcing and foreclosing on Agent's security interest in or Lien on
any of the Collateral, whether through judicial proceedings or otherwise, or (d)
in defending or prosecuting any actions or proceedings arising out of or
relating to Agent's or any Lender's transactions with any Borrower, or (e) in
connection with any advice given to Agent or any Lender with respect to its
rights and obligations under this Agreement and all related agreements, may be
charged to the applicable Borrower's Account and shall be part of the
Obligations.
16.10. INJUNCTIVE RELIEF. Each Borrower recognizes that, in the event
any Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to the Lenders; therefore, each Lender, if such Lender so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving that actual damages are not an adequate remedy.
16.11. CONSEQUENTIAL DAMAGES. Neither Agent, any Lender nor any agent
or attorney for any of them shall be liable to any Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12. CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. CONFIDENTIALITY. Agent, each Lender and each Transferee shall
hold all non-public information obtained by Agent, such Lender or such
Transferee pursuant to the requirements of this Agreement in accordance with its
customary procedures for handling confidential information of this nature;
PROVIDED, HOWEVER, Agent, each Lender and each Transferee may disclose such
confidential information (a) to its examiners, affiliates, outside auditors,
counsel and other professional advisors, (b) to Agent, any Lender or to any
prospective Transferees and Purchasing Lenders; and (c) as required or requested
by any Governmental Body or representative thereof or pursuant to legal process;
PROVIDED, FURTHER that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify Borrower of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event
78
<PAGE> 87
shall Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.
79
<PAGE> 88
Each of the parties has signed this Agreement as of the day and year
first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By:
--------------------------------
Nicolas Molina, Chief Executive Officer
800 Brickell Avenue, Suite 400
Miami, Florida 33131
TELEPHONE WAREHOUSE, INC.
By:
--------------------------------
Nicolas Molina, Vice President
2400 East Randal Mill Road
Arlington, Texas 76011
CELLULAR WAREHOUSE, INC.
By:
--------------------------------
Nicolas Molina, Vice President
8611 Roswell Road
Atlanta, Georgia 30350
NATIONAL CELLULAR, INCORPORATED
By:
--------------------------------
Nicolas Molina, Vice President
2400 East Randal Mill Road
Arlington, Texas 76011
CELLULAR USA
By:
--------------------------------
Nicolas Molina, Chief Executive Officer
800 Brickell Avenue, Suite 400
Miami, Florida 33131
<PAGE> 89
SOSEBEE ENTERPRISES, INC.
By:
--------------------------------
Nicolas Molina, Vice President
8611 Roswell Road
Atlanta, Georgia 30350
THE CHASE MANHATTAN BANK, as Lender and as Agent
By: /s/ Kathleen Maggi
--------------------------------
Its: Kathleen Maggi, Vice President
-------------------------------
600 Fifth Avenue
New York, New York 10020
Commitment Percentage: 100%
<PAGE> 90
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Chief Executive Officer of Let's Talk Cellular & Wireless, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of Telephone Warehouse, Inc., the corporation described in
and which executed the foregoing instrument and that he signed his name thereto
by order of the board of directors of said corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of Cellular Warehouse, Inc., the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
<PAGE> 91
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of National Cellular, Incorporated, the corporation described
in and which executed the foregoing instrument and that he signed his name
thereto by order of the board of directors of said corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Chief Executive Officer of Cellular USA, the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Nicolas
Molina, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of Sosebee Enterprises, Inc., the corporation described in
and which executed the foregoing instrument and that he signed his name thereto
by order of the board of directors of said corporation.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
<PAGE> 92
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 1st day of April, 1998, before me personally came Kathleen
Maggi, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of THE CHASE MANHATTAN BANK and that she was authorized to
sign her name thereto.
/s/ Loukia Harris
-----------------------------
Notary Public
Loukia Harris
Notary Public of New York
No. 01HA4995575
Qualified in Nassau County
Commission Expires April 27, 1998
<PAGE> 1
AUTHORIZED AGENCY AGREEMENT
BETWEEN
BELLSOUTH CELLULAR NATIONAL MARKETING, INC
AND
LET'S TALK CELLULAR & WIRELESS, INC.
EFFECTIVE: 4/1/98
<PAGE> 2
AUTHORIZED AGENCY AGREEMENT
BETWEEN
BELLSOUTH CELLULAR NATIONAL MARKETING, INC
AND
LET'S TALK CELLULAR & WIRELESS, INC.
THIS AGREEMENT IS ENTERED INTO BY Let's Talk Cellular & Wireless, Inc., a
Florida corporation with its principal place of business at 800 Brickell Avenue,
Suite 400, Miami, Florida 33126 ("AGENT") and BELLSOUTH CELLULAR NATIONAL
MARKETING, INC ("BCN"), a Georgia corporation, having its principal place of
business at 1100 Peachtree Street N.E., Suite 1000, Atlanta, GA 30309-4599 on
behalf of the entities listed on Exhibit A for the specific markets associated
with such entities as set forth on Exhibit A. Each entity in whose behalf BCN
contracts shall only contract for the market listed beside that entity's name.
In consideration of the mutual promises and covenants set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized words and phrases used in this Agreement shall have the
following meaning:
1.1 AFFILIATE. A person, association, partnership, corporation or
joint-stock company, trust or other business entity is an affiliate of that
person ("Person") that directly or indirectly Controls, is Controlled by or is
under common Control with another Person.
1.2 AGENT. The party defined as "AGENT" above and any sub-contractor,
employee, servant, Affiliate or agent of said party. The term "AGENT" as used
herein is applicable to one or more persons, a corporation or a partnership, as
the case may be, and the singular use includes the plural and the masculine and
neuter usages include the other and the feminine.
1.3 AREA. The Metropolitan Statistical Area(s) and/or Rural Service
Area(s) as set forth in Exhibit A, within which BCN has or intends to apply for
regulatory authority to provide CRS and within which AGENT has the authority to
solicit and contract, on behalf of BCN, with Subscribers.
-1-
<PAGE> 3
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.4 CELLULAR RADIO SERVICE. ("CRS") ***
1.5 COMMERCIAL MOBILE RADIO SERVICE. ("CMRS") ***
1.6 CONTROL OR CONTROLLING INTEREST. Ownership of fifty-one percent
(51%) of the voting power of all classes of voting stock or fifty-one percent
(51%) of the beneficial interests in income and capital of an entity other than
a corporation.
1.7 EQUIPMENT. Mobile and portable radio units that are used by
Subscribers in conjunction with CRS or CMRS and approved by the FCC.
1.8 FCC. The Federal Communications Commission.
1.9 MARKETS. Those MSAs and RSAs which BCN has grouped into management
units and which are commonly referred to by largest city in the grouping and
which are more fully described in Exhibit A.
1.10 MARKS. Trademarks, trade names, insignia, symbols, decorative
designs, or the like which BCN or its Affiliate owns or is licensed or
sublicensed to use in connection with Cellular Radio Service or products
relating thereto, and which BCN, in its sole discretion, determines that AGENT
is authorized to use.
1.11 NEW SUBSCRIBER. A Subscriber activated by Agent who has neither
cancelled BCN CRS within six (6) months of the date of activation (before or
after) nor is the member of a household or business entity at which another
person has cancelled BCN CRS within six (6) months of the date of activation
(before or after).
1.12 RESELLER. Any person, association, partnership, corporation or
joint-stock company, trust, and any other business entity which purchases bulk
quantities of CRS from BCN for resale distribution, directly or indirectly, to
ultimate users of CRS.
1.13 ROAMER. A CRS user who takes the Equipment out of the range of the
home system and receives cellular service in another system's coverage area.
1.14 SUBAGENT. An entity or person with which AGENT has an agreement
for the enrollment of Subscribers to BCN's CRS through AGENT.
-2-
<PAGE> 4
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.15 SUBSCRIBER. Any potential or actual customer who is the ultimate
user of CRS provided by BCN. However, for the purpose of calculating
compensation in Exhibit B, each CRS telephone number assigned to a customer of
BCN's CRS is deemed to be a separate Subscriber, regardless of how many CRS
telephone numbers may be used by that customer.
1.16 USAGE. A period of time during which a Subscriber uses the
cellular system and incurs charges for such use.
1.17 EXCLUSIVE MARKETS. All Markets that are not Non-Exclusive.
1.18 NON-EXCLUSIVE MARKETS. ***
ARTICLE II
APPOINTMENT OF AGENT
BCN hereby appoints AGENT, and AGENT hereby accepts the appointment, as
a nonexclusive, authorized agent of BCN to solicit and contract on behalf of BCN
with Subscribers for CRS in the Area, subject to all of the terms and conditions
hereof. AGENT recognizes and agrees that BCN has the right to and may appoint
other nonexclusive, authorized CRS agents in the Area, including retailers and
other business organizations as distributors of CRS in the Area, and that BCN
has the right to and may directly offer and furnish CRS to Subscribers within
the Area. AGENT recognizes and agrees that BCN will market Equipment directly or
indirectly through Affiliates. In addition, AGENT recognizes that under current
applicable FCC cellular rules, BCN must sell its CRS to Resellers.
AGENT agrees to act as BCN's agent in offering CRS to Subscribers. All
of such offerings shall be at the rates and under the terms and conditions which
BCN shall from time to time specify.
It is understood and agreed that Subscribers shall be customers of BCN
for CRS.
ARTICLE III
GENERAL OBLIGATIONS AND REPRESENTATIONS
3.1 GENERAL. AGENT acknowledges and agrees that AGENT has read and
understands the obligations imposed by the FCC upon CRS licensees such as BCN as
specified in Parts 22.911, 22.912 and 22.914 of the FCC's cellular rules. AGENT
acknowledges that it has
-3-
<PAGE> 5
conducted an independent investigation of the CRS business that it will conduct
pursuant hereto. AGENT recognizes that entry into the CRS business as an agent
of BCN involves business risks and that AGENT's success in such business will
depend primarily upon its abilities and efforts. BCN expressly disclaims the
making of, and AGENT acknowledges that it has not received or relied upon, any
guaranty, express or implied, as to the amount of compensation or other revenue
that it may earn as a result of its agency relationship with BCN.
3.2 ACCEPTANCE OF TERMS OF AGREEMENT. BCN and AGENT each acknowledges
that it has read this Agreement and understands and accepts the terms,
conditions and covenants contained herein as being reasonably necessary to
maintain BCN's high standards for CRS and to protect and preserve the goodwill
of BCN and of BCN's CRS and its Marks.
3.3 NO MISREPRESENTATIONS. AGENT represents to BCN, as an inducement to
its entry into this Agreement, that AGENT has made no misrepresentations to BCN
in its application for appointment as a nonexclusive, authorized agent of BCN or
in any other manner. Neither Party has knowledge of any representations relating
to this agency relationship by any officer, employee or agent of the other that
are contrary to the terms herein.
3.4 LOST PROFITS. AGENT and BCN mutually agree that neither shall have
any liability to the other for any lost profits or consequential damages even if
advised of the possibility of such damages.
3.5 BEST EFFORTS. BCN and AGENT mutually agree that each will at all
times faithfully, honestly and diligently perform its obligations hereunder, and
that it will continuously exert its best efforts to promote and enhance the use
of BCN's programs.
3.6 USE OF BCN REPRESENTATIVES. Unless BCN gives prior written consent
to AGENT, AGENT agrees that it will not, during the term of this Agreement,
knowingly use as a sub-contractor, Subagent, sales representative, or agent, any
Person or entity which has, or had within six (6) months of AGENT's use of such
Person or entity, an agreement with BCN to enroll Subscribers. For purposes of
this Paragraph 3.6 the expression "Person or entity which has, or had within six
(6) months of AGENT's use of such Person, an Agreement with BCN to enroll
Subscribers" includes all officers, directors, stockholder and other principals
of any entity which has, or had within six (6) months of AGENT's use of such
person, an Agreement with BCN to enroll Subscribers, but does not include other
employees of such entity. Should Agent inadvertently employ any such person,
Agent agrees to terminate such relationship upon thirty (30) days prior notice
from BCN.
-4-
<PAGE> 6
ARTICLE IV
AGENT'S USE OF SUBAGENTS
AGENT agrees that in the event that AGENT enters into agreements with
Subagents, its use of such Subagents shall be subject to the following terms and
conditions:
4.1 NOTICE TO BCN. AGENT shall, upon request of BCN, notify BCN in
writing of all Subagents, Subagents' principals and the terms of the agreement
AGENT has with each of its Subagents.
4.2 INFORMATION TO BE PROVIDED TO SUBAGENTS. AGENT shall inform
Subagents of all of AGENT's contractual obligations pursuant to this Agreement
and at all times keep each Subagent fully apprised of BCN's requirements with
respect to Subagents and any procedures relevant to Subagent's sale of CRS.
4.3 ACTIVATIONS. Subagents will have no direct communications with BCN.
All communications regarding activations, compensation, procedures, and any
other matters are to be handled solely by AGENT.
4.4 TRAINING. AGENT shall be responsible for ensuring that all
Subagents are adequately trained at AGENT's premises. Such training shall be as
specified in Article V.
4.5 USE OF MARKS. Except as provided in Paragraph 13.2, Subagents are
prohibited from using BCN's Marks in a manner which identifies Subagents as
representatives of BCN.
4.6 COMPLIANCE WITH AGREEMENT. Subagents must at all times comply with
provisions of this Agreement which may relate to Subagents, including but not
limited to Articles VII, X, XI, XV, XVI, XVII, XXIV, and XXVIII and the
provisions of any Exhibit.
4.7 RESPONSIBILITY OF AGENT FOR ACTS OF SUBAGENTS. Subagents are
representatives of AGENT only. AGENT shall be fully responsible for the acts of
its Subagents. If BCN determines that any Subagent is not in compliance with any
of the terms and conditions stated herein which BCN determines are applicable to
Subagents, BCN may terminate this Agreement with AGENT.
4.8 NONCOMPETITION BY SUBAGENT. AGENT shall not contract with a
Subagent who is a party, directly or indirectly, to a contract with any other
provider of CRS in the Area. AGENT's agreement with its Subagents shall provide
that such agreement shall be terminated if Subagent contracts with or in any
manner does business with a provider of CRS in the Area other than BCN.
-5-
<PAGE> 7
ARTICLE V
TRAINING
Training requested by AGENT will be provided at BCN's sole discretion
and at AGENT's expense. BCN, at its expense and in its discretion, may provide
training to AGENT's employees at locations selected by BCN within the counties
included within the Area.
ARTICLE VI
ADMINISTRATIVE PROCEDURES
6.1 SUBSCRIBER ENROLLMENT. BCN may periodically prescribe various
reasonable procedures to be followed by AGENT and its salespersons in the
solicitation of Subscribers, presentations relating to CRS and enrollment of
Subscribers. Attached hereto as Exhibit C and incorporated herein are current
procedures for reducing fraud with which AGENT shall comply when activating
Subscribers. BCN will also furnish CRS literature and forms of agreements AGENT
must use in the enrollment of Subscribers. AGENT agrees to comply with all
reasonable procedures prescribed by BCN for the solicitation of Subscribers,
presentations to Subscribers relating to CRS and enrollment of Subscribers.
AGENT shall communicate Subscriber enrollment and billing information to BCN via
telephone and follow-up forms.
6.2 NATIONAL ACCOUNTS. BCN has developed a list of national accounts in
the Area and has formulated a national account plan with guidelines for calling
on these accounts. AGENT shall comply with such guidelines, as amended from time
to time, when dealing with National Accounts. BCN will administer this plan and
monitor sales results.
6.3 BILLING, CREDIT AND COLLECTIONS. Upon enrollment of a particular
Subscriber by AGENT, that Subscriber shall become a customer of BCN for CRS and
BCN shall bill such Subscriber and offer and furnish such customer billing
services as BCN deems appropriate. BCN shall be responsible for collecting any
charges for CRS unpaid by Subscribers. BCN shall be responsible for approving
Subscribers for credit. BCN shall not activate any Subscriber unless and until
such Subscriber has satisfactorily passed a credit check and has paid any
required deposit. AGENT shall not be entitled to compensation for a Subscriber
who fails to pass the credit check or to pay any required deposit.
6.4 RATES. BCN shall, subject to any required regulatory approval,
determine and periodically modify rates for CRS and shall notify AGENT as soon
as practicable of each modification. AGENT acknowledges that from time to time
BCN may offer rates for CRS, by contract or otherwise, which rates may not be
made available to AGENT and its customers. AGENT shall take no action
inconsistent with and agrees to support BCN's efforts before regulatory
authorities regarding any modification of rates. Modifications of rates may
apply to
-6-
<PAGE> 8
both existing and future Subscribers.
6.5 CRS TELEPHONE NUMBERS. BCN will furnish CRS telephone numbers for
Subscribers subject to availability and technological capacity. In the event
technological changes occur which restrict or limit BCN's ability to furnish CRS
telephone numbers for Subscribers, BCN shall inform AGENT and BCN shall have no
liability to AGENT hereunder for the inability to furnish such numbers. If BCN
is unable to furnish numbers, AGENT's quotas set out on Exhibit B3 will be
appropriately adjusted. CRS telephone numbers will be proportionally allocated.
6.6 TECHNOLOGICAL CHANGES. If technological changes change the size of
BCN's coverage area or impose restrictions on the use of a Subscriber's
Equipment, BCN will inform AGENT of such changes and AGENT will inform
Subscribers with whom AGENT comes into contact of such changes or restrictions.
Failure by AGENT to inform Subscribers of such changes will be considered a
material breach of this Agreement.
ARTICLE VII
DUTIES AND RESPONSIBILITIES OF AGENT REGARDING EQUIPMENT
7.1 GENERAL RESPONSIBILITIES. AGENT agrees to sell, lease or rent
Equipment to be used by Subscribers of BCN's CRS. AGENT shall be responsible for
the warranty service for and installation and maintenance of such Equipment,
either through its own BCN-certified facility or by subcontracting with a
BCN-certified facility. AGENT agrees to offer only models of Equipment for sale,
lease or rental that meet quality standards set by the FCC and the
manufacturer's recommendations for use of such Equipment. At BCN's request AGENT
agrees to BMI to BCN for BCN's approval the models of Equipment which it
proposes to sell, lease or rent. AGENT agrees that BCN shall have the right to
reasonably approve or disapprove any Equipment. BCN shall not be obligated to
pay any commission to AGENT for any Subscriber whom AGENT enrolls on BCN's CRS
with an unapproved FCC type Equipment or Equipment which does not meet the
manufacturer's recommendations.
Subscribers shall be customers of AGENT with respect to Equipment. BCN
shall have no responsibility to AGENT or Subscribers with respect to the sale,
installation, warranty service for or maintenance of Equipment. The
indemnification provisions of Article XXIX of this Agreement shall apply to any
claims or demands against BCN which relate to AGENT's sale, lease or rental of
Equipment.
7.2 INVENTORY. AGENT agrees to maintain an inventory of approved models
of Equipment sufficient to meet reasonably anticipated demand therefor by
Subscribers AGENT enrolls.
-7-
<PAGE> 9
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AGENT may purchase Equipment from any available source, including BCN.
Such Equipment shall be of the style, appearance and quality as to be adequate
and suitable for use with BCN's CRS. Such Equipment will be sold, leased or
rented in accordance with all applicable federal, state and local laws, and the
same shall not reflect adversely upon the good name of BCN or any of its
programs or the Marks. AGENT acknowledges and agrees that BCN offers Equipment
for sale to those of its agents who meet BCN's credit criteria as an
accommodation to enable agents to meet the needs of BCN's CRS customers. AGENT
further acknowledges that BCN may from time to time stock equipment that it does
not sell to AGENT or that BCN will only consign to AGENT for sale in conjunction
with CRS.
7.3 ADDITIONAL EQUIPMENT SERVICES; BILLING BY BCN. AGENT shall be
responsible for arranging lease, lease-purchase and other financing plans for
Equipment sold, leased or rented by AGENT to Subscribers, and for offering to
Subscribers any insurance protection or other services for Equipment purchases,
leases and rentals, provided, however, that nothing herein shall preclude BCN
from offering such services directly in its discretion. BCN is responsible for
billing and for collecting for CRS charges and AGENT is responsible for
collecting for Equipment-related charges. It shall be the responsibility of
AGENT to collect amounts unpaid by Subscriber relating to Equipment purchase,
lease or rental charges, related maintenance charges, or any other charges for
which Subscriber may be obligated to AGENT whether billed by BCN or not.
ARTICLE VIII
COMPENSATION
BCN shall pay compensation to AGENT in accordance with the Compensation
Schedule in Exhibit B attached hereto and incorporated herein, which Schedule
may be amended from time to time as set forth in Exhibit B. Nothing herein shall
prohibit BCN from offering from time to time different rates, special promotions
or additional service packages with different compensation for AGENT. In the
event such rates, promotions or service packages are offered, AGENT shall be
required to evidence in writing its consent to the change in compensation in
order to be eligible to offer such rates, promotions or services to Subscribers.
AGENT understands that no compensation shall be paid unless AGENT complies with
the terms and conditions specified in this Agreement and the Compensation
Schedule. AGENT acknowledges that compensation paid to AGENTS and other
distributors for adding Subscribers to BCN's CRS may vary. ***
-8-
<PAGE> 10
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
***Furthermore, AGENT acknowledges that the standard compensation payable
pursuant to Exhibit B may be greater or less than the compensation payable to
other distributors of BCN's service.
In the event that, as set forth in Article III, BCN undertakes to
solicit or accept orders from Subscribers who are already owners of Equipment or
who, for other reasons, do not wish to be referred to an authorized agent, BCN
shall be under no obligation to refer such Subscribers to AGENT or to pay any
compensation to AGENT.
ARTICLE IX
QUOTAS
SEE EXHIBIT B3
ARTICLE X
AGENT'S SALES FACILITIES
AGENT agrees that it will sell CRS and Equipment at sales facilities in
the Area and at such additional or substitute sales facilities. Each of AGENT's
CRS sales facilities shall be comparable with their current facilities. BCN
Equipment and BCN collateral shall at all times be displayed at AGENT locations
consistent with the custom in the industry for indirect distribution channels.
At those distribution points at which AGENT is permitted to sell a Competitive
Service as provided in Article XXIV, AGENT agrees that BCN signage shall occupy
the marquee location directly beneath AGENT's name at which BCN products and
services are sold, provided that BCN agrees to pay the cost of such signage. In
no event shall AGENT display another CMRS provider's name in such marquee
location.
ARTICLE XI
AGENT'S INSTALLATION AND MAINTENANCE FACILITIES
11.1 FACILITIES. If AGENT sells a model of Equipment not sold by BCN,
AGENT shall provide warranty service for such Equipment.
11.2 CORRECTIVE WORK BY BCN. AGENT will be invoiced by BCN for the cost
of any and all corrective work performed on behalf of or by BCN which is caused
by AGENT's negligence or faulty installation, if such corrective work is
performed within one hundred twenty (120) days from the date of such
installation. If practical, BCN will notify AGENT prior to performing such
corrective work.
-9-
<PAGE> 11
ARTICLE XII
ADVERTISING
AGENT agrees to advertise BCN's CRS throughout the Area. If AGENT
follows BCN's procedures concerning enrollment of a Subscriber, adheres to
applicable tariffs, and complies with the terms and conditions of this
Agreement, then BCN shall pay AGENT for advertising costs in accordance with
Exhibit B.
All advertising and promotion by AGENT shall be completely factual and
shall conform to the highest standards of ethical advertising. AGENT shall not
use any advertising or marketing materials that BCN has disapproved.
ARTICLE XIII
MARKS
13.1 LIST OF MARKS. BCN has published a list of Marks which AGENT is
authorized to use under this Agreement in conjunction with the sale of BCN's CRS
and products. BCN will periodically update the list of Marks AGENT is authorized
to use under this Agreement. The most current updated list will always supersede
any previously issued list. Such list will also be supplemented with rules and
regulations pertaining to the Marks which AGENT agrees to follow.
13.2 RIGHT TO USE MARKS; VALUE OF MARKS. AGENT acknowledges that its
right to use the Marks is derived solely from this Agreement and is limited to
the right to identify AGENT as an agent of BCN for the sale of CRS and to
identify products and services bearing the Marks which may be sold by AGENT.
AGENT agrees to comply with all rules and regulations pertaining to such Marks
prescribed by BCN from time to time during the term of this Agreement. AGENT
agrees to maintain the quality and nature of the goods and services associated
with the Marks as established by BCN. AGENT recognizes the great value of the
goodwill associated with the Marks, and acknowledges that it has no interest in
the Marks and all rights therein and goodwill pertaining thereto belong
exclusively to BCN and its Affiliates, and that the Marks have a secondary
meaning in the mind of the public. AGENT acknowledges and agrees that all usage
of the Marks by AGENT and any goodwill established thereby shall inure to the
exclusive benefit of BCN and its Affiliates and that this Agreement does not
confer any goodwill or other interests in the Marks upon AGENT. Any unauthorized
use of the Marks by AGENT, or any use not in compliance herewith, shall
constitute an infringement of the rights of BCN and its Affiliates in and to the
Marks. Use of the Marks by a Subagent of AGENT, except to properly identify
products and services bearing the Marks which may be sold by the Subagent, shall
constitute an infringement of the rights of BCN in and to the Marks. Without
limiting the foregoing, no Subagent is authorized to use the "Bell" symbol logo
or in any way represent that it is an agent of BCN.
-10-
<PAGE> 12
13.3 USE OF MARKS BY AGENT. AGENT shall use the Marks with such words
qualifying or identifying the agency relationship of BCN and AGENT as BCN from
time to time reasonably prescribes. AGENT shall not use the Marks as part of any
corporate or trade name or with any prefix, suffix or other modifying words,
terms, designs or symbols, or in any modified form, nor may AGENT use the Marks
in connection with the sale or lease of any unauthorized product or service or
in any other manner not expressly authorized by this Agreement or separately in
writing by BCN. AGENT agrees to display the Marks on stationery and other forms
used in its CRS business in the manner prescribed by BCN, to give such notices
of registration as BCN specifies and to obtain such fictitious or assumed name
registrations as may be required under applicable law. Misuse of the Marks by
AGENT or its Subagents may result in termination of this Agreement or such other
remedy, including withholding of commissions, as BCN may establish from time to
time in its Advertising guidelines.
13.4 MODIFICATION OF MARKS. If it becomes advisable at any time in
BCN's sole discretion for AGENT to modify or discontinue use of any Mark or
substitute one or more additional trade or service marks to identify its
relationship with BCN or any Equipment, AGENT agrees to comply therewith within
a reasonable time after notice thereof by BCN and the sole obligations of BCN in
any such event shall be to reimburse AGENT for the out-of-pocket costs, if any,
of complying with this obligation and to indemnify AGENT as provided for in
Paragraph 13.5 below. In addition, AGENT shall replace obsolete identification
signs or identification material with new signs or identification material
should BCN adopt new Marks replacing one or more Marks identified by BCN in such
list as hereinbefore specified.
13.5 PROTECTION OF RIGHTS IN THE MARKS. AGENT agrees that it will not
during the term of this Agreement, or thereafter, attack the title or any rights
of BCN or its Affiliates in and to the Marks. BCN hereby indemnifies AGENT and
undertakes to hold AGENT harmless against any damages and costs from claims or
suits arising out of the use by AGENT of the Marks as authorized in this
Agreement, provided that prompt notice is given to BCN of any such claim or suit
and provided further, that BCN or its Affiliates shall have the option to
undertake and conduct the defense of any suit so brought and that no settlement
of any such claim or suit shall be made by AGENT without the prior written
consent of BCN.
AGENT agrees to assist BCN or its Affiliates and BCN agrees to
reimburse AGENT for all associated reasonable costs to the extent necessary in
the procurement of any protection or to protect any of BCN's or its Affiliates
rights to the Marks, and BCN or its Affiliates, if it or they so desire, may
commence or prosecute any claims or suits in its own name or that of its
Affiliates or in the name of AGENT with AGENT's approval or join AGENT as a
party thereto. When known, AGENT shall notify BCN in writing of any
infringements or imitations by others of the Marks which are the same as or
similar to those covered by this Agreement. BCN shall have the sole right to
determine whether any action shall be taken on account of any such
-11-
<PAGE> 13
infringements or imitations. AGENT shall not institute any suit or take any
action on account of any such infringement or imitations without first obtaining
the written consent of BCN.
13.6 MOBILINK MARKS. As long as BCN is licensed to use the MobiLink
trademark in the Area, and the AGENT also desires to use the MobiLink Mark, the
AGENT shall comply with all the terms and conditions of the MobiLink Addendum
which shall become a part of this Agreement.
ARTICLE XIV
RULES AND PROCEDURES
AGENT agrees to comply, as applicable, with Part 22 of the FCC's
cellular rules, all tariffs, other governmental rules, and procedures reasonably
prescribed from time to time by BCN relating to the sale of CRS, the sale,
lease, rental, installation, warranty service and repair of Equipment and the
conduct of AGENT's CRS business hereunder, all of which shall constitute
provisions of this Agreement as if fully set forth herein. All references herein
to this Agreement shall include all such tariffs, rules and procedures. BCN may,
at its option, incorporate such tariffs, rules and procedures in one or more
Operations Manuals or other written form. Except as to any liabilities covered
by AGENT's insurance, BCN agrees to indemnify and hold AGENT harmless against
liabilities from and costs of suits or claims arising out of AGENT's actions or
inactions which are required by BCN in writing for AGENT's compliance with rules
and procedures prescribed by BCN in accordance with this paragraph. In no event
shall BCN indemnify and hold AGENT harmless against liabilities from and costs
of suits or claims arising out of AGENT's actions or inactions unless BCN has
required in writing such actions or inactions.
ARTICLE XV
COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES
15.1 COMPLIANCE WITH BCN CRITERIA, LAWS AND REGULATIONS. AGENT shall
secure and maintain in force all licenses and permits required by AGENT and its
employees in the enrollment of Subscribers and the sale, lease, rental,
installation and maintenance of Equipment, including without limitation all
required FCC permits and certifications. AGENT shall comply with all BCN
installation, warranty and maintenance criteria, and shall conduct its business
in full compliance with all laws, ordinances and regulations applicable to
AGENT's business. AGENT shall not engage in any activity which would cause AGENT
and/or BCN to be in violation of any requirement, rule, decision, law,
regulation, judgment or order of any state or Federal governmental agency or
court. BCN shall offer CRS in accordance with applicable rules, regulations,
statutes and decisions governing CRS.
AGENT shall maintain its business on a sound financial basis and comply
with all legal obligations to BCN, to AGENT's employees, suppliers, lenders,
lessors, and to federal, state and municipal authorities, including but not
limited to tax authorities. AGENT shall maintain all real
-12-
<PAGE> 14
and personal property used in connection with its CRS business free of all liens
and encumbrances of every kind or character which may impair or jeopardize the
AGENT's conduct of its business.
AGENT shall comply, at its own expense, with the provisions of all
applicable municipal requirements and those state and federal laws applicable to
AGENT as an employer of labor or otherwise. AGENT expressly agrees not to
discriminate against any employee or applicant for employment because of race,
creed, color, national origin or sex. The provisions of Executive Order No.
11246, as amended, are incorporated herein by reference. AGENT will fully comply
with the provisions of the Federal Occupational Safety and Health Act of 1970
and any rules and regulations issued pursuant to such Act.
15.2 STANDARDS OF CONDUCT. AGENT agrees to refrain from any business or
advertising practice which may be injurious to the business of BCN and the
goodwill associated with the Marks.
15.3 NOTIFICATION OF ACTIONS INVOLVING AGENT. AGENT shall notify BCN in
writing within five (5) days of the commencement of any material action, suit or
proceeding, and of the issuance of any order, writ, injunction, award or decree
of any court, agency or other governmental instrumentality, involving AGENT or
any business conducted by AGENT. Notwithstanding any of the foregoing provisions
of this paragraph, a default by AGENT with respect to such provisions shall be
construed as a breach if it has a material and adverse impact upon the AGENT's
ability to furnish the services for which it has become obligated under this
Agreement.
ARTICLE XVI
INSURANCE
AGENT shall at all times during the term hereof, at AGENT's sole
expense, maintain workman's compensation in accordance with statutory
requirements in the Area and be insured under a commercial general liability
insurance policy including premises/operations; completed operations, broad form
property damage and bodily and personal injury, including death, against claims
caused by or occurring in conjunction with the operation of AGENT's CRS
business. Such insurance coverage shall be maintained under one or more policies
of insurance from a recognized insurance company qualified to do business within
the Area, providing in the aggregate a minimum liability protection of One
Million Dollars per occurrence for bodily and personal injury and death, One
Million Dollars per occurrence for property damage, and One Million Dollars for
completed operations, subject to such deductibles as BCN determines from time to
time to be appropriate. Completed operations coverage must be maintained for one
(I) year after the completion of the work. Such insurance shall also contain
contractual coverage insuring for the indemnification undertaken by AGENT
hereunder. Each such insurance policy
-13-
<PAGE> 15
shall provide for not less than thirty (30) days' prior written notice to all
insureds of any modification, cancellation or nonrenewal.
BCN may at any time and with ninety (90) days prior notice to AGENT
require AGENT to increase the amount of coverage of any type of insurance to
reflect inflation, higher damage awards or comparable factors which make the
above limits insufficient to cover AGENT's liabilities and AGENT's
indemnification of BCN under this Agreement. Within sixty (60) days after
commencement of this Agreement, and at other times specified by BCN, AGENT must
furnish proof satisfactory to BCN that insurance coverage required hereunder is
in force.
ARTICLE XVII
AGENT'S BUSINESS RECORDS
AGENT agrees to create and to maintain at its principal office and to
preserve for five (5) years from the date of their preparation full, complete
and accurate records of its business conducted pursuant to this Agreement. At
BCN's request or upon prior notice to AGENT, AGENT also agrees to have available
at AGENT's premises records of its Subagents conforming to the requirements
imposed upon AGENT by this Article XVII. Such records must include, for example,
but not be limited to, records of all CRS enrollment and Equipment sales,
leases, or rentals, and installation and repairs performed at AGENT's
facilities. At least once each year, AGENT shall perform a physical inventory of
all Equipment supplied by BCN to the AGENT for the BCN Leasing and Rental plans,
and shall provide a copy of the inventory to BCN within ten (10) days after it
is performed. Such records may be audited by BCN at reasonable times after
reasonable notice to AGENT. BCN expressly agrees, and will require its
authorized representatives to agree, that it will keep all such records strictly
confidential and that it will not disclose such information to any other agent
authorized by BCN to provide CRS or to any Reseller of BCN's CRS or to any other
person without AGENT's express prior written consent, except upon lawful demand
or request from a court, regulatory agency, or law enforcement agency.
ARTICLE XVIII
RELATIONSHIP OF BCN AND AGENTS
With the sole exception of the Subscribers enrolled by AGENT for the
account of BCN, with respect to which AGENT acts as agent of BCN and owes BCN
the fiduciary and other obligations of an agent to its principal, BCN and AGENT
acknowledge and agree that their agency relationship arising from this Agreement
does not constitute or create a general agency, joint venture, partnership,
employment relationship or franchise between them. In all dealings with
Subscribers, public officials and others, AGENT shall conspicuously identify
itself as an agent of BCN in the provision of CRS and otherwise as an
independent business and shall place such notices of its independent ownership
of its business on such forms, stationery, advertising
-14-
<PAGE> 16
and other materials as BCN may reasonably require from time to time. BCN has not
authorized or empowered AGENT to use the Marks except as herein provided and
AGENT shall not employ any Mark in signing any contract, lease, mortgage,
purchase agreement, negotiable instrument or other legal obligation, or in a
manner that may result in liability of BCN (or its Affiliates) for any
indebtedness or obligation of AGENT. Unless specifically authorized in writing,
neither BCN nor AGENT shall make any express or implied agreements, guarantees
or representations, or incur any debt, in the name of or on behalf of the other,
except as otherwise set forth herein.
Neither BCN nor AGENT shall be obligated by or have any liability under
any agreements or representations made by the other party that are not expressly
authorized hereunder, nor shall BCN be obligated for any damages to any person
or property directly or indirectly arising out of the CRS business conducted by
AGENT pursuant hereto, whether caused by AGENT's negligent or willful action or
failure to act, unless such damage is proximately caused by BCN or arises out of
AGENT's compliance with the rules or procedures prescribed in writing by BCN
pursuant to this Agreement.
ARTICLE XIX
AGENT'S PERSONNEL AND SUBAGENTS NOT DEEMED BCN'S EMPLOYEES
OR AGENTS
The parties agree that personnel employed by AGENT to perform services
under this Agreement and Subagents of AGENT are not BCN employees and AGENT
assumes full responsibility for their acts. Personnel employed by AGENT,
subcontractors of AGENT and Subagents shall be informed that they are not
entitled to the provisions of any of BCN's employee benefits. With respect to
such personnel, AGENT shall have sole responsibility for supervision, daily
direction and control. AGENT shall be responsible for worker's compensation,
disability benefits, unemployment insurance and withholding and remitting income
and social security taxes for said personnel, including contributions from them
as required by law.
AGENT warrants it has an appropriate agreement with all persons whose
services AGENT may require sufficient to enable it to comply with all provisions
of this Agreement.
ARTICLE XX
ASSIGNMENT
This Agreement is fully assignable by BCN to an affiliate or affiliates
of BCN, to a partnership or partnerships in which BCN or an affiliate has an
interest, or to any entity which succeeds to all or substantially all of BCN's
assets by sale, merger or operation of law. Any other assignment of this
Agreement by BCN shall be subject to the written approval of AGENT which
approval shall not be unreasonably withheld.
-15-
<PAGE> 17
AGENT acknowledges that BCN has entered into this Agreement in reliance
upon the character, business experience and ability of AGENT and its owner(s)
and that the rights and duties created by this Agreement are personal to AGENT
and its owner(s). Therefore, this Agreement may not be voluntarily,
involuntarily, directly or indirectly assigned, or otherwise transferred without
the written approval of BCN, which will not be unreasonably withheld, subject to
such reasonable conditions as BCN deems necessary. Nothing herein shall prohibit
transfers in connection with the merger or consolidation of AGENT with another
entity or the sale of substantially all of the assets of AGENT to another
entity. Any assignment or transfer without approval or which is not expressly
subject to the written approval of BCN shall constitute a breach hereof and
convey no rights or interests herein. Nothing herein shall prohibit AGENT from
making a public offering of its securities.
ARTICLE XXI
TERM AND EXTENSION OF AGENCY RELATIONSHIP
The term of this Agreement shall commence on the Commencement Date and
end on the date which is three calendar years later. AGENT shall provide to BCN
written notice of the date on which AGENT initiates CRS operations in the Area.
This Agreement shall be effective only after its execution by an officer or
other authorized employee of both AGENT and BCN. This Agreement is subject to
renewal for an additional term of one (1) year only upon written agreement by
each party. Each Party agrees to provide notice to the other Party of any
desired renewal of this Agreement ninety (90) days prior to the termination of
this Agreement.
This Agreement shall become effective upon completion of Let's Talk
Cellular & Wireless, Inc.'s ("LTCW") acquisition (the "CW Acquisition") of the
stock of Cellular Warehouse, Inc. ("CW"). The compensation provisions of this
agreement shall become effective as of April 1, 1998, provided that the closing
of the CW Acquisition has taken place by April 30, 1998, otherwise on the first
day of the month following the date of closing of the CW Acquisition (the
"Commencement Date"). All computations for compensation shall be computed based
on the Commencement Date. Prior to the Commencement Date, LTCW and CW's existing
agreements with BCN shall remain in full force and effect. LTCW and CW's
existing agreements with BCN shall terminate on the effective date of this
Agreement. In the event the CW Acquisition does not close by December 31, 1998,
this Agreement shall terminate.
ARTICLE XXII
TERMINATION OF AGREEMENT
22.1 TERMINATION BY AGENT. If AGENT is in substantial compliance with
this Agreement and BCN materially breaches this Agreement and fails to cure such
breach within
-16-
<PAGE> 18
thirty (30) days after written notice thereof is delivered to BCN, AGENT may
terminate this Agreement effective thirty (30) days after delivery to BCN of
written notice.
22.2 TERMINATION BY BCN FOR REGULATORY REASONS. BCN shall have the
right to terminate this Agreement effective upon thirty (30) days' written
notice in the event that:
A. the FCC's cellular rules are not continued in substantially the
same form and such change has a material adverse impact on BCN's ability to
conduct its business in the Area;
B. regulatory approval empowering BCN or an Affiliate to construct
and provide CRS in the Area is not granted to either BCN or an Affiliate, is
granted subject to terms and conditions unacceptable to BCN or an Affiliate, or
is granted under terms and conditions which, in BCN's opinion, materially affect
the intended purpose of this Agreement;
C. regulatory authorization of the Compensation Schedule or this
Agreement is made subject to terms and conditions unacceptable to BCN or its
Affiliates; or
D. AGENT or any Affiliate is granted regulatory authority to
construct or operate CRS in any area where BCN or any Affiliate has also been
granted such regulatory authority.
22.3 TERMINATION FOR CAUSE.
A. In addition to other rights of termination set forth in this
Agreement, BCN shall have the right to terminate this Agreement for cause
effective upon delivery of notice of termination to AGENT, if AGENT (or one or
more of its officers):
(i) has made any material misrepresentation or
omission in its application to establish an agency relationship with BCN or is
arrested for, convicted of or pleads no contest to a felony or other crime or
offense that is likely to adversely affect the reputation of BCN or its
affiliated companies or the goodwill of the Marks;
(ii) makes an unauthorized assignment of this
Agreement or makes an assignment of this Agreement that is not expressly subject
to the written approval of BCN and fails to correct such violation within thirty
(30) days after receipt of such notice; or
(iii) receives a notice of violation of the terms or
conditions of any license or permit required by AGENT or its employees in the
conduct of AGENT's CRS business and fails to correct such violation, or to
terminate the employment of such employee(s), within the time period specified
in such notice, if any, or within thirty (30) days after receipt of such notice,
whichever is earlier.
-17-
<PAGE> 19
B. BCN shall also have the right to terminate this Agreement
if AGENT fails to comply with any material provision of this Agreement, or any
tariff relating to CRS, and does not correct such failure within thirty (30)
days after written notice of such failure to comply is delivered to AGENT or if
the nature of such default is such that it cannot be cured within such thirty
(30) day period, AGENT is diligently attempting to cure such default.
C. BCN shall also have the right to terminate this Agreement
if BCN determines, in its reasonable discretion, that AGENT has inflated or
otherwise manipulated its count of Gross Additional Customers by falsifying
applications, adding nonexistent Subscribers, or by any other means or methods,
and does not correct such non-compliance within thirty (30) days after written
notice of such failure to comply is delivered to AGENT or if the nature of such
default is such that it cannot be cured within such thirty (30) day period,
AGENT is diligently attempting to cure such default.
22.4 TERMINATION BY EITHER PARTY. Either party shall have the right to
terminate this Agreement effective upon written notice if:
A. the other party makes an assignment for the benefit of
creditors;
B. an order for relief under Title 11 of the United States Code is
entered by any United States Court against the other party; or
C. a trustee or receiver of any substantial part of the other
party's assets is appointed by any Court.
22.5 MUTUAL AGREEMENT. This Agreement may be terminated at any time by
mutual written agreement of the parties.
ARTICLE XXIII
OBLIGATIONS OF AGENT UPON TERMINATION OR EXPIRATION
AGENT agrees that upon the expiration or termination of this Agreement,
AGENT and its owner(s) and Affiliates will: (1) not thereafter use any actual or
similar Marks, or any actual or similar trade name, service mark, trademark,
logo, insignia, symbols or decorative designs theretofore used by AGENT in the
conduct of its CRS business, in any manner or for any purpose except that AGENT
and its owner(s) may use or continue to use any trade name, service mark, logo,
insignia, symbols or decorative designs AGENT or its owner(s) used in any
business prior to the date of this Agreement; and will not utilize for any
purpose any actual or similar trade name, trade or service mark or other
commercial symbol or in any manner, identify itself or
-18-
<PAGE> 20
any business as associated with BCN or an Affiliate of BCN; (2) return to BCN
all advertising and marketing materials, forms, signage, and other materials
containing any Mark or otherwise identifying or relating to BCN's CRS business
in the Area and cancel any pending orders for advertising which may be canceled
without penalty; (3) take such action as may be required to cancel all
fictitious or assumed name or equivalent registrations relating to any Mark; or
authorize BCN, and any officer of BCN, as AGENT's attorney in fact, to take such
actions as may be required to cancel such fictitious or assumed name or
equivalent registrations, and if AGENT fails or refuses to do so, all
governmental agencies administering fictitious or assumed name or equivalent
registrations may accept and rely upon appropriate documents executed by BCN or
its officer canceling any such registration; (4) covenant to BCN that AGENT will
not attempt to solicit current BCN CRS Subscribers for referral to any
competitive entity providing cellular radio service [nothing herein shall
prevent AGENT from selling CRS to the public at its retail stores]; (5) return
all Equipment belonging to BCN within ten (10) days after termination or
expiration.
ARTICLE XXIV
COVENANTS NOT TO COMPETE
24.1 NO COMPETITION DURING TERM OF AGREEMENT; EXCLUSIVITY. AGENT
acknowledges that BCN has granted the rights herein in material part in
consideration of AGENT's agreement to act exclusively for BCN in the Exclusive
Markets. As a consequence, during the term of this Agreement (and any extensions
thereof), AGENT agrees that AGENT, any affiliate, or persons owning a
controlling interest in AGENT or an Affiliate will not, directly or indirectly
at any location, in the Exclusive Markets, (a) solicit, sell, offer or accept
offers for a Competitive Service in the Exclusive Markets, (b) induce or refer
any actual or prospective Subscriber of BCN's CRS to subscribe to a Competitive
Service in the Exclusive Markets, (c) provide any subscriber leads to a
Competitive Service in the Exclusive Markets, or (d) activate Subscribers
through a reseller or act as a reseller of Service, whether for
telecommunications service offered by any person, entity, or business (other
than BCN) in the Exclusive Markets. Competitive Service means any
facilities-based carrier, any reseller, or any agent thereof, which uses CMRS or
CRS.
24.2 Further during the term of this Agreement (and any extensions
thereof), AGENT agrees that AGENT, any affiliate, or persons owning a
controlling interest in AGENT or an Affiliate will not, directly or indirectly
at any location otherwise operated by Agent (a) solicit, sell, offer or accept
offers for a competitive CRS in the Area, (b) induce or refer any actual or
prospective Subscriber of BCN's CRS to subscribe to a Competitive Service in the
Area, (c) provide any subscriber leads to a competitive CRS provider in the
Area, or (d) activate Subscribers through a reseller or act as a reseller of
CRS, in the Area.
24.3 Notwithstanding anything herein to the contrary, for so long as
any location in the
-19-
<PAGE> 21
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
Non-Exclusive Markets continue to display the name Cellular Warehouse, AGENT
agrees that AGENT, any affiliate, or persons owning a controlling interest in
AGENT or an Affiliate will not, directly or indirectly at any such location, (a)
solicit, sell, offer or accept offers for a Competitive Service in the
Non-Exclusive Markets, (b) induce or refer any actual or prospective Subscriber
of BCN's CRS to subscribe to a Competitive Service in the Area, (c) provide any
subscriber leads to a Competitive Service in the Non-Exclusive Markets, or (d)
activate Subscribers through a reseller or act as a reseller of Service, whether
for telecommunications service offered by any person, entity, or business (other
than BCN) in the Non-Exclusive Markets.
24.4 GEORGIA. Notwithstanding the forgoing, Agent may continue to sell
CRS at those locations operated by Agent at which Agent sells CRS and CMRS on
behalf of Airtouch Cellular of Georgia as of the date of this agreement.
24.5 ***
ARTICLE XXV
SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS
Except as expressly provided to the contrary herein, each term and
condition of this Agreement, and any portion thereof, shall be considered
severable and if, for any reason, any such provision hereof is held to be
invalid, contrary to, or in conflict with any applicable present or future law,
regulation or public policy in a final, unappealable ruling issued by any court,
agency or tribunal with competent jurisdiction in a proceeding to which BCN is a
party, that ruling shall not impair the operation of, or have any other effect
upon, such other portions of this Agreement as may remain otherwise enforceable,
which shall continue to be given full force and effect and bind the Parties
hereto, although any portion held to be invalid shall be deemed not to be a part
of this Agreement from the date the time for appeal expires, if AGENT is a party
thereto, otherwise upon AGENT's receipt of a notice of nonenforcement thereof
from BCN.
To the extent that Article XXIII or XXIV hereof contains or imposes a
restriction upon AGENT that is deemed unenforceable by virtue of its scope in
terms of area, business activity prohibited and/or length or time, but could be
enforceable by reducing any or all thereof, AGENT and BCN agree that same shall
be enforced to the fullest extent permissible under the laws and public policies
applied in the jurisdiction in which enforcement is sought. BCN and
-20-
<PAGE> 22
AGENT shall mutually agree to a modification of any invalid or unenforceable
term or condition of Article XXIII or XXIV to the extent required to be valid
and enforceable. Such modifications to this Agreement shall be required only in
the area directly affected by any such ruling.
ARTICLE XXVI
WAIVER OF OBLIGATIONS
BCN or AGENT may by written instrument unilaterally waive or reduce any
obligation of or restriction upon the other under this Agreement, effective upon
delivery of written notice thereof to the other and such other effective date
stated in the notice of waiver.
Whenever this Agreement requires the consent of a Party, such request
shall be in writing and no consent may be unreasonably withheld. All consents or
withholding of consent with reasons therefor shall be in writing. Neither Party
makes any guarantees upon which the other may rely, and assumes no liability or
obligation to the other, by granting any waiver, approval or consent to the
other, or by reason of any neglect, delay or denial of any request therefor. Any
waiver granted by either Party shall be without prejudice to any other right
that Party may have, will be subject to continuing review, and may be revoked,
at the waiving Party's sole discretion, at any time and for any reason,
effective upon delivery to the other of ten (10) days' prior written notice.
BCN and AGENT shall not be deemed to have waived or impaired any right,
power or option reserved by this Agreement (including, without limitation, the
right to demand exact compliance with every term, condition and covenant herein,
or to declare any breach hereof to be a default and to terminate this Agreement
prior to the expiration of its term), by virtue of any custom or practice of the
Parties at variance with the terms hereof or any failure, refusal or neglect of
BCN or AGENT to exercise any right under this Agreement or to insist upon exact
compliance by the other with its obligations hereunder, including, without
limitation, any rule or procedure, or any waiver, forbearance, delay, failure or
omission by BCN to exercise any right, power or option, whether of the same,
similar or different nature, with respect to one or more other authorized
agents.
ARTICLE XXVII
RIGHTS OF PARTIES ARE CUMULATIVE
The rights of BCN and AGENT hereunder are cumulative and no exercise or
enforcement by BCN or AGENT of any right or remedy hereunder shall preclude the
exercise or enforcement by BCN or AGENT of any other right or remedy hereunder
of which BCN or AGENT is entitled by law to enforce.
-21-
<PAGE> 23
ARTICLE XXVIII
CONFIDENTIAL INFORMATION
Any specifications, drawings, sketches, models, samples, data, computer
programs or documentation, or technical or business information ("Information")
furnished or disclosed by BCN to AGENT hereunder shall be deemed the exclusive
property of BCN, including title to copyright in all copyrightable material,
and, when in tangible form, shall be returned to BCN upon completion or
termination of authorized work.
Further, the Parties hereby agree that Subscriber lists and related
information or data are the exclusive property of BCN and are to be used by
AGENT, its officers, employees, Subagents, subcontractors and servants solely in
the performance of its duties and obligations hereunder.
Unless any confidential information was previously known to AGENT free
of any obligation to keep it confidential, or has been or is subsequently made
public by BCN or a third party, it shall be held in confidence by AGENT, shall
be used only for the purposes hereunder, and may be used for other purposes only
upon such terms and conditions as may be mutually agreed upon in writing.
If AGENT is served with process to obtain Information, AGENT shall
immediately notify BCN which shall, in addition to AGENT's efforts, if any, have
the right to seek to quash such process.
Unless marked "proprietary", any Information furnished or disclosed by
AGENT to BCN shall not obligate BCN to hold such Information in confidence.
ARTICLE XXIX
INDEMNITIES
29.1 INDEMNIFICATION OF BCN. AGENT agrees to indemnify, defend and hold
BCN harmless against any liability for any claims or demands arising out of the
conduct of business by AGENT that are the result of AGENT's negligent or willful
act or failure to act, including, but not limited to, any claims or demands (a)
by AGENT's employees or any other persons, including but not limited to
Subscribers, for bodily injury, damage to property or other damages caused by
the acts or omissions of the AGENT or its subcontractors, or the employees or
agents of any of them, and (b) by AGENT's employees under worker's compensation
or similar laws. AGENT also agrees to indemnify, defend and hold BCN harmless
against any liability arising out of any allegedly unauthorized use of a
trademark, patent, copyright, process, idea, method or devise by AGENT covered
by this Agreement.
If two or more persons are at any time AGENT hereunder, whether or not
as partners or joint venturers, their obligations and liabilities to BCN shall
be joint and several.
-22-
<PAGE> 24
29.2 PROCEDURES WITH RESPECT TO INDEMNIFICATION. All indemnities
created in this Agreement shall include indemnification of Indemnitees
Affiliates, directors, officers, employees, agents, successors and assigns and
their heirs, legal representatives, and assigns thereof. The indemnification
shall be for all claims arising out of the specific event referred to in this
Agreement which is covered by the indemnification, including all obligations,
actual and consequential damages and costs reasonably incurred in the defense of
any claim, including without limitation reasonable accountant's, attorneys', and
expert witness fees, costs of investigation and proof of facts, court costs, and
other litigation expenses, including, but not limited to, travel and living
expenses. Written notice of claim shall be forwarded promptly by the Indemnitee
to the Indemnitor and there shall be no settlement of the claim without the
consent of the Indemnitor, which consent shall not be unreasonably withheld.
Indemnitee shall have the right to defend any such claim in which it is named as
a defendant at its own cost and expense. The indemnities created by this
Agreement shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement. Provisions for
indemnification in this Agreement are not in lieu of and do not supplant
insurance coverage required in the Agreement, and are not intended to act as
insurance.
ARTICLE XXX
MUTUAL GENERAL RELEASE
AGENT and BCN, subject to the exceptions set forth below, shall and do
hereby release and discharge each other and their parents, partners, officers,
directors, employees and assigns from any and all claims, losses, liabilities,
obligations, damages and actions of any kind, known or unknown, up to the date
hereof.
This Mutual Release shall not apply to the following claims,
liabilities or obligations:
1. BCN's right to offset against commissions owed to AGENT any amounts
due and owing to BCN for equipment sold to AGENT by BCN or moneys owed to BCN
for any other reason;
2. BCN's right to offset against commissions owed to AGENT any amounts
(a) determined by BCN to be due as the result of fraud by AGENT; (b) determined
by BCN to be due to BCN by AGENT for Subscribers that fail to remain on service
for the chargeback period required by the agreement between BCN and AGENT; and
(c) determined by BCN to be due to BCN by AGENT for payments due under Exhibit
B, Section I - Up-Front Compensation -Paragraph H;
3. Due to AGENT for residual or other compensation to which AGENT may
be entitled.
-23-
<PAGE> 25
ARTICLE XXXI
MISCELLANEOUS
31.1 GOVERNING LAW. Except to the extent governed by United States law
that preempts state law, this Agreement shall be interpreted under and governed
by the laws of the state in which the Area is located.
31.2 TESTIMONY. Matters relating to this Agreement may be in issue
before various regulatory bodies. Upon reasonable notice, AGENT agrees to fully
cooperate with BCN regarding any such matters including willingly providing
employees of AGENT to testify at appropriate times regarding any aspect of this
Agreement or other related issues. BCN agrees to reimburse AGENT for reasonable
costs expended in supplying such testimony.
31.3 BINDING EFFECT. This Agreement, including the preambles and
Exhibits (as amended), is binding upon the parties hereto, their respective
executors, administrators, heirs, assigns and successors in interest.
31.4 IMPOSSIBILITY OF PERFORMANCE. Neither BCN nor AGENT shall be
liable for loss or damage or deemed to be in breach of this Agreement if its
failure to perform its obligations results from: (1) compliance with any law,
ruling, order, regulation, requirement or instruction of any federal, state or
municipal government or any department or agency thereof or court of competent
jurisdiction; (2) acts of God; (3) acts or omissions of the other party; or (4)
fires, strikes, embargoes, war, insurrection or riot. BCN shall not be liable
for loss or damage or be deemed to be in breach of this Agreement if
technological changes occur which prohibit BCN from issuing numbers to
Subscribers. Any delay resulting from any of said causes shall extend
performance accordingly or excuse performance, in whole or in part, as may be
reasonable.
31.5 SURVIVAL. The terms, provisions, obligations, representations, and
warranties contained in this Agreement that by their sense and context are
intended to survive the performance thereof by either or both Parties hereunder
shall so survive the completion of performances and termination of this
Agreement, including the making of any and all payments due hereunder.
31.6 LICENSES. No licenses, express or implied, under any patents are
granted by BCN or its Affiliates to AGENT hereunder.
31.7 NOTICES AND PAYMENTS. All payments due AGENT shall be made to such
address or bank as AGENT from time to time designates. All notices, consents and
reports required to be delivered by the provisions of this Agreement shall be
deemed so delivered: (1) when delivered personally; or (2) seventy-two (72)
hours after being mailed, registered or certified mail, return
-24-
<PAGE> 26
receipt requested, postage prepaid, to the most current principal business
address of which the notifying Party has been notified ("Business Address"); or
(3) one business day after being delivered to a reputable overnight courier
service, prepaid, marked for next day delivery, addressed to the addressee at
the Business Address; or (4) on the first business day after receipt, if
delivered by facsimile transmission to the FAX number (if any) of the receiving
party, if receipt is confirmed by the addressee either orally or in writing. All
reports, financial records and other information required by this Agreement
shall be directed to such other persons and places as BCN may direct from time
to time.
31.8 PUBLICITY. AGENT agrees not to initiate any cellular
service-related public relations activities incorporating BCN's corporate names,
including but not limited to news releases, news conferences, news briefings or
any other type of function involving reporters, editors or news directors of any
news organizations, without first consulting BCN public relations personnel.
Further, AGENT agrees to refer all cellular service-related questions from news
organizations to BCN public relations personnel.
31.9 PRODUCT LIABILITY. BCN shall not be liable or responsible for nor
warrant any products or accessories sold by AGENT. Any and all problems or
claims from said sale shall be referred back to AGENT.
31.10 HEADINGS. The headings in this Agreement are for convenience only
and shall not be construed to define or limit any of the terms herein.
31.11 PRIOR AGREEMENTS. By signing hereunder AGENT acknowledges and
agrees that as of the effective date of this Agreement, any Agreement providing
compensation from BCN to AGENT for new Subscriber enrollment which AGENT has
with BCN for the Area(s) referenced herein shall be null and void and no further
compensation will be paid under the prior Agreements by BCN unless otherwise
provided herein.
31.12 ENTIRE AGREEMENT. This Agreement, including the preambles and
exhibits, sets forth the entire Agreement between the parties as to the subject
matter hereof and merges all prior discussions between them, and neither of the
parties shall be bound by any conditions, definitions, understandings, or
representations with respect to such subject matter other than as expressly
provided herein, or as duly set forth subsequent to the effective date hereof in
writing and signed by the duly authorized representatives of both parties.
ARTICLE XXXII
DISPUTE RESOLUTION
DISPUTE RESOLUTION. Any dispute arising out of or related to this Agreement
which cannot be resolved by negotiation shall be settled by binding arbitration
in accordance with the
-25-
<PAGE> 27
J.A.M.S./ENDISPUTE Arbitration Rules and Procedures ("Endispute Rules"), as
amended by this Agreement. The parties will jointly select one (1) independent
arbitrator familiar with the wireless telecommunications industry, provided that
if the parties cannot agree on an arbitrator, the selection shall be made by
J.A.M.S./ENDISPUTE in accordance with the Endispute Rules. The cost of
arbitration, including the fees and expenses of the Arbitrator, shall be shared
equally by the parties unless the arbitration award provides otherwise. Each
party shall bear the costs of preparing and presenting its case. The parties
agree that this provision and the Arbitrator's authority to grant relief shall
be subject to the United States Arbitration Act, 9 U.S.C. 1-16 ET. SEQ.
("USAA"), the provisions of this Agreement and the ABA-AAA Code of Ethics for
Arbitrators in Commercial Disputes. In the event of a conflict between the USAA
and the Endispute Rules, the Endispute Rules shall govern. The parties agree
that the Arbitrator shall have no power or authority to make awards or issue
orders of any kind except as expressly permitted by this Agreement, and in no
event shall the Arbitrator have the authority to make any award that provides
for punitive or exemplary damages. The Arbitrator's decision shall follow the
plain meaning of the relevant documents and shall be final and binding. The
award may be confirmed and enforced by any court of competent jurisdiction. All
post-award proceedings shall be governed by the USAA.
ALL DISCUSSIONS AND DOCUMENTS PREPARED TO ANY ATTEMPT TO RESOLVE A
DISPUTE UNDER THIS PROVISION ARE CONFIDENTIAL AND FOR SETTLEMENT PURPOSES ONLY
AND SHALL NOT BE ADMITTED IN ANY COURT OR OTHER FORUM AS AN ADMISSION OR
OTHERWISE AGAINST A PARTY FOR ANY PURPOSE INCLUDING THE APPLICABILITY OF FEDERAL
AND STATE COURT RULES.
-26-
<PAGE> 28
IN WITNESS WHEREOF the parties hereto have executed, sealed and
delivered this Agreement in two counterparts on the day and year first above
written.
BELLSOUTH MOBILITY INC LET'S TALK CELLULAR & WIRELESS, INC.
as provided herein on behalf of entities
listed on Exhibit A for specific markets
noted
BY: /s/ Dan Smith BY: /s/ Brett Beveridge
---------------------------- -------------------------------
Dan Smith Brett Beveridge
---------------------------- -------------------------------
(PRINT OR TYPE NAME) (PRINT OR TYPE NAME)
TITLE: Vice President TITLE: President
DATE: 4/2/98 DATE: 3-30-98
-27-
<PAGE> 29
*** CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
MEMPHIS
Number of Active New Subscribers
Who Have Completed 150 Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------------
0 - 999 ***
1000 - 2499 ***
2500 - 3999 ***
4000 - 5999 ***
6000 and above ***
JACKSONVILLE
Number of Active New Subscribers
Who Have Completed 150 Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------------
0 - 1000 ***
1001 - 2500 ***
2501 - 4000 ***
4001 - 6000 ***
6001 and above ***
ORLANDO
Number of Active New Subscribers
Who Have Completed 150 Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------------
0 - 999 ***
1000 - 2499 ***
2500 - 4499 ***
4500 - 6999 ***
7000 and above ***
<PAGE> 30
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
BIRMINGHAM
Number of Active New Subscribers
Who Have Completed 150 Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------------
0 - 750 ***
751 - 1750 ***
1751 - 3500 ***
3501 - 6000 ***
6001 and above ***
HUNTSVILLE
Number of Active New Subscribers
Who Have Completed 150 Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------------
0 - 500 ***
501 - 1250 ***
1251 - 2200 ***
2201 - 3500 ***
3501 and above ***
<PAGE> 31
AUTHORIZED AGENT AREA AND LOCATIONS
EXHIBIT A
AREA:
This Exhibit A sets forth the Area in which AGENT is authorized to
distribute CRS as an AGENT for BCN.
<TABLE>
<CAPTION>
AREA: LICENSEE:
- ----- ---------
<S> <C> <C> <C>
FCC Market No Market Name Primary City Licensee Name
Atlanta
234 Athens, GA Atlanta-Athens MSA Limited Partnership
017 Atlanta, GA Atlanta-Athens MSA Limited Partnership
371 GA l - Whitfield Georgia RSA No. 1 Limited Partnership
372 GA 2(B1) - Dawson Georgia RSA No. 2 Limited Partnership
372 GA 2(B3) - Dawson Atlanta-Athens MSA Limited Partnership
373 GA 3 - Chattooga Georgia RSA No. 3 Limited Partnership
374 GA 4(B3) - Jasper Northeastern Georgia RSA Limited Partnership
374 GA 4(B1) - Jasper Atlanta-Athens MSA Limited Partnership
375 GA 5(B1) - Haralson Atlanta-Athens MSA Limited Partnership
376 GA 6(B4) - Spalding American CellularCommunications Corp.
376 GA 6(B5) - Spalding Atlanta-Athens MSA Limited Partnership
South Florida
012 Miami, FL Florida Cellular Service, Inc.
072 West Palm Beach-
Boca Raton, FL Florida Cellular Service, Inc.
360 FL l(B2) - Collier Florida Cellular Service, Inc.
361 FL 2(B2) - Glades Florida RSA No. 2B L.P.
361 FL 2(B3) - Glades Florida Cellular Service, Inc.
370 FL 11(B1)-Monroe Florida Cellular Service, Inc.
</TABLE>
<PAGE> 32
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
EXHIBIT B
AGENT COMPENSATION
I
STANDARD UP-FRONT COMPENSATION
AGENT will be paid *** for each New Subscriber enrolled in the Area
under on a twelve month or longer digital service package having a minimum
monthly charge of more than *** or greater and for which BCN does not pay
reduced compensation as provided Article VIII. AGENT will be paid *** for
each new Subscriber enrolled in the Area under on a twelve month or longer
non-digital service package having a minimum monthly charge of *** or
greater and for which BCN does not pay reduced compensation as provided Article
VIII. AGENT will be paid *** for each new Subscriber enrolled in the Area
under on a twelve month or longer service package having a minimum monthly
charge of less *** and for which BCN does not pay reduced compensation as
provided in Article VIII.
A. The above compensation shall be paid within thirty (30) working days
following the close of the commission cycle in the Area in which the
Subscriber began using BCN's service. AGENT will not be paid for
Subscribers who subscribe to BCN's service outside of any area
specified in this Agreement. BCN reserves the right, at any time and
from time to time, to change the period used to determine payment of
AGENT compensation, provided, however, that such cycle shall not exceed
thirty (30) days. AGENT shall be notified in writing of any change in
such period.
If a Subscriber does not complete 150 days of continuous active
service (as defined in Section V of this Exhibit B) in the Area in
which the Subscriber began using BCN's service, AGENT shall be required
to repay to BCN the amount of compensation paid by BCN to AGENT for
such Subscriber. Such repayment may be deducted by BCN from amounts
otherwise owed to AGENT by BCN. If such amount is not deducted by BCN,
such repayment shall be made by AGENT to BCN within thirty (30) days
after BCN notifies AGENT that the Subscriber has failed to complete
[150] days of continuous active service in the Area in which the
Subscriber began using BCN's service.
B. In order to be paid within the time period set forth in Paragraph A
above, AGENT must submit all deposits, earnest payments and appropriate
paperwork to BCN no later than thirty (30) days from the date the
service request was submitted to BCN by the AGENT. No compensation will
be paid unless all paperwork is accurately completed to BCN's
satisfaction and in accordance with BCN's procedures. Additionally, BCN
shall not be obligated to pay any compensation to AGENT for any
Subscriber whom AGENT enrolls on BCN's CRS with any unapproved FCC type
Equipment or Equipment which does not meet the manufacturer's
recommendations. In order to ensure that compensation is
<PAGE> 33
appropriately credited to AGENT's account, AGENT must supply BCN with
the correct security code when activating Subscribers.
If, notwithstanding the above, BCN pays AGENT compensation for a
Subscriber before all paperwork is processed, BCN may, in its
discretion require AGENT to repay to BCN the amount of compensation
paid by BCN to AGENT for such Subscriber. Such repayment may be
deducted by BCN from amounts otherwise owed to AGENT by BCN. If such
amount is not deducted by BCN, such repayment shall be made by AGENT to
BCN within thirty (30) days after BCN notifies AGENT that the repayment
is due. After such repayment is made, if AGENT submits all completed,
appropriate paperwork for such Subscriber within ninety (90) days from
the date of such repayment, BCN shall repay to AGENT the amount due as
compensation for such Subscriber.
C. AGENT is responsible for obtaining and remitting to BCN the deposit, if
any, required from subscribers enrolled by AGENT. If BCN does not
receive such deposit within thirty (30) days of the Subscriber's
activation date, BCN may, in its discretion, require AGENT to pay to
BCN the amount of the deposit due for such Subscriber's account. Such
payment may be deducted by BCN from amounts otherwise owed to AGENT by
BCN. If such amount is not deducted by BCN, such payment shall be made
by AGENT to BCN within thirty (30) days after BCN notifies AGENT that
the payment is due.
D. A Subscriber who is enrolled by AGENT and has attained 150 days of
continuous active service and who then voluntarily disconnects and
reconnects within a 120 day period shall not be included in AGENT's
count of Gross Additional Customers and BCN shall not pay any
additional Up-Front compensation to AGENT for any such Subscriber.
If, notwithstanding the above, BCN pays AGENT compensation for a
Subscriber described in this Paragraph D, BCN may, in its discretion
require AGENT to repay to BCN the amount of compensation paid by BCN to
AGENT for such Subscriber. Such repayment may be deducted by BCN from
amounts otherwise owed to AGENT by BCN. If such amount is not deducted
by BCN, such repayment shall be made by AGENT to BCN within thirty (30)
days after BCN notifies AGENT that the repayment is due. Provided,
however, BCN shall not require AGENT to repay any compensation which
was paid for such Subscriber after one-hundred-twenty (120) days from
the date of the last service activation of such Subscriber.
Additionally, if a Subscriber changes telephone numbers or Equipment,
such Subscriber shall not be included in AGENT's count of Gross
Additional Customers because of such change, and BCN shall not pay any
additional compensation to AGENT for any such Subscriber because of
such change.
The provisions of this Paragraph D shall apply only to Subscriber
enrollment in the Area in which the Subscriber began using BCN's
service.
<PAGE> 34
E. A Subscriber who is enrolled by AGENT and has attained
one-hundred-fifty 150 days of continuous active service and who then is
disconnected for nonpayment and is subsequently reconnected shall not
be included in AGENT's count of Gross Additional Customers and BCN
shall not pay any additional Up-Front compensation to AGENT for any
such Subscriber.
F. Should BCN, in its sole discretion, determine that AGENT has inflated
or otherwise manipulated its count of Gross Additional Customers by
falsifying applications, adding nonexistent Subscribers, adding
Subscribers who do not use minimal amounts of airtime, or by any other
means or methods, then BCN shall, in addition to any other rights it
may have under this Agreement, have the right to collect from AGENT,
and AGENT agrees to pay to BCN, all payments made to AGENT by BCN for
each such Subscriber and all amounts due for unpaid bills for service
for each such Subscriber. AGENT agrees to pay any amounts due to BCN
within thirty (30) days after BCN provides evidence to AGENT of such
actions. Provided, however, BCN shall not require AGENT to repay any
compensation which was paid for such Subscriber after twelve (12)
months from such Subscriber's service activation date.
G. If AGENT activates a cellular telephone number and submits the number
to BCN, and on the date of submission of the number to BCN the
equipment is not installed or picked up by the Subscriber, or if the
Subscriber returns the equipment with less than five (5) minutes usage
(a "no install"), AGENT agrees to notify BCN of the no install by the
close of business on the second day following the submission of the
number to BCN. If AGENT fails to notify BCN of the no install within
the above time, AGENT agrees to pay BCN, or allow BCN to deduct from
compensation otherwise due to AGENT, the sum of $50.00 per no install
to compensate BCN for the costs incurred in processing the no install.
BCN shall also have the right to deduct any compensation which was paid
for such a no install. If BCN agrees to terminate a Subscriber
agreement, it shall not be a no install.
H. If AGENT fails to notify a Subscriber of any charges due for BCN's CRS,
including activation fees, access charges, or per minute charges, or if
AGENT misrepresents or provides inadequate information about any such
charges, the size of the coverage area, or anything else about BCN's
CRS to a Subscriber, BCN shall have the right to deduct from
commissions otherwise due to AGENT, or AGENT agrees to pay BCN upon
demand, an amount equal to any amount which BCN pays to or allows the
Subscriber for such charges of which the Subscriber was not notified or
which were misrepresented to the Subscriber. Further, if AGENT fails to
program any Subscriber Equipment correctly and according to
recommendations made and/or standards set by the manufacturer and/or
BCN (such recommendations and/or standards shall include but not be
limited to programming for expanded spectrum), BCN shall have the right
to deduct from compensation otherwise due to AGENT, or AGENT agrees to
pay BCN upon demand, an amount determined by BCN for such faulty
programming. BCN will notify AGENT in advance of such amount.
<PAGE> 35
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
I. If AGENT activates a number and the billed name and address reflect the
AGENT's name and/or address and not the actual Subscriber (or his or
her employer), BCN may charge back the compensation paid to AGENT and
AGENT agrees to be responsible for all unpaid bills for service for
such a number.
J. BCN may, in its discretion in the event ESN changes are excessive,
impose a charge upon AGENT for ESN changes. Prior to imposing any such
charge, BCN shall notify AGENT and allow AGENT thirty (30) days to
correct the problem. Such charge shall be in accordance with the ESN
charge guidelines specified by management in the Area.
K. No compensation will be paid to AGENT for numbers activated by, and in
the name of, AGENT, its Subagents, affiliates, employees, any person
included in the definition of AGENT, and the like.
II
RESIDUAL COMPENSATION FOR CUSTOMERS
ADDED PRIOR TO THE COMMENCEMENT OF THIS
AGREEMENT
A. Except as provided here, Residual Compensation shall be paid for
subscribers included in the subscriber bases of Let's Talk Cellular of
America Inc. f/k/a Let's Talk Cellular of America, Inc. and Cellular
Warehouse, Inc. as of the date of this agreement (the "Residual Bases")
and in accordance with the rate schedules applicable to those various
Residual Bases (the "Rates") (those rate schedules are attached to this
Exhibit "B" as Attachment B4). Subscribers activated after the date of
this agreement shall not be included in the Residual Bases. All
Subscribers included in the Residual Bases shall be deemed to have been
activated by Agent.
B. Residual Compensation for all the Residual Bases shall terminate upon
the first to occur of any of the following events:
(i) the expiration or termination of this Agreement;
(ii) the termination of the service activated for a Subscriber by
Agent on behalf of BCN;
(iii) ***;
(iv) ***;
(v) Agent establishing any new point of distribution in the Area
(other than the Laser
<PAGE> 36
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Electronics store to be acquired by AGENT) from which Agent
activates, sells or otherwise distributes *** other than
exclusively on behalf of BCN; ***
C. Residual Compensation for Residual Bases in each of the Non-Exclusive
Markets shall be reduced as follows:
(i) ***
(ii) ***
(iii) ***
(iv) ***
(v) ***
<PAGE> 37
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
***
(vi) ***
D. Residual Compensation for Residual Bases in Exclusive Markets shall be
paid as follows:
(i) ***
(ii) ***
(iii) ***
***
<PAGE> 38
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
***
E. Residual Compensation will be based on the aggregate number of
Subscribers billed during the month who have completed 150 days of
continuous active service. Residual Compensation shall be paid within
thirty (30) working days following the close of the last billing period
in the Area in which the Subscriber completed 150 days of continuous
active service. Should BMI implement split cycle billing, BMI reserves
the right, at any time and from time to time, to change the period used
to determine payment of Residual Compensation. AGENT shall be notified
in writing of any change in such period. Residual Compensation shall be
paid for each Subscriber until the Subscriber's mobile telephone number
is terminated or until this Agreement terminates, whichever event shall
first occur.
III
RESIDUAL COMPENSATION FOR NEW SUBSCRIBERS
ADDED AFTER COMMENCEMENT OF AGREEMENT
BMI will pay to AGENT Residual Compensation, as defined below, for all
Subscribers who activate service on or after the commencement date of this
Agreement as follows:
A monthly commission will commence with the first day of a Subscriber's
service but will be paid to AGENT retroactively after a Subscriber defined above
has completed 150 days of continuous active service. The amount of the monthly
commission AGENT will be paid *** of the amount BMI bills that Subscriber for
monthly access and airtime usage, EXCLUDING ancillary services, insurance,
roamer and Equipment charges, taxes and tolls ("Residual Compensation"). Tolls
shall be defined as calls which originate or terminate outside of the Area.
Residual Compensation will be based on the aggregate number of Subscribers
billed during the month who have completed 150 days of continuous active
service.
Residual Compensation shall be paid within thirty (30) working days
following the close of the last billing period in the Area in which the
Subscriber completed 150 days of continuous active service. Should BMI implement
split cycle billing, BMI reserves the right, at any time
<PAGE> 39
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
and from time to time, to change the period used to determine payment of
Residual Compensation. AGENT shall be notified in writing of any change in such
period.
Residual Compensation shall be paid for each Subscriber until the
Subscriber's mobile telephone number is terminated or until this Agreement
terminates, whichever event shall first occur.
IV
PAYMENT FOR SERVICE OPTIONS
BCN reserves the right to determine whether AGENT will receive
compensation for service options when those options are introduced or
implemented. Payment for service options shall be determined by the appropriate
BCN Manager in the Area.
V
COMPENSATION MODIFICATION
Starting *** , BCN shall have the right to adjust up-front compensation
in accordance with the following:
***
VI
GENERAL
A. Continuous active service refers to the use of BCN's CRS without
interruption, either voluntary or involuntary.
For purposes of calculating continuous active service, a Subscriber who
is disconnected for nonpayment and is reconnected to BCN's service in
the same billing cycle shall be considered as having continuous active
service.
B. If AGENT receives Equipment under any BCN program and invoices are not
timely paid, or if AGENT owes BCN amounts for any other reason,
including, but not limited to, all amounts due for unpaid bills for
cellular service provided to AGENT or its officers or principals, BCN
reserves the right to deduct such unpaid amounts from AGENT's
compensation.
AGENT understands that it will be invoiced for lost, stolen and damaged
Equipment
<PAGE> 40
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
which has been shipped by BCN or BCN's supplier in accordance with
standard practices.
C. If AGENT believes there are any discrepancies in commission payments,
AGENT must submit a request for reconciliation within ninety (90) days
from the date of such payment.
B. If BCN believes that AGENT may cease doing business as a BCN agent or
if BCN determines that this Agreement may terminate for any other
reason, then BCN may, in its sole discretion, withhold compensation
otherwise due to AGENT in order to cover chargebacks or other
deductions from AGENT's compensation that BCN may make for Subscribers
who do not complete 150 days of continuous active service. BCN shall
inform AGENT in such a case of the reasons for withholding
compensation. The amount of such commissions to be withheld shall not
exceed five (5) times the average monthly commissions paid to AGENT.
VII
COOPERATIVE ADVERTISING
Agent shall also be paid *** per new Subscriber activation on a twelve
month or longer service package having a fixed monthly charge of *** or greater
as cooperative advertising reimbursement ("Coop Dollars"). All such funds shall
be used towards advertising BCN's CRS. BCN agrees that Coop Dollars payable
hereunder shall be *** in accordance with the provisions of this Exhibit B,
Section I. Agent agrees that all advertising paid for with Coop Dollars shall
conform to BCN's cooperative advertising guidelines and that no such advertising
shall include any reference to any other Commercial Mobile Radio Service
Provider. Agent specifically agrees that in Georgia where Agent shall be
representing both BellSouth Mobility Inc. CRS and Airtouch of Georgia CRS, that
*** whether paid for with Coop Dollars or not. Agent agrees that if in the
opinion of BCN, Agent's advertising does not conform to BCN's cooperative
advertising guidelines, BCN may suspend temporarily or permanently payment of
Coop Dollars after thirty (30) days prior written notice from BCN to AGENT of
the nature of such non-conformance and the failure of AGENT to correct such
non-conformance. Agent agrees to provide to BCN on a monthly basis evidence that
Agent has spent Coop Dollars on advertising conforming to BCN's cooperative
advertising guidelines.
<PAGE> 41
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
B1
[CELLULAR WAREHOUSE GEORGIA LOCATIONS]
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alpharetta (AL) *** 770-687-1400 770-887-0202 North Point Market North Point Pkwy, Ste 910
Alpharetta, GA 30202
- ---------------------------------------------------------------------------------------------------------------------------------
Athens (AH) *** 708-552-1500 705-862-1599 Athens West 8190 Atlanta Hwy., Suite 11
Shopping Center Athens, GA 80805
- ---------------------------------------------------------------------------------------------------------------------------------
Austell (AU) *** 770-944-7899 770-739-5335 Heritage Hills 1355 East West Conn, Ste. B
Austell, GA 30001
- ---------------------------------------------------------------------------------------------------------------------------------
Buckhead (BU) *** 404-240-0102 404-355-0804 Peachtree Battle 2391 Peachtree Road
Promenade Atlanta, GA 30305-4138
- ---------------------------------------------------------------------------------------------------------------------------------
Carrollton (CT) *** 770-838-8000 770-838-9933 Free Standing Bldg. 490 Bankhead Hwy
Carrollton, GA 30917
- ---------------------------------------------------------------------------------------------------------------------------------
Cobb (CO) *** 770-585-8900 770-585-8001 Market Plaza 1255 Johnson Ferry Road
Marietta, GA 30068-2728
- ---------------------------------------------------------------------------------------------------------------------------------
Covington (CV) *** 770-385-9999 770-784-0780 Covington Crossing 8189 Hwy 278 NW Suite 15
Covington, GA 30209
- ---------------------------------------------------------------------------------------------------------------------------------
Cumming (CU) *** 770-886-7878 770-888-7877 Lakeland Plaza 550 Lakeland Plaza Suite 20
Cumming, GA 30130
- ---------------------------------------------------------------------------------------------------------------------------------
Dunwoody (DU) *** 770-893-1858 770-983-6454 Dunwoody Place II 8728 Roswell Road Suite 5
Dunwoody, GA 30380
- ---------------------------------------------------------------------------------------------------------------------------------
Fayetteville (FA) *** 770-461-4042 770-461-7738 Hwy 85 Plaza 1381 A Hwy 85 North
Fayetteville, GA 30215
- ---------------------------------------------------------------------------------------------------------------------------------
Kennesaw (KE) *** 770-499-8290 770-499-8210 Toys R Us Shopping Ctr 501 Roberts Court Suite 8
Kennesaw, GA 30144
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrenceville (LA) *** 770-983-9892 770-883-8181 Springfield Park 585 Duluth Hwy Suite 704
Lawrenceville, GA 30245
- ---------------------------------------------------------------------------------------------------------------------------------
Norcross (NO) *** 770-417-1111 770-408-1807 North Belt Business 8135 Jimmy Carter Blvd.
Park Norcross, GA 30071
- ---------------------------------------------------------------------------------------------------------------------------------
Peachtree Ctr (PE) *** 404-884-5857 404-584-6010 Peachtree Center Mall 231 Peachtree St NE Ste 38
Atlanta, GA 30303
- ---------------------------------------------------------------------------------------------------------------------------------
Smyrna *** 770-553-0334 770-553-8502 3833 B South Cobb Drive
Smyrna, GA 30080
- ---------------------------------------------------------------------------------------------------------------------------------
Snellville (SN) *** 770-972-8552 770-872-5188 Mountain View Village 4002 US Hwy 78
Snellville, GA 30278
- ---------------------------------------------------------------------------------------------------------------------------------
Tucker (TU) *** 770-493-4600 770-493-8050 Briarcliff Village 2110 Henderson Mill Road
Atlanta, GA 30345
- ---------------------------------------------------------------------------------------------------------------------------------
Woodstock *** 770-517-5083 770-517-4267 The Shop at Fowler 9020 Hwy 92 Suite 110
Crossing Woodstock, GA 30189
- ---------------------------------------------------------------------------------------------------------------------------------
Harris Tweeter ***
Kiosks 3 Harris Teeter Stores Metro Atlanta
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 42
B2
[LET'S TALK CELLULAR GEORGIA LOCATIONS]
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
MALL NAME STORE ADDRESS STORE CITY STORE PHONE STORE FAX
- ---------------------------------------------------------------------------------------------------------------------
Lenox Square 3393 Peachtree Road NE Atlanta (215) 612-9770 (215) 612-9371
- ---------------------------------------------------------------------------------------------------------------------
Cumberland Mall 1000 Cumberland Mall Atlanta (215) 612-9770 (215) 612-9371
- ---------------------------------------------------------------------------------------------------------------------
Georgia Square 3700 Atlanta Highway Athens (719) 573-2420 (719) 573-2421
- ---------------------------------------------------------------------------------------------------------------------
Peachtree Center 231 Peachtree Street Atlanta (719) 528-8050 (719) 260-9878
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
QUOTAS ***
***
<PAGE> 44
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENT B4
RESIDUAL COMPENSATION FOR NEW SUBSCRIBERS
ON AGENT'S CUSTOMER BASE AS OF THE END OF THE
DECEMBER 1993/JANUARY 1994 COMMISSION CYCLE
MARKET COMMISSION RATE
- ------ ---------------
Atlanta ***
Atlanta (Southern Cellular Base) ***
Nashville ***
Memphis ***
Jacksonville ***
Orlando ***
Birmingham ***
South Florida ***
South Florida (Cellular Trading Base) ***
RESIDUAL COMPENSATION FOR NEW SUBSCRIBERS
ADDED AFTER DECEMBER 1993/JANUARY 1994 COMMISSION CYCLE
BUT PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT
ATLANTA
Number of Active New
Subscribers Who Have
Completed 150 Days of
Continuous Active
Service Added to
AGENT's Base Since
the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------
0 - 3500 ***
3501 - 7000 ***
7001 - 12000 ***
12001 - 20000 ***
20001 and above ***
SOUTH FLORIDA
The South Florida post December 1993/January 1994 base shall be divided
into four groups for residual purposes. Group One shall be the Cellular Trading
Activations during the period January 1994
<PAGE> 45
***CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
through November 1996 on the Miami MSA system. Group Two shall be the Cellular
Trading Activations during the period January 1994 through November 1996 on the
West Palm Beach MSA system. Group Three shall be the Let's Talk Cellular &
Wireless, Inc. activations. Group Four shall be all other post December
1993/January 1994 activations by Cellular Warehouse. The Let's Talk Cellular &
Wireless, Inc. group shall be paid at [5.5%]. Residual compensation shall be
paid for each group, other than Let's Talk Cellular & Wireless, Inc., without
regard to the number of subscribers in the other groups in accordance with the
following schedule:
Number of Active New
Subscribers Who Have
Completed [150] Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------
0 - 3499 ***
3500 - 5499 ***
5500 - 6299 ***
6300 - 6999 ***
7000 and above ***
NASHVILLE
Number of Active New
Subscribers Who Have
Completed [150] Days of
Continuous Active Service
Added to AGENT's Base
Since the December 1994 Residual
Commission Cycle Percent
- ------------------ -----------
0 - 999 ***
1000 - 2499 ***
2500 - 3999 ***
4000 - 5999 ***
6000 and above ***
<PAGE> 46
<TABLE>
<S> <C> <C>
Orlando
060 Orlando, FL Orlando SMSA Limited Partnership
Melbourne
137 Melbourne-Titusville- Orlando SMSA Limited Partnership
Palm Bay
Daytona
146 Daytona Beach, FL Orlando SMSA Limited Partnership
Jacksonville
Jacksonville, FL Jacksonville MSA Limited Partnership
Memphis
036 Memphis, TN/R/MS Memphis SMSA Limited Partnership
Nashville
046 Nashville-Davidson, TN Nashville/Clarksville MSA Limited Partnership
209 Clarksville-Hopkinsville, Nashville/Clarksville MSA Limited Partnership
TN/KY
647 TN 5(B3) - Fayette Nashville/Clarksville MSA Limited Partnership
651 TN 9- Maury Nashville/Clarksville MSA Limited Partnership
Birmingham
041 Birmingham, AL Alabama Cellular Service, Inc.
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C>
Huntsville
120 Huntsville, AL Huntsville MSA Limited Partnership
307 AL 1(B1) - Franklin Decatur RSA Limited Partnership
</TABLE>
AGENT may open new sales facilities with the Area.
