<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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O2WIRELESS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
GEORGIA 7389 58-2467466
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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440 INTERSTATE PARKWAY NORTH
ATLANTA, GEORGIA 30339
(770) 763-5620
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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STEPHEN F. JOHNSTON, SR.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
O2WIRELESS SOLUTIONS, INC.
440 INTERSTATE PARKWAY NORTH
ATLANTA, GEORGIA 30339
(770) 763-5620
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
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<S> <C>
TERRY F. SCHWARTZ, ESQ. J. VAUGHAN CURTIS, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP ALSTON & BIRD LLP
PROMENADE II, SUITE 3100 1201 WEST PEACHTREE STREET
1230 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30309
ATLANTA, GEORGIA 30309 (404) 881-7000
(404) 815-3500 (404) 881-4777 (FAX)
(404) 685-7031 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.0001 par value.............................. $86,250,000 $22,770
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(1) Includes shares that may be sold by the Company and certain
shareholders of the Company upon exercise of the Underwriters'
over-allotment option. See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE
ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
SHARES
[LOGO]
O2WIRELESS SOLUTIONS, INC.
COMMON STOCK
This is the initial public offering of common stock by o2wireless
Solutions, Inc. We are offering shares of our common stock and
some of our shareholders are offering shares of our common stock.
We estimate that the initial public offering price will be between $
and $ per share. We will not receive any of the proceeds from the sale
of common stock by the selling shareholders.
------------------
There is currently no public market for the common stock. We have applied
to list our common stock on the Nasdaq National Market under the symbol "OTWO."
------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before offering expenses, to o2wireless
Solutions................................................. $ $
Proceeds to selling shareholders............................ $ $
</TABLE>
The underwriters may also purchase up to additional shares
of common stock from us and the selling shareholders at the offering price, less
the underwriting discount, within 30 days following the date of this prospectus
to cover over-allotments.
Delivery of the shares of common stock will be made on or about ,
2000.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CHASE H&Q CREDIT SUISSE FIRST BOSTON
THOMAS WEISEL PARTNERS LLC
, 2000
<PAGE> 3
Graphics depicting o2wireless Solutions' service offerings and integrated
network solution divided into four categories (plan, design, deploy, maintain)
followed by the following language:
o2wireless Solutions, Inc. is a leading provider of integrated network
solutions for the global wireless telecommunications industry. We offer
expertise in major telecommunications technologies, including voice, data,
broadband and mobile commerce applications. We also offer a full suite of
business planning and consulting services to wireless, wireline and
emerging broadband telecommunications industry participants. Since
inception, we have contributed to the design and implementation of over
47,000 communications facilities in all 50 U.S. states and 26 countries.
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Forward-Looking Statements.................................. 11
Use of Proceeds............................................. 11
Dividend Policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Selected Consolidated and Pro Forma Financial Data.......... 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 23
Management.................................................. 32
Related Party Transactions.................................. 38
Principal and Selling Shareholders.......................... 41
Description of Capital Stock................................ 43
Shares Eligible for Future Sale............................. 47
Plan of Distribution........................................ 49
Legal Matters............................................... 51
Experts..................................................... 51
Where You Can Find More Information......................... 52
Index to Financial Statements............................... F-1
</TABLE>
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" beginning on page 5 and the
financial statements beginning on page F-1, before making an investment
decision.
COMPANY OVERVIEW
o2wireless Solutions provides comprehensive integrated network solutions to
all sectors of the global wireless telecommunications industry. We believe that
our integrated service offering enables our customers to rapidly plan, design,
deploy and maintain their wireless networks. Our vendor and technology
neutrality and understanding of all major wireless and wireline
telecommunications technologies allows us to provide unbiased evaluations and
recommendations for our customers. Our proprietary processes and technologies
include Virtual Project Manager, a Web-based project management tool, and
E-Site, our project tracking software. These tools enable us to capitalize on
prior project experience and deliver high-quality network solutions. Because we
integrate services across the wireless and wireline industry segments, we have
the ability to provide significant time-to-market advantages for our customers
and to manage their needs throughout their entire business development.
In 1999, we completed projects for more than 125 customers and were
involved in the development of over 11,000 communications facilities. To date,
we have been involved in the design and implementation of over 47,000
communications facilities. Our customers include: wireless and broadband
carriers, such as Adelphia Business Solutions, Bell Atlantic Mobile, BellSouth,
Knology, Nextel and Sprint; equipment vendors, such as Ericsson, Motorola and
Nortel Networks; and tower companies such as American Tower, Crown Castle and
SpectraSite. We have completed projects in all 50 U.S. states and 26 countries
including Brazil, China, Germany, Honduras, Israel, Japan, Jordan, Mexico,
Puerto Rico and Russia.
OUR MARKET OPPORTUNITY
According to Forrester Research, wireless communications has been the
fastest growing segment of the telecommunications sector over the past seven
years. We believe that this growth is driven in part by:
- global deregulation and privatization of the telecommunications industry;
- dramatic advances in wireless and wireline technologies;
- increased availability and usage of wireless technologies;
- increased demand for broadband wireless applications, including wireless
Internet and mobile commerce;
- structural changes in the industry driving service providers to offer
comprehensive telecommunications services; and
- a trend towards replacing fixed line telecommunications services with
wireless solutions.
According to Forrester Research, the U.S. wireless subscriber base will
grow to over 110 million by 2003 from 77 million in 1999, generating industry
revenues in excess of $46.1 billion. The number of subscribers is expected to
further increase to 143 million by 2005. International Data Corporation further
estimates that the international wireless subscriber base will grow to over 1.1
billion by 2003 from 303 million in 1998. A new wave of telecommunications
service providers is beginning to offer high speed fiber optic networks packaged
with broadband wireless technologies to deliver enhanced telecommunications
services and features to new customers and markets. According to Forrester
Research, total spending for wireless data services in the U.S. alone is
expected to generate $4.2 billion in revenue by 2003 and $8.4 billion by 2005.
1
<PAGE> 6
INTEGRATED SERVICE OFFERING
We provide our customers with comprehensive integrated solutions. We
customize our services to meet the individual needs of our customers by offering
bundled and unbundled packages of our core services. Through our program
management services, we help our customers effectively manage the process of
planning, designing, deploying and maintaining wireless networks.
PLANNING SERVICES. We provide pre-deployment planning services for all the
steps involved in developing or refining a network or deployment strategy. Our
business consultants analyze the financial, engineering, competitive market and
technology issues applicable to a proposed network project. Our services include
defining subscriber profiles and target markets, usage forecasting, market
planning and competition, and regulatory, geographical and network configuration
analysis.
DESIGN SERVICES. We provide a full range of services for the design of
wireless telecommunications networks, including the related wireline components.
Based on analyses of traffic patterns, population density, topography and
propagation environment, we provide radio frequency engineering and network
design services tailored to the individual market. These include determining the
optimal placement of network equipment and use of radio frequencies. We also
provide fixed network engineering services, including specialized design
services for packet-switched and IP router-based network elements.
DEPLOYMENT SERVICES. We provide our customers with comprehensive site
development and site audit services, including site feasibility and zoning
studies, lease negotiations, civil and structural engineering and third party
vendor management. We install all major types of wireless and wireline
telecommunications equipment, including base station electronics, antennas and
ancillary equipment. We also assist our customers in moving incumbent users of
their licensed spectrum to new frequencies by providing point-to-point and
point-to-multipoint line-of-sight microwave engineering and support services.
MAINTENANCE SERVICES. Our network maintenance services are comprised of
post-deployment radio frequency optimization services, network operations and
maintenance services, and network monitoring. We also perform radio frequency
testing relating to employee safety in the vicinity of radiowave emitting
devices, as increasingly mandated for certain of our customers by federal
regulatory authorities such as OSHA and the FCC. We can also assume
responsibility for the day-to-day operation and maintenance of our customers'
telecommunications networks.
OUR GROWTH STRATEGY
Our goal is to be the leading independent provider of integrated
full-service network solutions to the global wireless telecommunications
industry. Our growth strategy includes the following:
- Develop new customers and cross-market to existing customers;
- Remain at the forefront of emerging telecommunications technologies;
- Attract, retain and develop high-quality employees;
- Leverage prior experience; and
- Pursue targeted acquisitions.
OUR HISTORY
We were incorporated in 1991 under the name American Communications
Construction, Inc. In November 1997, we changed our name to Clear Communications
Group, Inc., and in July 1998 we reorganized our corporate structure by creating
a holding company, Clear Holdings, Inc. In May 2000, we changed our name from
Clear Holdings to o2wireless Solutions, Inc. Our principal executive offices are
located at 440 Interstate Parkway North, Atlanta, Georgia 30339 and our
telephone number is (770)763-5620.
2
<PAGE> 7
THE OFFERING
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Common stock offered by o2wireless Solutions......... shares
Common stock offered by selling shareholders......... shares
Common stock to be outstanding after the offering.... shares
Use of proceeds...................................... - to repay indebtedness under our credit
agreement of approximately $22 million;
- to redeem our senior subordinated notes
for approximately $13 million;
- to repay other indebtedness of
approximately $4 million;
- to redeem our Series D Preferred Stock
for approximately $7.9 million; and
- to use the balance of the proceeds for
working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol............... "OTWO"
</TABLE>
Unless otherwise noted, the information in this prospectus assumes that all
outstanding shares of convertible preferred stock are converted into common
stock upon the closing of this offering and that the underwriters do not
exercise their option to purchase an additional shares of common
stock from us and the selling shareholders to cover over-allotments, if any.
The number of shares of common stock to be outstanding does not include the
following:
- 663,358 shares subject to options outstanding as of April 30, 2000, at a
weighted average exercise price of $3.79 per share;
- 413,285 shares of common stock available for future issuance under our
1998 Stock Option Plan; and
- warrants to purchase 2,675,954 shares of common stock at an exercise
price of $.01 per share.
Please see "Capitalization" for a more complete discussion regarding the
outstanding shares of our common stock, our preferred stock, the options and
warrants to purchase our common stock and related matters.
3
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table presents summary financial data. You should read this
information together with the financial statements and the notes to those
statements appearing elsewhere in this prospectus and the information under
"Selected Consolidated and Pro Forma Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1998 1999
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ACTUAL PRO FORMA(1)
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(UNAUDITED)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues..................................... $ 6,003 $ 24,485 $ 48,631 $ 48,631
Operating (loss) income...................... (1,360) (1,471) 1,075 1,075
(Loss) income before extraordinary item and
cumulative effect of change in accounting
principle.................................. (1,360) (2,403) 60 60
Net loss..................................... (1,360) (2,403) (317) (317)
Preferred stock dividends and accretion of
discount on redeemable preferred stock..... (9) (413) (632) (119)
Net loss applicable to common stockholders... (1,369) (2,816) (949) (436)
======== ======== ======== ========
Basic and diluted loss per common share
before extraordinary item and cumulative
effect of change in accounting principle... $ (0.57) $ (1.05) $ (0.21) $ (.01)
======== ======== ======== ========
Basic and diluted loss per common share...... $ (0.57) $ (1.05) $ (0.35) $ (.08)
======== ======== ======== ========
Basic and diluted weighted average shares.... 2,388,218 2,682,252 2,712,717 5,248,801
======== ======== ======== ========
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<CAPTION>
DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(UNAUDITED) (UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 2,509 $ 2,509 $
Working capital..................................... 12,009 12,009
Total assets........................................ 59,473 59,473
Total debt, including common stock put warrants..... 35,062 35,062
Redeemable preferred stock.......................... 10,960 2,613
Total shareholders' (deficit) equity................ (3,004) 5,344
</TABLE>
- ------------------------------
(1) The pro forma column assumes the automatic conversion of all outstanding
shares of our Class A Preferred Stock and our Series C Preferred Stock into
3,184,707 shares of common stock, as of the later of January 1, 1999 or the
date of issuance.
(2) The pro forma as adjusted column reflects the receipt by us of the net
proceeds of approximately $ million from the sale of
shares of common stock in this offering at the initial public offering price
of $ per share, after deducting estimated underwriting discounts
and commissions and estimated offering expenses. See "Capitalization" and
"Use of Proceeds."
4
<PAGE> 9
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. Our business, financial condition and
operating results could be adversely affected by any of the following factors,
in which event the trading price of our common stock could decline, and you
could lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS
OUR RESULTS OF OPERATIONS WILL SUFFER IF WE ARE UNABLE TO MANAGE OUR GROWTH
EFFECTIVELY.
Our business is experiencing a period of significant expansion, and we
anticipate that further expansion will be required to address potential growth
in the demand for our services. We expect this expansion to continue to place a
significant strain on our managerial, operational and financial resources. In
order to manage this growth in our business, we need to hire a substantial
number of personnel in the near future, including project management,
engineering and direct sales and marketing personnel. The actual number of
employees we will need to hire is not determinable and may fluctuate drastically
depending on the size and number of new contracts we receive and any changes to
the scope of our existing projects.
To manage the expected growth of our operations and personnel, we will be
required to:
- improve existing and implement new operational, financial and management
controls, reporting systems and procedures; and
- integrate, train, motivate and manage employees.
If we fail to address these issues, or if our expected growth does not
materialize, our business and results of operations may suffer.
WE MAY NOT BE ABLE TO HIRE OR RETAIN A SUFFICIENT NUMBER OF QUALIFIED ENGINEERS,
TECHNICIANS, AND PROJECT MANAGERS TO SUSTAIN OUR GROWTH, MEET OUR CONTRACTUAL
COMMITMENTS OR MAINTAIN THE QUALITY OF OUR SERVICES.
Our future success will depend on our ability to attract and retain
additional highly skilled engineering and technical personnel. Experienced
engineers, technicians, project managers and other highly skilled employees are
in great demand. Competition for such personnel is intense, and we may be unable
to attract sufficiently qualified individuals in adequate numbers to meet the
demand for our services.
OUR OPERATING RESULTS MAY SUFFER BECAUSE OF COMPETITION IN THE WIRELESS SERVICES
INDUSTRY.
The telecommunications network services market is highly competitive and is
served by numerous companies. Many of these competitors have significantly
greater financial, technical and marketing resources, generate greater revenues
and have greater name recognition and international experience than we. We
believe that the principal competitive factors in our market include the ability
to deliver our services within budget and on time, reputation, accountability,
project management expertise, industry experience, pricing and expertise in new
and evolving technologies. We may not be able to compete effectively on these or
other bases, and, as a result, our business and results of operations may be
adversely affected.
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<PAGE> 10
OUR QUARTERLY RESULTS MAY FLUCTUATE. IF WE FAIL TO MEET EARNINGS ESTIMATES, OUR
STOCK PRICE COULD DECLINE.
Our quarterly and annual operating results have fluctuated in the past and
may vary in the future due to a variety of factors, including:
- the timing and size of network deployment by our customers and the timing
and size of orders for network equipment built by our vendor customers;
- fluctuations in demand for our services;
- the length of sales cycles;
- reductions in the prices of services offered by our competitors;
- costs of integrating technologies or businesses; and
- telecommunications market conditions and general economic conditions.
Due to these factors, our quarterly revenues, expenses and results of
operations could vary significantly in the future. You should take these factors
into account when evaluating past periods, and, because of the potential
variability in our quarterly results, you should not rely upon results of past
periods as an indication of our future performance. In addition, because our
operating results may vary significantly from quarter to quarter, results may
not meet the expectations of securities analysts and investors, and this could
cause the price of our common stock to decline significantly.
WE RECOGNIZE REVENUES ON MOST OF OUR CONTRACTS ON A PERCENTAGE-OF-COMPLETION
BASIS, WHICH COULD CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE.
We recognize revenues for our fixed-price contracts using the
percentage-of-completion method. Under the percentage-of-completion method, in
each period we recognize expenses as they are incurred and we recognize revenue
based on a comparison of the costs incurred to date for the project to the then
estimated total costs of the project. Accordingly, the revenue we recognize in a
given quarter depends on the costs we have incurred for individual projects and
our then current estimate of the total remaining costs to complete individual
projects. If in any period we significantly increase our estimate of the total
costs to complete a project, we may recognize very little or no additional
revenue with respect to that project. As a result, our gross margin in such
period and in future periods may be significantly reduced and in some cases we
may recognize a loss on individual projects prior to their completion. To the
extent that our estimates fluctuate over time or differ from actual
requirements, gross margins in subsequent quarters may vary significantly from
our estimates and could harm our results of operations.
OUR BUSINESS MAY BE HARMED IF WE INCREASE OUR STAFFING LEVELS IN ANTICIPATION OF
A PROJECT AND UNDERUTILIZE OUR PERSONNEL BECAUSE SUCH PROJECT IS DELAYED,
REDUCED OR TERMINATED.
Since our business is driven by large, and sometimes multi-year, contracts,
we forecast our personnel needs for future projected business. If we increase
our staffing levels in anticipation of a project and such project is delayed,
reduced or terminated, we may underutilize these additional personnel, which
would increase our general and administrative expenses and could adversely
affect our results of operations. On some projects we may contract a portion of
the work to third-party subcontractors. If our third-party subcontractors fail
to complete projects in a timely manner and fail to provide the quality we
expect in our service offerings, our reputation and results of operations could
be adversely affected.
6
<PAGE> 11
OUR BUSINESS STRATEGY INCLUDES THE POSSIBLE ACQUISITION OF OTHER BUSINESSES, BUT
WE MAY NOT BE ABLE TO IDENTIFY APPROPRIATE ACQUISITION CANDIDATES OR PROPERLY
INTEGRATE THEIR BUSINESSES.
From time to time, we may consider acquisitions of other businesses. We
expect to face competition for acquisition candidates, which may limit the
number of acquisition opportunities and may lead to higher acquisition prices.
Also, we may not be able to identify, acquire or manage additional businesses
profitably or to successfully integrate the acquired businesses with our
business. Businesses that we acquire may have liabilities that we underestimate
or do not discover during our pre-acquisition investigations. Some of the
liabilities of the businesses we acquire, even if we do not expressly assume
them, may be imposed on us as the successor to the business. Further, each
acquisition involves a number of other special risks that could cause the
acquired business to fail to meet our expectations. For example:
- the acquired business may not achieve expected results;
- we may not be able to retain key personnel of the acquired business;
- we may incur substantial, unanticipated costs, delays or other
operational financial problems when we try to integrate the business with
our own;
- our management's attention may be diverted; or
- our management may not be able to manage the combined entity effectively
or to make acquisitions and grow our business internally at the same
time.
We cannot predict the timing, size or success of any future acquisitions,
our ability to integrate any acquired businesses, or their associated capital
requirements. In addition, we may not be able to obtain acquisition financing
when required, or such financing may only be available on terms and conditions
that are unacceptable to us. If we fail to address the above issues, or if we
are unable to fund our acquisition plans, our growth could be limited.
IF WE FAIL TO PROPERLY MANAGE ANY FUTURE INTERNATIONAL EXPANSION, IT COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
We may expand internationally. As a result, we may need to establish
international operations, hire additional personnel and establish relationships
with additional suppliers and customers. This expansion could require
significant financial resources and management attention and could have a
negative effect on our results of operations. In addition, our international
business may be subject to a variety of risks, including, among other things,
increased costs associated with maintaining international marketing efforts,
applicable government regulation, fluctuations in foreign currency, and
difficulties in collecting international accounts receivable.
WE HAVE RELIED AND CONTINUE TO RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A
SIGNIFICANT PORTION OF OUR REVENUES. LOSING ONE OR MORE OF THESE CUSTOMERS MAY
ADVERSELY AFFECT OUR REVENUES.
We generate a significant portion of our revenues from a limited number of
customers, and we expect that this will continue for the foreseeable future. For
example, for the year ended December 31, 1999, revenues from each of our three
most significant customers, Nortel Networks, Sprint and Carolina PCS, accounted
for more than 10% of our revenues, and collectively these customers accounted
for approximately 35% of our revenues. Further, our contracts with customers are
for limited terms, and our customers may discontinue use of our services upon
short notice. If we lose any of our large customers, or if we are unable to add
new large customers, our revenues will not increase as expected. In addition,
our reputation and brand name could be harmed.
IF OUR CUSTOMERS DO NOT RECEIVE SUFFICIENT FINANCING, OUR BUSINESS MAY BE
SERIOUSLY HARMED.
Some of our customers and potential customers have limited operating
histories and financial resources. These customers often must obtain significant
amounts of financing to fund their
7
<PAGE> 12
operations and deploy their networks. We frequently work with such companies
prior to their receipt of financing. If these customers fail to receive adequate
financing and therefore fail to make timely payments to us, our results of
operations may be harmed.
A LOSS OF ONE OR MORE OF OUR KEY CUSTOMERS OR DELAYS IN PROJECT TIMING FOR SUCH
CUSTOMERS COULD CAUSE A SIGNIFICANT DECREASE IN OUR REVENUES.
We anticipate that some of our key customers will change in the future as
current projects are completed and new ones are begun. The services required by
any one customer can be limited by a number of factors, including industry
consolidation, technological developments, economic slowdown and internal budget
constraints. None of our customers is obligated to purchase additional services,
and most of our active customer contracts could be terminated without cause or
penalty by the customer on notice to us of 30 days or less. As a result of these
factors, the volume of work performed for specific customers is likely to vary
from period to period, and a major customer in one period may not use our
services in a subsequent period. Accordingly, we cannot be certain that present
or future customers will not terminate their network service arrangements with
us or significantly reduce or delay their projects. Any termination, change,
reduction or delay in our projects could seriously harm our business and results
of operations.
WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, MARKET CONDITIONS AND
INDUSTRY DEVELOPMENTS TO MAINTAIN OR GROW OUR REVENUES.
The market for wireless and other network system design, deployment and
management services is characterized by rapid change and technological
improvements. Our future success will depend in part on our ability to enhance
our current service offerings to keep pace with technological developments and
to address increasingly sophisticated customer needs. We may not be successful
in developing and marketing in a timely manner service offerings that respond to
the technological advances by others and our services may not adequately or
competitively address the needs of the changing marketplace. If we are not
successful in responding in a timely manner to technological change, market
conditions and industry developments, our revenues may decline and our business
may be harmed.
OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF
OUR MANAGEMENT TEAM.
We believe that our success depends to a significant degree upon the
continued contributions of our executive officers and other key personnel, both
individually and as a group. Our future performance will be substantially
dependent on our ability to retain and motivate them. The loss of the services
of any of our executive officers, particularly Stephen F. Johnston, Sr., our
Chairman and Chief Executive Officer, Michael W. Riley, our President and Chief
Operating Officer, or William J. Loughman, our Chief Financial Officer, could
prevent us from executing our business strategy.
WE MAY ENCOUNTER POTENTIAL COSTS OR CLAIMS RESULTING FROM PROJECT PERFORMANCE.
Many of our engagements involve projects that are significant to the
operations of our customers' businesses. Our failure to meet a customer's
expectations in the planning or implementation of a project or the failure of
unrelated third party contractors to meet project completion deadlines could
damage our reputation and adversely affect our ability to attract new business.
We frequently undertake projects in which we guarantee performance based upon
defined operating specifications or guaranteed delivery dates. Unsatisfactory
performance or unanticipated difficulties or delays in completing such projects
may result in a direct reduction in payments to us, or payment of damages by us,
which could harm our business.
8
<PAGE> 13
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS IS DEPENDENT ON CONTINUED GROWTH IN THE DEPLOYMENT OF WIRELESS
NETWORKS, AND OUR REVENUES WILL BE REDUCED IF THERE ARE DELAYS IN SUCH
DEPLOYMENT.
The wireless telecommunications industry has experienced a dramatic rate of
growth both in the United States and internationally. If the rate of growth
slows and carriers reduce their capital investments in wireless infrastructure
or fail to expand into new geographies, our business and results of operations
would suffer. A portion of our revenue is generated from new licensees seeking
to deploy their networks. To date, the pace of network deployment has sometimes
been slower than expected, due in part to difficulties experienced by holders of
licenses in raising the necessary financing, and there can be no assurance that
future bidders for licenses will not experience similar difficulties. There has
also been substantial regulatory uncertainty regarding payments owed to the U.S.
Government by past successful wireless bidders, and such uncertainty has delayed
network deployments. In addition, factors such as allegations of health risks
associated with the use of cellular phones, as well as future legislation, legal
decisions and regulation, may slow or delay the deployment of wireless networks,
which, in turn, could harm our business.
OUR SUCCESS IS DEPENDENT ON THE CONTINUED TREND TOWARD OUTSOURCING
TELECOMMUNICATIONS NETWORK SERVICES.
Our success is dependent on the continued trend by telecommunications
companies to outsource their network design, deployment and management needs. If
telecommunications companies and network equipment vendors elect to perform more
network design or deployment services themselves, our revenues may decline and
our business and results of operations would be harmed.
THE CONSOLIDATION OF EQUIPMENT VENDORS OR CARRIERS COULD ADVERSELY AFFECT OUR
BUSINESS.
Recently, the wireless telecommunications industry has been characterized
by significant consolidation activity. This consolidation may lead to a greater
ability among equipment vendors and carriers to provide a full line of network
services and could simplify integration and installation, which may lead to a
reduction in demand for our services. Moreover, the consolidation of equipment
vendors or carriers could have the effect of reducing the number of our current
or potential customers which could increase their bargaining power. This
potential increase in bargaining power could create competitive pressures
whereby a particular customer may request our exclusivity with them in a
particular market. Accordingly, we may not be able to attract or maintain
certain customer relationships where we are unable to provide an exclusive
arrangement which could adversely affect our business and results of operations.
OUR STOCK PRICE MAY BE PARTICULARLY VOLATILE BECAUSE OF THE INDUSTRY WE ARE IN.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
and telecommunications companies have been extremely volatile and have
experienced fluctuations that have often been unrelated to or disproportionate
to the operating performance of such companies. These broad market fluctuations
could adversely affect the price of our common stock.
RISKS RELATED TO THIS OFFERING
OUR EXECUTIVE OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL CONTROL
APPROXIMATELY % OF OUR COMMON STOCK AFTER THIS OFFERING AND, AS A RESULT,
WILL BE ABLE TO EXERCISE CONTROL OVER ALL MATTERS REQUIRING SHAREHOLDER
APPROVAL.
Upon completion of this offering, our executive officers and directors and
their affiliates will beneficially own, in the aggregate, approximately %
of our outstanding common stock. In
9
<PAGE> 14
particular, our Chairman and Chief Executive Officer, Stephen F. Johnston, Sr.,
will beneficially own, in the aggregate, approximately % of our outstanding
common stock. As a result, these shareholders will be able to exercise
significant influence over all matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions,
which may have the effect of delaying or preventing a third party from acquiring
control over us. These transactions may include those that other shareholders
deem to be in their best interests and in which those other shareholders might
otherwise receive a premium for their shares over then current prices. For
additional information regarding our stock ownership, see "Principal and Selling
Shareholders."
WE HAVE BROAD DISCRETION TO USE CERTAIN PORTIONS OF THE OFFERING PROCEEDS, AND
OUR INVESTMENT OF THOSE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.
Some of the net proceeds of this offering are not allocated for specific
uses. Our management has broad discretion to spend such proceeds in ways with
which shareholders may not agree. The failure of our management to apply these
funds effectively could impede our ability to expand the business. This could
harm our results of operations and could cause the price of our common stock to
decline.
PROVISIONS IN OUR CHARTER DOCUMENTS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO
ACQUIRE US AND COULD DEPRESS THE PRICE OF OUR COMMON STOCK.
Upon completion of the offering, our articles of incorporation and bylaws
will contain provisions that could delay, defer or prevent a change in control
of our company or our management. These provisions could also discourage proxy
contests and make it more difficult for you and other shareholders to elect
directors and take other corporate actions. As a result, these provisions could
limit the price that investors are willing to pay in the future for shares of
our common stock. These provisions will include:
- establishing a staggered board of directors;
- authorizing the board of directors to issue additional preferred stock,
which could be issued quickly with terms that delay or prevent a change
in control; and
- prohibiting shareholder action by written consent.
For a more complete description of these anti-takeover provisions, see
"Description of Capital Stock -- Preferred Stock" and "-- Anti-Takeover
Provisions."
OUR SECURITIES HAVE NO PRIOR MARKET AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING.
Before this offering, there has not been a public market for our common
stock and the market price of our common stock may decline below the initial
public offering price. The initial public offering price has been determined by
negotiations between us and the representatives of the underwriters. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. In addition, an active public market for our
common stock may not develop or be sustained after this offering.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION BY INVESTING IN OUR
COMMON STOCK.
The initial public offering price is substantially higher than the net
tangible book value of each outstanding share of common stock immediately after
the offering. Purchasers of common stock in this offering will suffer immediate
and substantial dilution. This dilution will reduce the net tangible book value
of their shares, since these investments will be at a substantially higher per
share price than they were for our existing shareholders. The dilution will be
$ per share in the net tangible book value of the common stock from the
initial public offering price. If additional shares
10
<PAGE> 15
are sold by the underwriters following exercise of their over-allotment option,
or if outstanding options or warrants to purchase shares of common stock are
exercised, you will incur further dilution.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of common stock in the public
market following this offering could cause the market price of our common stock
to decline. After this offering, we will have outstanding shares
of common stock. All the shares sold in this offering will be freely tradable.
Of the remaining shares of common stock outstanding after this
offering, of such shares will be eligible for sale in the public
market beginning 180 days after the date of this prospectus. After this
offering, some of the holders of our common stock will have the right to require
us to register the sale of their shares, subject to limitations and to the
lock-up agreements with the underwriters. These holders also have the right to
include their shares in any future public offerings of our equity securities.
After this offering we also intend to register up to approximately
additional shares of our common stock for sale upon the exercise
of outstanding stock options issued or reserved for future issuance pursuant to
our 1998 Stock Option Plan.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus. There are risks
and uncertainties relating to these statements, and there can be no guarantee
that these statements will prove to be correct. Forward-looking statements
include assumptions as to how we may perform in the future. When we use words
like "believe," "could," "may," "will," "estimate," "continue," "seek,"
"anticipate," "intend," "expect," "predict," "potential," and "plan" or similar
expressions, we are making forward-looking statements.
We have based these statements on our current expectations about future
events. Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee that these
expectations actually will be achieved. In evaluating these statements, you
should consider various factors, including the risks set forth in "Risk
Factors." These risk factors may cause actual results to differ materially from
any forward-looking statements.
USE OF PROCEEDS
Assuming an initial public offering price of $ per share, we will
receive net proceeds of approximately $ million from the sale of the
shares of common stock in this offering ($ million if
the underwriters exercise their over-allotment option in full).
Of the net proceeds we receive in the offering, we intend to use
approximately $22 million to repay indebtedness under our credit facility with
Wachovia Bank, N.A. The credit facility matures on November 1, 2004 and
currently bears a weighted average interest rate of 9.824%.
We intend to use approximately $13 million to redeem our senior
subordinated notes, all of which are held by American Capital Strategies, Ltd.
The notes bear interest at an annual rate of 12.75% and mature October 31, 2005.
We intend to use approximately $4 million to repay notes payable to the sellers
of an acquired business. These notes bear interest at the prime rate and mature
in May 2002. We also intend to use approximately $7.9 million to redeem our
Series D Preferred Stock, all of which is held by Stratford Capital Partners,
L.P. and Stratford Equity Partners, L.P. Upon redemption of the senior
subordinated notes, the Company will incur a loss in the amount of the then
unaccreted discount on such notes. In addition, a non-recurring expense charge
for prepayment premiums and the write-off of previously capitalized loan costs
will be incurred. Also, income available to common shareholders will be reduced
by the amount of the unaccreted discount on the Series D Preferred Stock, upon
its redemption.
11
<PAGE> 16
We expect to use the remaining net proceeds from this offering of
approximately $ million for working capital and general corporate purposes. In
addition, we may use a portion of the net proceeds to acquire businesses. We
currently have no commitments or agreements to acquire other businesses. Pending
the uses described above, we intend to invest the net proceeds in interest-
bearing, investment grade securities.
DIVIDEND POLICY
We have never paid dividends on our common stock. Covenants in our
financing arrangements prohibit or limit our ability to declare or pay cash
dividends. For a more complete description of these restrictions, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." We currently intend to retain any future earnings to finance the
growth and development of our business and therefore do not anticipate paying
any cash dividends in the foreseeable future. Any future determination to pay
cash dividends will be at the discretion of our Board of Directors and will
depend upon our financial condition, results of operations, capital
requirements, general business conditions and other factors that the Board of
Directors may deem relevant.
12
<PAGE> 17
CAPITALIZATION
The following table shows our capitalization at December 31, 1999:
- on an actual basis;
- on an unaudited pro forma basis after giving effect to the automatic
conversion upon the closing of this offering of all outstanding shares of
convertible preferred stock into 3,184,707 shares of common stock; and
- on an unaudited pro forma basis, as adjusted to reflect the receipt by us
of net proceeds of approximately $ million from the sale of
shares of common stock in this offering at the initial
public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion........................ $24,459 $24,459 $
Common stock put warrants................................... 9,031 9,031
Class A convertible preferred stock; 100,000 shares, $0.01
par value, authorized and 56,817 shares issued and
outstanding, actual; no shares issued and outstanding, pro
forma; no shares issued and outstanding, pro forma as
adjusted.................................................. 5,300 --
Series C convertible preferred stock; 75,000 shares, no par
value, authorized and 30,479 shares issued and
outstanding, actual; no shares issued and outstanding, pro
forma; no shares issued and outstanding, pro forma as
adjusted.................................................. 3,048 --
Series D senior redeemable preferred stock; 100,000 shares,
no par value, authorized and 75,000 shares issued and
outstanding, actual; 75,000 shares issued and outstanding,
pro forma; 75,000 shares issued and outstanding, pro forma
as adjusted............................................... 2,613 2,613
Shareholders' equity:
Common stock; 15,000,000 shares, $.0001 par value,
authorized and 2,712,917 shares issued and outstanding,
actual; 5,897,624 shares issued and outstanding pro
forma; 15,000,000 shares, $.0001 par value, authorized
and shares issued and outstanding, pro
forma as adjusted....................................... -- 1
Additional paid-in capital................................ 3,261 11,608
Accumulated deficit....................................... (6,265) (6,265)
------- ------- -------
Total shareholders' equity (deficit)............... (3,004) 5,344
------- ------- -------
Total capitalization............................... $41,447 $41,447 $
======= ======= =======
</TABLE>
The outstanding share information shown in the table above excludes:
- 663,358 shares subject to options at a weighted average exercise price of
$3.79 per share;
- 413,285 shares of common stock available for future issuance under our
1998 Stock Option Plan; and
- warrants to purchase 2,675,954 shares of common stock at an exercise
price of $.01 per share.
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<PAGE> 18
DILUTION
The pro forma net tangible deficit book value of our common stock at
December 31, 1999 was approximately $(17.2) million, or $(2.91) per share of
common stock. The pro forma net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by 5,897,624
shares of common stock outstanding after giving effect to the conversion of all
outstanding shares of preferred stock into 3,184,707 shares of common stock upon
the closing of this offering.
After giving effect to the issuance of shares in this
offering and the receipt of approximately $ million of net proceeds from
this offering, based on an assumed initial public offering price of
$ per share and after deducting the estimated underwriting discounts
and commissions and estimated offering expenses, our pro forma as adjusted net
tangible book value at December 31, 1999 would have been approximately
$ million, or $ per share. This amount represents an immediate
increase in pro forma net tangible book value of $ per share to
existing shareholders and an immediate dilution of $ per share to
purchasers of common stock in this offering. Dilution is determined by
subtracting pro forma as adjusted net tangible book value per share after this
offering from the amount of cash paid by a new investor for a share of common
stock. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible deficit book value per share at
December 31, 1999...................................... $(2.91)
Increase in pro forma net tangible book value per share
attributable to new investors..........................
------
Pro forma as adjusted net tangible book value per share
after this offering....................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes as of December 31, 1999, on a pro forma as
adjusted basis described above, the number of shares of common stock purchased
from us, the total consideration paid to us and the average price per share paid
by existing shareholders and by new investors who purchase shares of common
stock in this offering. We have assumed an initial public offering price of
$ per share and we have not deducted estimated underwriting discounts
and commissions and estimated offering expenses in our calculations.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholders......... 5,897,624 % $12,248,313 % $2.08
New investors..........
--------- --- ----------- --- -----
Total........ 100% $ 100% $
========= === =========== === =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, sales in
this offering will reduce the number of shares of common stock held by existing
shareholders to approximately % of the total shares of common stock
outstanding after the offering and will increase the number of shares held by
new investors to , or approximately % of the total shares of
common stock outstanding after the offering.
The above table assumes no exercise of any outstanding stock options or
warrants. As of April 30, 2000, there were options outstanding to purchase a
total of 663,358 shares of common stock with a weighted average exercise price
of $3.79 per share. As of April 30, 2000, there were warrants outstanding to
purchase a total of 2,675,954 shares of common stock at an exercise price of
$.01 per share. If any of these options or warrants are exercised, there will be
further dilution to new public investors. Please see "Capitalization" and
"Management -- Stock Option Plan" for additional information about the
outstanding options and warrants.
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<PAGE> 19
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included elsewhere
in this prospectus.
HISTORICAL PRESENTATION
The historical statements of operations data set forth below are derived
from and qualified by reference to our financial statements included elsewhere
in this prospectus. The historical results are not necessarily indicative of
results to be expected in any future period.
PRO FORMA PRESENTATION
The pro forma financial data included on page F-48 has been derived from
our unaudited pro forma condensed financial information which was prepared to
illustrate the effects of certain acquisitions. The unaudited pro forma
consolidated statement of operations data for the year ended December 31, 1999
give effect to our acquisitions of TWR Telecom, Inc. and its subsidiaries,
Specialty Drilling Inc., and McKenzie Telecommunications Group, Inc. as if those
transactions had occurred on January 1, 1999. The pro forma information also
assumes the automatic conversion of all shares of our Class A Preferred Stock
and Series C Preferred Stock outstanding as of December 31, 1999 into 3,184,707
shares of common stock, as of the later of January 1, 1999 or the date of
issuance.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1999
---------------------
1995 1996 1997 1998 ACTUAL PRO FORMA
------ ------ ------- ------- ------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues...................................... $1,440 $2,208 $ 6,003 $24,485 $48,631 $70,238
Cost of revenues.............................. 1,025 1,619 5,078 19,723 35,919 51,508
Selling, general and administrative
expenses.................................... 767 1,417 2,092 4,835 9,517 15,468
Depreciation and amortization................. 53 28 193 1,398 2,120 3,147
------ ------ ------- ------- ------- -------
Operating (loss) income....................... (405) (856) (1,360) (1,471) 1,075 115
Total other expense........................... (77) (66) (145) (887) (2,241) (4,340)
------ ------ ------- ------- ------- -------
Loss before income taxes, extraordinary item,
and cumulative effect of accounting
change...................................... (482) (922) (1,505) (2,358) (1,166) (4,225)
Income tax (expense) benefit.................. -- (55) 145 (45) 1,226 2,188
------ ------ ------- ------- ------- -------
(Loss) income before extraordinary item and
cumulative effect of change in accounting
principle................................... (482) (977) (1,360) (2,403) 60 (2,037)
Extraordinary item............................ -- -- -- -- (256) (256)
Cumulative effect of change in accounting
principle................................... -- -- -- -- (121) (121)
------ ------ ------- ------- ------- -------
Net loss...................................... (482) (977) (1,360) (2,403) (317) (2,414)
Preferred stock dividends and accretion of
discount on redeemable preferred stock...... -- -- (9) (413) (632) (119)
------ ------ ------- ------- ------- -------
Net loss applicable to common stockholders.... $ (482) $ (977) $(1,369) $(2,816) $ (949) $(2,533)
====== ====== ======= ======= ======= =======
Basic and diluted loss per common share before
extraordinary item and cumulative effect of
change in accounting principle................ $(0.24) $(0.49) $ (0.57) $ (1.05) $ (0.21) $ (0.41)
====== ====== ======= ======= ======= =======
Basic and diluted loss per common share......... (0.24) (0.49) $ (0.57) $ (1.05) $ (0.35) $ (0.48)
====== ====== ======= ======= ======= =======
Basic and diluted weighted average shares....... 2,000 2,000 2,388 2,682 2,713 5,249
====== ====== ======= ======= ======= =======
</TABLE>
15
<PAGE> 20
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1999
---------------------
1995 1996 1997 1998 ACTUAL PRO FORMA
----- ------- ------- ------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..................... $ (12) $ 831 $ 793 $ 186 $ 2,509 $ 2,509
Working capital............................... (31) 390 2,630 2,139 12,009 12,009
Total assets.................................. 540 977 12,237 19,191 59,473 59,473
Total debt, including common stock put
warrants.................................... 873 2,142 4,475 20,344 35,062 35,062
Redeemable preferred stock.................... -- -- 4,462 4,875 10,960 2,613
Total shareholders' equity.................... (790) (1,607) (4,513) (920) (3,004) 5,344
</TABLE>
16
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analyses and other information contained in the
following discussion relative to markets for our products and services and
trends in revenues, gross margins and anticipated expense levels, as well as
other statements including words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend" and "plan" and other similar expressions,
constitute forward-looking statements. These forward-looking statements are
subject to business and economic risks and uncertainties, and our actual results
of operations may differ materially from the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in "Risk Factors" as well as other risks and uncertainties
referenced in this prospectus.
OVERVIEW
o2wireless Solutions is a leading provider of integrated network solutions
to the global wireless telecommunications industry. We plan, design, deploy and
maintain wireless telecommunications networks for voice and data communications
providers. We also offer specialized business planning and consulting services
to telecommunications industry participants.
We have built our business through both internal growth and acquisitions.
During 1999, we acquired certain strategically positioned companies in order to
create an integrated telecommunications services company with depth and
expertise in wireless and wireline technologies and a broad geographical
presence. We acquired Cellular Technology International, Inc., based in North
Carolina, to increase our capacity to install and commission wireless and
wireline infrastructure and to strengthen our equipment engineering
capabilities. We acquired TWR Telecom, Inc. and its subsidiaries, along with
Specialty Drilling, Inc. based in Houston, to increase our geographic presence
in the southwestern U.S. and to add civil and structural engineering. These
acquisitions also provided us with implementation capacity and a
hazard/navigation lighting manufacturing business. Finally, we acquired McKenzie
Telecommunications Group, Inc., based in Phoenix, to expand our capabilities in
site acquisition, zoning, program management and implementation of large
projects. All of our acquisitions have been accounted for under the purchase
method of accounting. Aggregate goodwill for these acquisitions was
approximately $12.0 million which is being amortized on a straight-line basis
over 10 years, the expected period of benefit.
We generally offer our network planning, design and deployment services on
either a fixed-price or a time-and-materials basis, with scheduled deadlines for
completion times, that is, on a time-certain basis. We recognize revenues for
our fixed-price contracts using the percentage-of-completion method. Under the
percentage-of-completion method, in each period we recognize expenses as they
are incurred and we recognize revenue based on a comparison of the current costs
incurred for the project to the then estimated total costs of the project.
Accordingly, the revenue we recognize in a given quarter depends on the costs we
have incurred for individual projects and our then current estimate of the total
remaining costs to complete individual projects. If in any period we
significantly increase our estimate of the total costs to complete a project, we
may recognize very little or no additional revenue with respect to that project.
As a result, our gross margin in such period and in future periods may be
significantly reduced and in some cases we may recognize a loss on individual
projects prior to their completion. Our contracts are typically structured with
milestone events that dictate the timing of payments to us from our customers.
Accordingly, there may be a significant delay between the date we record revenue
and the date we receive payment from our customers. During our planning process,
we divide projects into deliverables which enables us to better understand the
costs associated with each of the components and minimizes the risks of
exceeding our initial estimates.
Our customers include wireless carriers, equipment vendors, tower
companies, and broadband carriers. We have derived, and believe that we will
continue to derive, a significant portion of our
17
<PAGE> 22
revenues from a limited number of customers. For the year ended December 31,
1999, we derived 15% of revenues from Nortel Networks, 11% of revenues from
Sprint, and 10% of revenues from Carolina PCS. In each case, our business was
obtained from multiple departments within the organization. The volume of work
performed for specific customers is likely to vary from period to period, and a
major customer in one period may not use our services in a subsequent period.
Our cost of revenues includes direct compensation and benefits, living and
travel expenses, payments to third-party sub-contractors and other direct
project-related expenses, in addition to allocations of indirect overhead. As of
December 31, 1999, we had 400 employees working on contracted projects.
Selling, general and administrative expenses include compensation and
benefits, facilities expenses and other expenses not related directly to
projects. We are currently installing a new financial management and accounting
software program to better accommodate our growth.
Depreciation and amortization expenses include depreciation on our
furniture, fixtures and equipment and amortization related to our recent
acquisitions.
Interest expense is primarily related to interest on notes payable to
related parties and our banking facilities. We currently intend to repay our
line of credit with the proceeds of this offering. We may enter into future
borrowings or notes related to future acquisitions, and we may incur additional
interest expense as a result.
During fiscal 2000, we expect to report a non-recurring expense charge in
the amount of approximately $21.2 million, which will be attributable to the
immediate accretion of the remaining Series D discount, the accretion of Put
warrants to fair value, and the write-off of previously capitalized loan costs.
In addition prepayment premiums exist based on the retirement of our senior
subordinated notes upon completion of this offering. See "Use of Proceeds."
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1999
REVENUES. Our revenues increased 99% from $24.5 million for the year ended
December 31, 1998 to $48.6 million for the year ended December 31, 1999. The
increase was primarily attributable to our acquisitions of Cellular Technology
International, Inc. in January 1999, and TWR Telecom, Inc. and McKenzie
Telecommunications Group, Inc., both of which were completed in November 1999.
The increase in revenues attributable to internal growth amounted to
approximately $7.1 million primarily in design and deployment services. The
remaining portion of the increase in revenues is attributable to our
acquisitions.
COST OF REVENUES. Our cost of revenues increased from $19.7 million, or
81% of revenues, for the year ended December 31, 1998 to $35.9 million, or 74%
of revenues, for the year ended December 31, 1999, primarily due to the increase
in the number of contracts associated with our acquisitions. Costs also
increased significantly due to increased staffing costs to support the
significant growth in existing businesses. Gross margin increased to 26.1% for
the year ended December 31, 1999 from 19.4% for the year ended December 31, 1998
due to higher margin contracts from our acquisitions, along with a shift in the
mix of services to higher margin services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses increased from $4.8 million, or 19.7% of revenues, for
the year ended December 31, 1998 to $9.5 million, or 19.6% of revenues, for the
year ended December 31, 1999. The increase in selling, general and
administrative expenses in absolute dollars was primarily attributable to our
acquisitions, as well as the growth in existing businesses.
OTHER INCOME (EXPENSE). For the year ended December 31, 1998, other
expense was $887,000 as compared to $2.2 million of other expense for the year
ended December 31, 1999. This increase was attributable to increased interest
expense of $2.3 million arising from acquisitions and higher utilization of our
bank line of credit to support working capital needs.
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EXTRAORDINARY ITEMS. For the year ended December 31, 1999, we reported an
extraordinary loss of $256,000, net of income for benefit of $171,000. This
extraordinary loss resulted from the extinguishment of indebtedness in
connection with the refinancing of our credit facility.
In addition, for the year ended December 31, 1999, we recorded an expense
of $121,000 relating to the effect of changing our accounting method for
organization costs from deferral to expensing these costs as incurred.
INCOME TAXES. For the year ended December 31, 1998, we had an income tax
expense of $45,000, as compared to an income tax benefit of $1.2 million for the
year ended December 31, 1999. The benefit for 1999 was primarily attributable to
the decrease in the valuation allowance and recognition of deferred tax
benefits. At December 31, 1999, we had a net operating loss carryforward of $3.2
million, which gives rise to substantially all of our gross deferred tax asset.
Certain limitations exist on the usage of the net operating loss, but it is
projected that $1.6 million may be utilized in 2000.
NET LOSS. Our net loss decreased 87% from $2.4 million for the year ended
December 31, 1998 to $317,000 for the year ended December 31, 1999. This
decrease was due primarily to increased margin on services provided and income
tax benefits recorded, offset by increased cost of indebtedness.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1998
REVENUES. Our revenues increased from $6.0 million for the year ended
December 31, 1997 to $24.5 million for the year ended December 31, 1998. The
increase was primarily attributable to our acquisition of Communications
Development Systems, Inc. in June 1998 along with ISDC, Inc. and Minerich in
November 1997 and the addition of new services provided.
COST OF REVENUES. Our cost of revenues increased from $5.0 million, or 83%
of revenues, for the year ended December 31, 1997 to $19.7 million, or 81% of
revenues for the year ended December 31, 1998. The increase was attributable
primarily to acquisitions. Gross margin was 15.4% for the year ended December
31, 1997 compared to 19.4% for the year ended December 31, 1998. The increase in
gross margin was primarily attributable to the higher margin contracts acquired
as part of the acquisitions mentioned above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses increased from $2.1 million, or 35% of revenues, for the
year ended December 31, 1997 to $4.8 million, or 19.7% of revenues for the year
ended December 31, 1998. The increase in selling, general and administrative
expenses in absolute dollars was primarily attributable to costs of growth while
the decrease as a percentage of revenues was primarily attributable to the
acquisitions mentioned above.
OTHER INCOME (EXPENSE). For the year ended December 31, 1997 other expense
was $146,000 as compared to other expense of $887,000 for the year ended
December 31, 1998. This change was the result of increased interest expense,
primarily attributable to higher utilization of our bank line of credit for
acquisition purposes and working capital needs.
INCOME TAXES. Our income tax benefit was $145,000 for the year ended
December 31, 1997 compared to an expense of $45,000 during 1998. During 1998,
the Company recorded an increase in the deferred tax valuation allowance in the
amount of $942,000, as it was not considered more likely than not at that time
that deferred tax assets were realizable.
NET LOSS. Our net loss increased 77% from approximately $1.4 million for
the year ended December 31, 1997 to $2.4 million for the year ended December 31,
1998. Our net loss increased primarily as a result of our acquisitions in late
1997 and June 1998.
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LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have primarily financed our operations through
commercial bank borrowings, the issuance of subordinated notes, and the sale of
preferred and common stock. Cash provided by and used in operations is primarily
derived from our contracts in process and changes in working capital. Cash used
in operations was $6.7 million for the year ended December 31, 1999. Cash used
in operations was $3.4 million for the year ended December 31, 1998. Cash used
in operations was $146,000 for the year ended December 31, 1997.
As of December 31, 1999, we had available cash of $900,000 and cash in
escrow of $1.6 million. The $1.6 million was escrowed to pay off affiliate notes
which were subsequently canceled in January 2000.
Cash used in investing activities was $4.4 million, $3.9 million and $11.3
million for the years ended December 31, 1997, 1998 and 1999, respectively.
Investing activities consist primarily of acquisitions, as well as capital
expenditures to support our growth.
Cash provided by financing activities for the year ended December 31, 1999
was $20.3 million. This primarily consisted of proceeds from sales of
subordinated notes and preferred stock totaling $23.2 million and $15.2 million
borrowed under our new revolving credit agreement, offset by repayment of our
previous bank loan and costs associated with refinancing of $12.1 million, and
repayments of various notes totaling $6 million. Cash provided by financing
activities was $6.7 million for the year ended December 31, 1998 and $5.1
million for the year ended December 31, 1997.
In November 1999, we entered into a $25 million syndicated credit agreement
with Wachovia Bank, N.A. as agent. This agreement provides for a term loan of
$10.5 million, a revolving credit facility of up to $11.5 million, and an
additional $3.0 million loan to be used if needed for acquisitions. The credit
facility is due November 1, 2004, and bears interest based on LIBOR plus a
margin of 3%. As of December 31, 1999, the interest rates ranged from 8.40% to
9.46% with a weighted average of 8.82%. The line of credit is secured by
substantially all of our business assets, is guaranteed by our subsidiaries and
is senior to approximately $21.0 million of subordinated indebtedness. Under the
terms of the credit agreement, we are required to provide the lenders with
periodic budgets, financial statements and public reports and filings, and we
must meet specified thresholds with respect to profitability and debt to net
worth ratios. Additionally, the negative covenants in the credit agreement limit
our ability to sell our assets outside the ordinary course of business, merge
with or acquire other businesses or make capital expenditures over a specified
amount in any fiscal year. The covenants also prohibit us from issuing
dividends, creating liens or incurring additional indebtedness. As of December
31, 1999, $15.2 million was outstanding under the credit facility.
In November 1999, we closed a senior subordinated note purchase agreement
with American Capital Strategies, Ltd. for up to $17.5 million in financing. At
closing, we issued the Tranche A Notes in the principal amount of $13.0 million.
Tranche B financing for the balance of $4.5 million is available for us to use
in connection with possible future acquisitions. The proceeds were used to repay
certain outstanding indebtedness and for working capital. The Tranche A Notes
bear interest at a nominal rate of 12.75% per annum and mature October 31, 2005.
We are subject to the same covenants as described above with respect to our
senior credit facility, and the Tranche A Notes are secured by all our assets
but are subordinate to our senior lenders.
Also in November 1999, we issued 75,000 shares of Series D Preferred Stock
to Stratford Capital Partners, L.P. and Stratford Equity Partners, L.P. for
consideration of $7.5 million. The proceeds were used to repay certain
outstanding indebtedness and for working capital. The Series D Preferred Stock
carries a dividend at a rate of 8% per annum, payable quarterly, provided that
the dividends are paid in cash. The Series D Preferred Stock carries a dividend
at a rate of 11%
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per annum if we choose to pay the dividends in-kind. Under the terms of the
Series D Preferred Stock, we are subject to similar covenants as described
above.
In connection with the issuance of the Tranche A Notes and Series D
Preferred Stock, we issued warrants to the holders to purchase up to 1,032,763
and 1,491,755 shares, respectively, of our common stock at an exercise price of
$0.01 each. The warrants were valued at issuance using the Black-Scholes option
pricing model based on an estimated fair value of $4.60 per share, and have been
recorded as a discount from the face value of the Tranche A Notes and Series D
Preferred Stock.
We believe that our cash and cash equivalent balances, funds available
under our existing line of credit, and net proceeds from this offering will be
sufficient to satisfy our cash requirements for at least the next twelve months.
The estimates for the periods for which we expect the net proceeds from this
offering and our available cash balances and credit facilities to be sufficient
to meet our capital requirements are forward-looking statements that involve
risks and uncertainties as set forth under the caption "Risk Factors" in this
prospectus. Our capital requirements will depend on numerous factors, including
commercial acceptance of new service offerings, possible acquisitions of
complementary businesses or technologies, the resources we dedicate to new
technologies and new markets and demand for our suite of services.
We may need to raise additional capital if we expand more rapidly than
initially planned, to develop new technologies and/or services, to respond to
competitive pressures or to acquire complementary businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our shareholders will be reduced, our
shareholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of our shareholders. There can
be no assurance that additional financing will be available or on terms
favorable to us. If adequate funds are not available or are not available on
acceptable terms, our ability to fund our expansion, take advantage of
unanticipated opportunities, expand our suite of services or otherwise respond
to competitive pressures could be significantly limited. Our business may be
harmed by such limitations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in interest rates that may
impact our financial position. Historically, and as of December 31, 1999, we
have not used derivative instruments or engaged in hedging activities. In
January 2000, we entered into an interest rate swap agreement with our senior
lender in accordance with our loan agreement. For more information about the
swap agreement, see note 17 to our consolidated financial statements.
Our revolving credit facility bears interest at LIBOR plus a margin of 3%.
Accordingly, changes in LIBOR, which is affected by changes in interest rates in
general, will affect the interest rate on our revolving credit facility.
Some of our outstanding warrants to purchase common stock have a put
feature that enables the holders thereof, upon the occurrence of certain events,
to sell the warrants and any common stock issued upon exercise back to us at
fair value, up to a maximum aggregate put price of approximately $22.7 million.
As of December 31, 1999, the put feature in the warrants was recorded as a $9.0
million liability on our balance sheet. As long as these warrants contain the
put feature, we will have to record a liability at each balance sheet date equal
to the fair market value of the warrants, but not exceeding the maximum put
price. In addition, as long as the warrants contain the put feature, we will
incur a non-cash charge in our statement of operations equal to the excess of
the fair market value of the warrants at the current balance sheet date over the
fair market value at the previous balance sheet date, but not exceeding the
maximum put price. The put feature will expire upon completion of this offering.
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We temporarily invest our excess cash in money market funds. Changes in
interest rates would not significantly affect the fair value of these cash
investments.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued SFAS No.
137, which postpones the mandatory adoption date of SFAS No. 133 by us until
January 1, 2001.
SFAS No. 133 requires that all derivatives be recognized on the balance
sheet at their fair value. On the date the derivative contract is entered into,
SFAS No. 133 requires that we designate the derivative as (i) a fair value
hedge, (ii) a cash flow hedge, (iii) a foreign currency hedge, (iv) a net
investment in a foreign operation, or (v) a trading instrument. We have entered
into an interest rate swap agreement which we have classified as a cash flow
hedge. We do not have any other derivative instruments and do not expect that
the adoption of SFAS No. 133 on January 1, 2001 will have a significant effect
on our consolidated financial position or results of operations.
In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation (FIN No. 44). FIN No. 44
clarifies the application of APB Opinion No. 25, Accounting for Stock Issued to
Employees, to certain areas of stock based compensation. Among other issues, FIN
No. 44 clarifies the accounting consequences of a modification to the terms of a
fixed stock option award. FIN No. 44 is effective July 1, 2000 but covers
specific events, such as option repricing, which occurred after either December
15, 1998 or January 12, 2000.
During 1999, we repriced certain employee incentive stock options. If these
options are still outstanding as of July 1, 2000, such options will be subject
to variable accounting treatment, with any excess of the market value of the
shares underlying the options over the exercise price of the options reflected
as compensation expense in the statement of operations. We expect that most or
all of these repriced options will be exercised before July 1, 2000, and
consequently will not require accounting as modified options under FIN No. 44.
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BUSINESS
OVERVIEW
We provide comprehensive integrated network solutions to all sectors of the
global wireless telecommunications industry that enable our customers to rapidly
plan, design, deploy and maintain their wireless networks. We strive to remain
current in all major wireless and wireline telecommunications technologies and
our vendor and technology neutrality allows us to provide unbiased evaluations
and recommendations for our customers. We utilize proprietary processes and
technologies, including a Web-based project management tool, Virtual Project
Manager, and our proprietary project tracking software, E-Site, which enable us
to capitalize on prior project experience and deliver high-quality network
solutions. Because we integrate services across the wireless and wireline
industry segments, we have the ability to provide significant time-to-market
advantages for our customers and to manage our clients' needs throughout their
entire business development life cycle. Our depth of highly-skilled personnel is
a primary factor which enables us to deliver optimal network solutions to our
customers.
We believe that rapidly developing new technologies and competitive
pressures are driving telecommunications providers to outsource all phases of
their wireless and wireline telecommunications network implementation. Our
full-service offering is designed to meet our customers' increasing needs to
outsource telecommunications infrastructure expansion and management. We provide
our services on a cost-effective, time-certain basis which is intended to enable
our customers to more accurately budget their network deployment and management.
Our customers can therefore concentrate on their core competencies and rely on
us for planning, deploying and maintaining their telecommunications networks.
In 1999, we completed projects for more than 125 customers and were
involved in the development of over 11,000 communications facilities. To date,
we have been involved in the design and implementation of over 47,000
communications facilities. We provide infrastructure services to wireless
carriers, such as Bell Atlantic Mobile, BellSouth, Nextel and Sprint; equipment
vendors, such as Ericsson, Motorola and Nortel Networks; tower companies such as
American Tower, Crown Castle and SpectraSite; and broadband carriers, such as
Adelphia Business Solutions and Knology. In addition to performing work in the
United States, we have performed work in countries including Brazil, China,
Germany, Honduras, Israel, Japan, Jordan, Korea, Mexico, Nicaragua, Puerto Rico
and Russia. As of December 31, 1999, we had completed projects in all 50 U.S.
states and 26 countries.
INDUSTRY BACKGROUND
GROWTH OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY. According to Forrester
Research, wireless communications has been the fastest growing segment of the
telecommunications sector over the past seven years. We believe that this growth
is driven in part by:
- global deregulation and privatization of the telecommunications industry;
- dramatic advances in wireless and wireline technologies;
- increased availability and usage of wireless technologies;
- increased demand for broadband wireless applications, including wireless
Internet and mobile commerce, or m-commerce;
- structural changes in the industry driving service providers to offer
comprehensive telecommunications services; and
- a trend towards replacing fixed line telecommunications services with
wireless solutions.
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According to Forrester Research, the U.S. wireless subscriber base will
grow to over 110 million by 2003 from 77 million in 1999, generating industry
revenues in excess of $46.1 billion. The number of subscribers is expected to
further increase to 143 million by 2005. International Data Corporation further
estimates that the international wireless subscriber base will grow to over 1.1
billion by 2003 from 303 million in 1998. A new wave of telecommunications
service providers are beginning to offer high speed fiber optic networks
packaged with broadband wireless technologies to deliver enhanced
telecommunications services and features to new customers and markets. According
to Forrester Research, total spending for wireless data services in the U.S.
alone is expected to generate $4.2 billion in revenue by 2003 and $8.4 billion
by 2005.
EMERGING TELECOMMUNICATIONS SECTOR. In response to structural changes in
the telecommunications industry and opportunities provided by deregulation, new
carriers are developing next-generation networks, which include wireless and
wireline access for voice and data communications. In addition, new equipment
manufacturers have emerged to fill specific needs resulting from the development
of new technologies and advances in existing technologies.
Incumbent carriers are broadening their service offerings and updating
their current networks with new equipment. In the process, they are entering
markets for which they have yet to develop needed technical personnel. The
convergence of wireless and wireline services is also adding complexity to the
telecommunications environment as carriers deploy networks spanning traditional
wireless/wireline boundaries.
INDUSTRY CHALLENGES. In this increasingly competitive climate,
telecommunications companies are concentrating on satisfying customer demand for
enhanced services, seamless and universal coverage, better quality, faster data
transmission and lower prices. The proliferation of wireless carriers and new
technologies has created an environment where speed to market is a critical
element of a carrier's success. Carriers are also encountering increasing
challenges in maintaining complex networks and technologies. For example, the
introduction of wireless Internet technologies and the growth in broadband
wireless services requiring the transmission of large amounts of data has
created new technological hurdles for carriers establishing or upgrading their
networks.
As a result of increased competition and demand, carriers and equipment
vendors are focusing on their core competencies and outsourcing network services
wherever possible. We believe that new wireless telecommunications entrants are
choosing to outsource their network planning, designing, deployment and
maintenance in order to leverage a specialized, flexible work force and reduced
fixed expenses. Incumbent carriers are also turning to outsourcing to avoid the
significant time-to-market delays inherent in building an employee base skilled
in emerging technologies. We believe that wireless carriers and equipment
vendors seek independent network service providers who offer a single point of
accountability, expertise across various technologies and disciplines, a
comprehensive, packaged solution, and the depth of highly skilled, experienced
employees capable of handling large-scale domestic and international projects.
OUR SOLUTION
We provide a wide range of comprehensive, integrated services to the global
wireless telecommunications industry that enable our customers to rapidly plan,
design, deploy and maintain their wireless telecommunications networks. Our
customers include wireless and wireline service providers, equipment
manufacturers and tower companies. We have expertise in the major wireless and
wireline telecommunications technologies and provide objective solutions to our
customers by remaining technology and vendor independent. Our project management
experience, along with our proprietary project management tools, allows us to
provide our customers with significant time-to-market advantages and quality
services.
COMPREHENSIVE INTEGRATED SOLUTIONS. We provide a comprehensive service
offering, from pre-deployment planning through network installation, maintenance
and optimization. Our customers value our ability to span the full range of
services across wireless and wireline technologies,
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allowing them a true end-to-end solution for their network needs. Our integrated
solution enables our customers to rely upon a single responsible party who is
charged with delivering and managing their entire telecommunications network. We
provide comprehensive management services during each phase of the engagement,
enabling us to efficiently schedule processes and resources in order to reduce
the time and cost of network deployment and management.
VERTICAL TELECOMMUNICATIONS EXPERTISE. Our capabilities in both wireless
and wireline technologies represent a distinct benefit to our customers. Since a
substantial portion of a "wireless" transmission signal is carried over a
wireline network, our ability to work with both technologies provides an
inherent benefit to our customers. Our customers can rely on a single service
provider to deploy their telecommunications network and ensure a proper
integration between wireless and wireline components. Additionally, our
technology expertise and single source of accountability allow us to streamline
our customers' time-to-market and cost of deployment.
TECHNOLOGY AND VENDOR INDEPENDENCE. We have experience in the major
wireless and wireline technologies. Our diverse customer base and past project
experience allow us to evaluate and work with a wide range of technologies.
Additionally, through our participation in the principal wireless industry
associations, we are able to contribute to the adoption of industry-wide
standards and remain current on emerging technologies and trends. We preserve
our ability to provide unbiased evaluations and recommendations by remaining
technology and vendor independent. We provide services to many of the largest
telecommunications carriers, and are qualified and approved by nearly every
major telecommunications equipment vendor.
PROPRIETARY TOOLS AND METHODOLOGIES. We have developed proprietary
processes and technologies to coordinate the integration of our services on a
national scale. E-Site, our proprietary database program management software
tool, allows us to combine and analyze data relating to a project in order to
coordinate the many complex steps involved in a network deployment. We license a
Web-based civil and site engineering software tool known as Virtual Project
Manager. This Web-based tool enables our customers to access comprehensive
project information on a real-time basis. Our project managers facilitate
feedback of information among the various specialized activities so that our
project teams work quickly and effectively. E-Site and Virtual Project Manager
permit us to optimize resource deployment and deliver our services on time and
within budget.
DEPTH OF SKILLED PERSONNEL. Our principal asset is our staff of 566
people, which combines expertise in both wireless and wireline technologies. We
keep our personnel current on evolving technologies through our programs of
continuous technical education and equipment manufacturer certification.
Additionally, our employees gain excellent technical skills by working on a
range of projects with our diverse customer base. Over 87% of our employees work
directly on customer projects. Our staff includes more than 162 engineers and
technicians.
OUR GROWTH STRATEGY
Our goal is to be the leading independent provider of integrated
full-service network solutions to the global wireless telecommunications
industry. Our growth strategy includes the following elements.
DEVELOP NEW CUSTOMERS AND CROSS-MARKET TO EXISTING CUSTOMERS. We utilize
our significant experience in the wireless and wireline industries as well as
our growing geographic reach to pursue new customer opportunities and to
cross-sell our comprehensive services to existing customers. We often utilize
our strategic business consulting services to establish relationships with
customers at the outset of a project. Based on this relationship, we pursue
opportunities for network design and deployment. After a network is deployed, we
offer ongoing operations, maintenance and optimization services. Our experience
with emerging technologies also offers cross-selling opportunities for network
upgrades and deployment of our customers' next generation
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networks. We also seek to use each engagement in a limited geographic area to
promote similar services for a customer's other regional or national operations.
REMAIN AT THE FOREFRONT OF EMERGING TELECOMMUNICATIONS TECHNOLOGIES. We
endeavor to remain current in all major emerging wireless and wireline
technologies in order to identify future business opportunities. We achieve this
goal through our continuing technical education and equipment manufacturer
certification programs. Additionally, we actively market our technology
expertise to wireless and wireline companies deploying leading edge technologies
so that we may keep abreast of new technologies.
ATTRACT, RETAIN AND DEVELOP HIGH-QUALITY EMPLOYEES. We intend to continue
to attract and retain qualified employees by offering interesting and
challenging projects and opportunities to work with emerging technologies.
Additionally, our continuing education programs allow our personnel to remain
current on next-generation technologies. Our personnel also continually update
their equipment manufacturer certifications. We believe our commitment to
employee skill development fosters company loyalty and increases employee
retention. We will continue to motivate our employees through a broad employee
stock ownership program.
LEVERAGE PRIOR EXPERIENCE. By capturing data from prior engagements in our
software tools E-Site and Virtual Project Manager, we leverage our prior
experience and identify best practices. Further, we believe our prior experience
enables us to more accurately assess our staffing needs at the beginning of a
project and more efficiently utilize our resources. We believe that the
experience of our technical personnel and our proprietary tools and processes
provide our customers with significant benefits, including critical
time-to-market advantages.
PURSUE TARGETED ACQUISITIONS. We intend to expand the scope of our
services, capacity and geographic presence by selectively acquiring businesses
that will supplement our technical expertise, allow us to acquire additional
human resources or strategic customer relationships or expand our presence in
key geographic markets. From 1997 through 1999, we acquired several businesses
to extend our geographic reach, broaden our service offerings and technical
expertise, increase capacity and add professional resources.
OUR SERVICES
We provide comprehensive integrated solutions to the global wireless
telecommunications industry. Our services include network planning, design,
deployment and maintenance. We customize our services to individual needs by
offering both bundled and unbundled service packages. Our program management
services integrate the planning, design, deployment and maintenance of wireless
telecommunications networks. We begin by helping our customers identify the
optimal technology solution for their particular needs, and we manage the
subsequent bidding process from multiple equipment vendors. We manage network
deployment to ensure seamless integration of component parts. In addition to
providing a single point of project accountability, our program management
services provide integration synergies that give our customers greater speed-
to-market and minimize network deployment costs.
PLANNING SERVICES. We provide pre-deployment planning services for all
steps involved in developing or refining a network or deployment strategy. Our
business consultants utilize their expertise and experience to analyze the
financial, engineering, competitive market and technology issues applicable to a
proposed network project. We work together with our customers' management team
to evaluate various strategic alternatives for network implementation. With a
new network deployment, we conduct a thorough demographic analysis and
preliminary network design. We combine this analysis with informed cost
estimates to create a comprehensive network solution. We also offer specialized
consulting services, including auction services for wireless licenses, valuation
services for acquired licenses, and business planning services.
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DESIGN SERVICES. We provide a full range of services for the design of
wireless telecommunications networks, which includes related wireline aspects of
the network. We have professional engineering licenses in all of the 48
contiguous U.S. states. We believe our customers value our ability to provide a
comprehensive package of vertically integrated services not traditionally
available from a single source service provider. Our design services include:
Radio Frequency Engineering and Network Design. Our technical experts
study and analyze the traffic patterns, population density, topography and
propagation environment in each market under consideration. Our radio
frequency (RF) engineers design each integrated telecommunications system
to meet the customer's requirements. Our wireless RF design services
include detailed assessments of individual geographic markets, estimates of
the cost of wireless coverage involved, and collection of comprehensive
radio propagation data and modeling. We perform the calculations,
measurements and tests necessary to determine the optimal placement of
network equipment. This includes designing the network to make optimal use
of radio frequencies, resulting in the highest possible signal quality for
the greatest portion of subscriber usage within existing constraints. The
constraints may be imposed by cost parameters, terrain, license
limitations, interference with other operators, site availability,
applicable zoning requirements or other factors.
Fixed Network Engineering. Most wireless calls are ultimately routed
through a wireline network. As a result, the traffic from wireless networks
must be connected with switching centers within wireline networks. For
microwave, fiber optic and other transport technologies, we determine the
optimal and most economical locations and methods for connection with other
networks or with central switching stations on the wireline backbone. Our
engineers are involved in specifying, provisioning and implementing fixed
network facilities. Additionally, the convergence of voice and data
networks, specifically through broadband technologies, such as LMDS, MMDS
and Fast Ethernet, has created a new demand for specialized fixed network
engineering skills. These skills include design, capacity and traffic
analysis for packet-switched and IP router-based network elements. Our
engineering teams are trained in specialized data networking and Internet
protocol engineering issues.
Facilities Design and Engineering. We engineer and design the
infrastructure of telecommunications facilities, including base station
electronics, antennas and ancillary power equipment.
DEPLOYMENT SERVICES. We provide our customers with comprehensive site
development and site audit services, including site feasibility and zoning
studies, lease negotiations, civil and structural engineering and third party
vendor management. We install all major types of wireless and wireline
telecommunications equipment, including base station electronics, antennas and
ancillary equipment. We also assist our customers in moving incumbent users of
their licensed spectrum to new frequencies by providing point-to-point and
point-to-multipoint line-of-sight microwave engineering and support services.
Site Development and Audit. We provide our customers with the
resources to locate and develop the sites needed for the rollout of
wireless systems. These activities include evaluating the zoning
feasibility of wireless base stations, negotiating leases, performing the
civil and structural engineering required to prepare the rooftop or tower
site, and, when necessary, managing subcontractors and obtaining the proper
electrical and telecommunications connections. We maintain general
contractor licenses in all states where they are required, and all of our
site acquisition employees have real estate licenses. Our proprietary
software tool E-Site allows us and our customers to retrieve and analyze
real-time data concerning their project deployment or maintenance. We also
provide tower analysis services, including site audits, in which our
technical experts gather, record and evaluate comprehensive data concerning
a particular telecommunications site.
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Equipment Installation and Optimization. We install all major types
of wireless and wireline telecommunications equipment, including base
station electronics, antennas and ancillary equipment. We also install and
optimize DC and other power systems for telecommunications facilities. We
perform specialized wireless and microwave tower erection and installation
services and provide installation and optimization services for all major
PCS, cellular and broadband wireless air interface standards, wireline and
fiber optic cable equipment manufacturers. Further, we have created
customized interior site audit and status reports that enable a customer to
determine the exact configuration of equipment at a particular existing
facility for which adequate records are not available.
Spectrum Clearing. In order for our customers to use the radio
frequency spectrum they have licensed, it is often necessary for them to
analyze the licensed spectrum for microwave interference and move incumbent
users of this portion of the spectrum to new frequencies. We assist our
customers in accomplishing this spectrum clearing function by providing
complete point-to-point and point-to-multipoint line-of-sight microwave
engineering and support services. Our engineering and support services
include identifying existing microwave paths, negotiating relocation with
incumbent users, managing and tracking relocation progress and documenting
the final decommissioning of incumbent users. We also assist our customers
with FAA and FCC filings, review and analysis.
Manufacture and Marketing of Specialized Hazard Lighting. We design,
manufacture, market and install FAA-approved aviation obstruction lighting
systems primarily for wireless towers. In addition to a line of
standardized lighting products, we design, manufacture and install custom
obstruction lighting systems.
MAINTENANCE SERVICES. Network maintenance services are comprised of
post-deployment radio frequency optimization services, network operations and
lighting systems maintenance services, and network monitoring.
Post-Deployment Radio Frequency Optimization. Upon initial
deployment, a network is adjusted to provide optimal wireless service based
upon a set of parameters existing at that time, such as cell density,
spectrum usage, base station site locations and estimated calling volumes
and traffic patterns. In time, some of these parameters may change,
requiring, for example, the relocation of base stations, addition of new
equipment or the implementation of system enhancements. We offer ongoing
radio frequency optimization services to periodically test network
elements, tune the network for optimal performance and identify elements
that need to be upgraded or replaced. We also offer benchmark testing and
quality engineering services. We believe we are one of only three U.S.
companies to perform RF compliance testing relating to employee safety in
the vicinity of radiowave emitting devices. Federal regulatory authorities
such as OSHA and the FCC are phasing in more restrictive regulations in
order to insure employee safety and have established a September 2000
compliance deadline. We believe that the demand for outsourced services in
this area will grow significantly.
Network Operations and Maintenance. We can assume responsibility for
day-to-day operation and maintenance of our customers' telecommunications
networks. We are also able to handle all aspects of physical plant
maintenance, including infrastructure, supporting power systems and
ancillary equipment. Our engineers and other professional and support staff
work with our customers to allocate site maintenance and other
responsibilities between our service team and the customer's personnel. We
provide staffing to perform the necessary services for ongoing
optimization, operations, maintenance and repair of critical network
elements, including base station equipment, mobile switching centers and
network operating centers to the extent required by our customers. We also
provide training services for the internal network staff of our customers.
Remote Monitoring. We have designed and developed a proprietary fully
integrated remote monitoring system for our obstruction lighting system.
This remote, reverse diagnostics
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<PAGE> 33
system has additional inputs for external applications such as card access,
building temperature, gate access, pressure reading and power fluctuations
as well as real-time reporting on obstruction lighting functions at a
particular site. Our experience in remote monitoring includes establishing
a Network Operations Center in Houston, Texas.
SALES AND MARKETING
We market and sell our services through our corporate headquarters and
regional sales offices. Our business development director at corporate
headquarters seeks to develop national customer accounts. We supplement his
efforts with members of our executive management team. Our regional sales
personnel, consisting of seven people, focus on repeat business generated at the
local level, while striving to cross-sell services to existing customers. Our
sales efforts tend to be relationship driven and therefore more lasting in
nature.
CUSTOMERS
We provide our services to a large cross-section of the telecommunications
industry, with strong emphasis on the wireless sector. In 1999, we completed
projects for more than 125 customers in 26 countries. For the year ended
December 31, 1999, we received approximately 15% of our revenues from Nortel
Networks, 11% of our revenues from Sprint, and 10% of our revenues from Carolina
PCS. The list below sets forth our top four customers in each of the identified
categories:
<TABLE>
<CAPTION>
WIRELESS CARRIERS BROADBAND CARRIERS EQUIPMENT VENDORS TOWER COMPANIES
- ------------------------ --------------------------- ----------------- ---------------
<S> <C> <C> <C>
Bell Atlantic Adelphia Business Solutions Alcatel Clearshot
Carolina PCS Clearsource Ericsson Crown Castle
Nextel Knology Motorola SBA
Sprint Teligent Nortel Networks SpectraSite
</TABLE>
Set forth below is a list of the types of services we have performed for
some of the customers identified above.
<TABLE>
<CAPTION>
NETWORK
OPERATIONS
AND
CUSTOMER PLANNING DESIGN DEPLOYMENT MAINTENANCE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adelphia Business Solutions (check mark) (check mark) (check mark)
Bell Atlantic (check mark) (check mark) (check mark)
Carolina PCS (check mark) (check mark) (check mark)
Crown Castle (check mark) (check mark) (check mark)
Motorola (check mark) (check mark)
Nextel (check mark) (check mark) (check mark)
Nortel Networks (check mark) (check mark) (check mark)
Sprint (check mark) (check mark) (check mark)
</TABLE>
METHODOLOGY AND TECHNOLOGY
PROJECT MANAGEMENT PROCESS. Our project managers use our specialized
methodologies and software tools to coordinate the many activities involved in
planning, designing, deploying and maintaining wireless telecommunications
networks. Through the combined efforts of our project managers and technical
experts, we are able to integrate and closely monitor the various stages of a
network deployment. We have dedicated resources that maintain and improve our
project management processes to better serve our customers, and improve the
quality and efficiency of our network deployments.
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<PAGE> 34
PROJECT MANAGEMENT TOOLS
E-Site. Our Web-enabled proprietary project management software tool,
E-Site, enables us to monitor all phases of a network deployment. E-Site
includes detailed functions to assist in property management, project
management, maintenance and project-critical reports. Property management
information can include tenants by site, a tenants listing, tenant
lease/options, property summaries, summary of site visits and site
inquiries. Master project timelines provide detailed, step-by-step action
items and status reports. The maintenance menu provides information on
lease status, lease types, power and telephone utilities, property
managers, site ownership, site types, tenants, vendors and site visits,
among other functions. In addition, E-Site is highly flexible with respect
to data import and export, accepting connections to almost all database
programs used by our customers.
Virtual Project Manager. We license a third-party Web-based
application software known as Virtual Project Manager. This tool aggregates
project information and permits viewing of real time project data and
posting of detailed project notes. In addition, Virtual Project Manager
provides an audit tool for our customers during network planning, design,
deployment and maintenance.
HUMAN RESOURCES
As of March 31, 2000, we had 566 employees. We believe that our future
success will depend on our continued ability to attract, retain, integrate and
motivate qualified personnel, and upon the continued service of our senior
management and key technical personnel.
We employ Human Resources Managers in four of our regional offices and
engage several outside recruiters on a continuous basis. Our primary hiring
sources include employee referrals, print advertising, Internet job postings and
direct recruiting.
We attract and retain employees by offering technical training
opportunities, a stock option award program, bonus opportunities, and
competitive salaries and benefits. Our Director of Technical Training arranges
for ongoing educational programs to enhance the technical abilities of our
employees through both classroom and field training. Additionally, our employees
upgrade their equipment manufacturer certifications regularly.
Each new employee participates in an orientation program focusing on our
culture, organization and values. We are dedicated to maintaining an innovative,
entrepreneurial atmosphere where our employees work as a team to regularly
exceed the expectations of our customers.
COMPETITION
Our market is highly competitive and is served by numerous service
providers. The breadth of our product and service offerings nevertheless makes
individual comparisons difficult. Within each service category, we compete with
multiple providers. With respect to planning and network design services, we
compete with Comsearch (a subsidiary of Allen Telecom Inc.), LCC International
and Wireless Facilities. With respect to engineering, project management and
deployment services, we compete with Whalen & Company, Inc. (a subsidiary of
Tetra Tech, Inc.), Fluor-Daniel and Black & Veatch. Many of our competitors have
significantly greater financial, technical and marketing resources, generate
greater revenues and have greater name recognition than we.
We believe the principal competitive factors in our market include the
ability to complete projects within budget and on time, a reputation for
quality, accountability, project management expertise, industry experience and
competitive pricing. Expertise in emerging technologies has also become
increasingly important. We believe that our ability to integrate wireless and
wireline technologies, as well as our vendor and technology independence, gives
us a competitive advantage. We believe our ability to compete also depends on
additional factors which are outside of our
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<PAGE> 35
control, including our customers' internal network deployment capabilities, our
customers' internal budgeting processes, fluctuations in demand for our services
and the costs of integrating the various technologies.
FACILITIES
Our principal executive offices are located in approximately 11,000 square
feet of office space in Atlanta, Georgia. The lease for such space expires in
May 2003. We also lease office and, in some instances, warehouse space in
Arizona, California, Maryland, New Jersey, North Carolina and Texas. We own
office space in Kentucky.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. We are not currently
party to any legal proceeding which we expect would, in the event of an adverse
outcome, have a material effect on our business.
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<PAGE> 36
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names and positions of our executive officers and
directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stephen F. Johnston, Sr.(1)............... 48 Chairman of the Board, Chief Executive
Officer and Director
Michael W. Riley.......................... 52 President, Chief Operating Officer and
Director
William J. Loughman....................... 44 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
John G. Farmer, Jr.(2).................... 52 Director
Andrew D. Roscoe(1)(2).................... 42 Director
Lisa Roumell(1)(2)........................ 41 Director
Darin R. Winn(1)(2)....................... 35 Director
</TABLE>
- ------------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Stephen F. Johnston, Sr. has served as our Chairman and Chief Executive
Officer since he co-founded our company in 1991 under the name American
Communications Construction, Inc., which provided services to four rural
cellular telephone systems in Kentucky and West Virginia. In 1997, Mr. Johnston
formed Clear Communications Group, Inc. through the combination of ACCI and two
other wireless service providers. Prior to working in the telecommunications
industry, Mr. Johnston co-founded with his father an elevator construction and
maintenance company in 1980, which was subsequently sold to Dover Elevator
Company. Mr. Johnston has over 13 years of experience in the telecommunications
industry.
Michael W. Riley joined o2wireless Solutions in November 1997 as our
President and Chief Operating Officer and has served as a director since that
time. Prior to joining our company, Mr. Riley worked for AT&T Wireless as the
Vice President and General Manager from April 1996 through November 1997. In
that role, Mr. Riley was responsible for building out the network
infrastructure, developing the management organizations, formulating sales and
distribution strategies, and producing operating budgets for seven large PCS
markets. From 1992 through April 1996, Mr. Riley worked for Motorola as Vice
President and Director of Worldwide Operations and later as the President of
Iridium North America, a joint venture between Sprint, Motorola and Bell of
Canada. From 1987 through 1992, Mr. Riley served in several management positions
with Metro Mobile, a wireless cellular operator, including Director of
Marketing, General Manager and Vice President of Operations. Mr. Riley has over
25 years of experience in the telecommunications industry.
William J. Loughman has served as our Executive Vice President, Chief
Financial Officer, Secretary and Treasurer since December 1999. Prior to that
time, Mr. Loughman served as our Vice President of Finance, Secretary and
Treasurer since April 1998. From November 1996 to April 1998, Mr. Loughman was
the Director of Business Development for AT&T Wireless. From 1993 to 1996, Mr.
Loughman was the Director of Operations for Motorola -- Network Management
Group, a subsidiary of Motorola Inc. While employed with Motorola, Mr. Loughman
served as a director of several telecommunications companies, including Omnitel
Ltd. in Lithuania, Jordan Mobile Telephone Company in Jordan, St. Petersburg
Telecom in Russia, and Pakistan Mobile
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<PAGE> 37
Communications Ltd. in Pakistan. Mr. Loughman has over 15 years of experience in
the telecommunications industry.
John G. Farmer, Jr. has been a director of o2wireless Solutions since
December 1999. Since 1994, Mr. Farmer has served as the managing partner of
Stratford Capital Partners, L.P. and Stratford Equity Partners, L.P., both of
which are small business investment companies affiliated with the Hicks, Tate &
Furst organization and collectively will own greater than five percent of our
common stock upon the exercise of their warrants. Prior to joining Stratford,
Mr. Farmer served as Senior Vice President and Regional Manager for GE Capital's
Corporate Finance Group, focusing primarily on private and public middle market
companies, equity funds and leveraged buyout sponsors. Prior to working with GE
Capital, Mr. Farmer served in various senior management positions with MBank in
Dallas, Texas.
Andrew D. Roscoe has been a director of o2wireless Solutions since November
1997. Mr. Roscoe is the founder and principal of Force Nine, LLC, a
telecommunications investment firm which he founded in September 1999. Since
February 2000, Mr. Roscoe has served as the Chief Executive Officer and a
director of GroupServe, Inc., a wireless Internet applications firm. From 1992
to 1999, Mr. Roscoe served in a variety of positions, including President and
Chief Executive Officer, with The Strategis Group, a telecommunications research
firm, and its predecessors. From 1994 to 1997, Mr. Roscoe served as the Chairman
of Integrated Site Development Company, LLC, which was sold to o2wireless
Solutions in 1997. Mr. Roscoe is also the founder and a director of RJB
Management Company, which is one of our shareholders. In 1987, Mr. Roscoe
founded Economic and Management Consultants International, Inc., a wireless
consulting firm. Mr. Roscoe has over 17 years of experience in the
telecommunications industry, analyzing technology, markets and finance.
Lisa Roumell has been a director of o2wireless Solutions since November
1997. Since July 1995, Ms. Roumell has been a general partner at DeMuth, Folger
& Wetherill II, and DFW Capital Partners, L.P., both of which are private equity
funds. DFW Capital Partners, L.P., upon conversion of its preferred stock, will
own greater than five percent of our common stock. From 1985 to 1995, Ms.
Roumell worked with First Century Partners, the private equity affiliate of
Smith, Barney, Harris & Upham and was a general partner from 1990 to 1995. Prior
to 1985, Ms. Roumell was a financial analyst in the Smith, Barney, Harris &
Upham corporate finance department.
Darin R. Winn has been a director of o2wireless Solutions since December
1999. Since August 1998, Mr. Winn has been a principal at American Capital
Strategies, Ltd., a publicly traded buyout and mezzanine fund, and was
responsible for opening the ACS office in Dallas, Texas. ACS will own greater
than five percent of our common stock upon the exercise of its warrants. From
1995 to August 1998, Mr. Winn was an associate with Stratford Capital Partners,
L.P. and Stratford Equity Partners, L.P., Dallas-based private investment firms.
From 1991 to 1995, Mr. Winn was a member of GE Capital's Southwest Corporate
Finance Group where he focused on transactions involving senior debt financing
opportunities. Prior to GE Capital, Mr. Winn was a member of the Dean Witter
Reynolds Southwest Corporate Finance Group where he gained experience in mergers
and acquisitions, leveraged buyouts, corporate restructuring, public offerings,
and private placements of both debt and equity.
BOARD STRUCTURE AND COMMITTEES
Upon completion of this offering, our Board of Directors will consist of
three classes that will serve staggered three-year terms.
Our board composition is currently governed by a Voting and Co-Sale
Agreement which allows each of DFW Capital Partners, L.P., American Capital
Strategies, Ltd., Stratford Capital Partners, L.P. and Stratford Equity
Partners, L.P. to designate one member of the Board of Directors. This
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<PAGE> 38
agreement will terminate upon the completion of this offering. For a more
complete description of the Voting and Co-Sale Agreement, see "Related Party
Transactions."
We have two standing committees: an Audit Committee and a Compensation
Committee. Ms. Roumell and Messrs. Winn, Farmer and Roscoe have been appointed
as the members of the Audit Committee, and Ms. Roumell and Messrs. Johnston,
Winn and Roscoe have been appointed as the members of the Compensation
Committee.
The Audit Committee selects the independent public accountants to audit our
annual financial statements and establishes the scope of and oversees the annual
audit. The Compensation Committee determines the compensation for employee
directors and, after receiving and considering the recommendation of our Chief
Executive Officer and the President, all officers of the company and any other
employee that the Compensation Committee may designate from time to time. The
Compensation Committee also administers our employee stock option plan. Our
board may establish other committees from time to time to facilitate the
management of the business and affairs of the company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Stephen F. Johnston, Sr., our Chairman and Chief Executive Officer, serves
as a member of the Compensation Committee of the Board of Directors.
From time to time in 1997, Mr. Johnston made loans to our predecessor
American Communications Construction, Inc., represented by demand promissory
notes in the aggregate principal amount of approximately $3.3 million. Also,
from time to time in 1997, Mr. Johnston made loans to an affiliated corporation,
Clear Communications Group, Inc. (which merged into ACCI in November 1997),
represented by demand promissory notes in the aggregate principal amount of
approximately $1.2 million. The interest rate for each of the above notes was
the prime rate plus 200 basis points. Each of the above notes was either
satisfied or forgiven as of December 1997.
In November 1998, we entered into a financial support agreement with
Stephen F. Johnston, Sr., pursuant to which Mr. Johnston agreed to provide
certain limited guaranties of our indebtedness. In consideration of that
agreement, we paid Mr. Johnston $10,000 and agreed to issue warrants to Mr.
Johnston in the event that he was not released from the guaranty by certain
dates. Pursuant to this agreement, on April 1, 1999 and October 1, 1999, we
issued warrants to Mr. Johnston to purchase an aggregate of 75,718 shares of
common stock at an exercise price of $.01 per share. These warrants are
exercisable at any time and expire on April 1, 2009 and October 1, 2009,
respectively. Mr. Johnston also has registration rights with respect to the
shares of common stock to be issued upon exercise of the warrants as more fully
described under the section "Description of Capital Stock -- Registration
Rights."
In a private placement during the period from June 1999 through August
1999, we sold 14,957 shares of our Series C Preferred Stock for a purchase price
of $1,495,700 to Clear Investors, LLC, of which Mr. Johnston is the controlling
member. The Series C Preferred Stock is presently convertible into our common
stock at a conversion price of $2.7411 per share. Upon the closing of the
offering, each outstanding share of Series C Preferred Stock will convert into
approximately 36.5 shares of our common stock. Mr. Johnston, as a holder of the
Series C Preferred Stock also has registration rights with respect to shares of
the common stock to be issued upon conversion of the Series C Preferred Stock as
more fully described under "Description of Capital Stock -- Registration
Rights."
In February 1998, we entered into an agreement with Mr. Johnston to lease
the office space in which our corporate headquarters are located. The lease
provides for minimum annual rental payments of approximately $182,000 through
May 2003. Lease payments to Mr. Johnston by us with respect to such property
totaled approximately $182,000 and $137,000 during 1999 and 1998,
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<PAGE> 39
respectively. Management believes that the rent paid for such office space is at
or below market rental rates for comparable space.
During 1999, we leased office space from Mr. Johnston for our regional
office in Richmond, Kentucky and incurred approximately $30,000 of lease expense
from January to March 1999. On March 1, 1999, we purchased the office from Mr.
Johnston for $325,000 and terminated the lease agreement. Management believes
that the purchase price was at or below the fair market value for such property.
In September 1999, we purchased equipment from Clear Paging, Inc., a
company in which Mr. Johnston is an executive officer and the majority
shareholder, for a purchase price of approximately $32,000. In addition, we
received approximately $40,000 in 1999 from Clear Paging for services provided.
In November 1999, our wholly-owned subsidiary, Clear Communications Group,
Inc., purchased equipment for approximately $300,000 from DSSK, Inc., in which
Mr. Johnston is a significant investor. Management believes that the purchase
price paid for such equipment was the fair market value for such equipment.
No interlocking relationship exists between our Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows all compensation for services rendered to us in
all capacities that was awarded to, earned by, or paid to, our chief executive
officer and our executive officers whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1999, whom we refer to in
this prospectus collectively as the "Named Executive Officers."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS GRANTED COMPENSATION(1)
- ---------------------------- -------- ------- --------------- ---------------
<S> <C> <C> <C> <C>
Stephen F. Johnston, Sr................... $189,346 $46,250 -- $432
Chairman of the Board and
Chief Executive Officer
Michael W. Riley.......................... $189,346 $46,250 40,000 $540
President and
Chief Operating Officer
William J. Loughman....................... $114,711 $13,500 25,000 $460
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
</TABLE>
- ------------------------------
(1) Represents premiums for life and disability insurance paid for the benefit
of the indicated Named Executive Officers.
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<PAGE> 40
OPTION GRANTS IN 1999
The following table sets forth information regarding stock options granted
to the Named Executive Officers during 1999. All of these stock options were
granted under our 1998 Stock Option Plan.
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO EXERCISE OF STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE OPTION TERM
OPTIONS DURING PER EXPIRATION ---------------------------
NAME GRANTED PERIOD SHARE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen F. Johnston, Sr..... -- --% $ -- -- $ -- $ --
Michael W. Riley............ 40,000 18.5 3.02 6/30/09 76,000 192,400
William J. Loughman......... 25,000 11.5 3.02 6/14/09 47,500 120,250
</TABLE>
AGGREGATE OPTION EXERCISES AND OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for 1999, and exercisable and
unexercisable options held at December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen F. Johnston,
Sr................... -- -- -- -- -- --
Michael W. Riley....... -- -- 154,965 76,643
William J. Loughman.... -- -- 60,000 0
</TABLE>
- ------------------------------
(1) The value of in-the-money options is based on an assumed initial public
offering price of $ per share, less the per share exercise price,
multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
We do not have any employment agreements with any of our Named Executive
Officers.
STOCK OPTION PLAN
In September 1998 we adopted our 1998 Stock Option Plan. Our 1998 Stock
Option Plan has an effective date of November 18, 1997, which is the date it was
adopted by our wholly-owned subsidiary Clear Communications Group, Inc. prior to
our reorganization. A total of 1 million shares of common stock have been
authorized for issuance under the 1998 Stock Option Plan.
The 1998 Stock Option Plan permits the grant of options to our directors,
officers, and key employees. Options may be either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code or non-qualified
stock options.
The 1998 Stock Option Plan is administered by the board or a committee
appointed by the board. Subject to the limitations set forth in the 1998 Stock
Option Plan, the board or the committee has the authority to select the eligible
persons to whom award grants are to be made, to designate the number of shares
to be covered by each award, to determine whether an option is to be an
incentive stock option or a non-qualified stock option, to establish vesting
schedules, to specify the exercise price of options and the type of
consideration to be paid upon exercise and, subject to restrictions, to specify
other terms of awards.
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<PAGE> 41
The maximum term of options granted under the 1998 Stock Option Plan is ten
years. Options granted under the 1998 Stock Option Plan generally are
non-transferable. Options generally expire three months after the termination of
an option holder's service. However, if an option holder is permanently disabled
or dies during his or her service, such person's options generally may be
exercised up to 12 months following disability or death.
The exercise price of options granted under the 1998 Stock Option Plan is
determined by the administrator in accordance with the guidelines set forth in
the 1998 Stock Option Plan. The exercise price of an incentive stock option
cannot be less than 100% of the fair market value of the common stock on the
date of the grant. The exercise price of an incentive option granted to a person
who holds more than 10% of the voting power of o2wireless Solutions cannot be
less than 110% of the fair market value of our common stock on the date of the
grant.
Options granted under the 1998 Stock Option Plan vest at the rate
determined by the board or the committee as specified in the option agreement.
Upon changes in control in our ownership through a merger, all outstanding
stock awards under the 1998 Stock Option Plan must either be substituted by the
surviving entity or terminated to the extent not exercised upon 60 days written
notice.
The 1998 Stock Option Plan may be amended or modified from time to time by
the Board of Directors without shareholder approval, except that shareholder
approval is required to either:
- increase the number of shares available for issuance under the 1998 Stock
Option Plan; or
- change the class of persons eligible for incentive stock options.
Amendments to the 1998 Stock Option Plan which require shareholder approval
must be approved by a majority of shares present and voting at a shareholders
meeting at which a quorum is present.
As of April 30, 2000, we had issued options to purchase 586,715 shares of
common stock under the 1998 Stock Option Plan.
In May 2000, our Board of Directors approved an annual option grant,
commencing on the date of our public offering, to Stephen F. Johnston, Sr.,
Michael W. Riley and William J. Loughman in the amounts of 15,000, 15,000 and
7,500 shares, respectively, at an exercise price equal to the fair market value
of our common stock on the date of grant. The options will vest in equal
increments over a period of three years.
COMPENSATION OF DIRECTORS
Each of our non-employee directors who has not been appointed to the Board
of Directors pursuant to a contractual agreement receives cash compensation of
$1,000 per meeting up to a maximum of $4,000 per year. Each of these directors
also receives options to purchase 4,000 shares of our common stock on an annual
basis. These options have ten year terms and will vest over a period of five
years from the date of grant. Options will not vest if a director ceases to be a
director. These options will have an exercise price equal to the fair market
value of our common stock on the date of grant.
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<PAGE> 42
RELATED PARTY TRANSACTIONS
The following is a description of transactions since January 1, 1997 to
which we have been a party, in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of more than 5% of our capital
stock had or will have a direct or indirect material interest, other than our
compensation arrangements with our directors and executive officers that are
described under "Management." For information with respect to certain related
party transactions between us and Mr. Johnston, please see "Compensation
Committee Interlocks and Insider Participation."
On January 1, 1997, we issued the equivalent (after giving effect to a
subsequent stock split) of approximately 352,823 shares of our common stock to
David W. Hughes, formerly one of our executive officers and a holder of more
than 5% of our common stock, at a purchase price of $.01 per share. In addition,
on November 20, 1997, we issued 117.5 additional shares of our common stock to
Mr. Hughes at a purchase price of $.01 per share.
On November 20, 1997, we sold 50,000 shares of our Class A Convertible
Preferred Stock to DFW Capital Partners, L.P., a beneficial holder of more than
five percent of our common stock (as converted), at a purchase price of $100.00
per share. In October 1999, January 2000, and April 2000, we issued an
additional 7,669 shares of Class A Preferred Stock to DFW Capital Partners,
L.P., in payment of accrued dividends at the rate of 6% per annum. The Class A
Preferred Stock is presently convertible into our common stock at a conversion
price of $2.7411 per share. Upon the closing of this offering, each outstanding
share of our Class A Preferred Stock will convert into approximately 36.5 shares
of our common stock, for an aggregate of 2,103,863 shares.
Also on November 20, 1997, in connection with the acquisition of the
outstanding stock of our subsidiary, ISDC, Inc., we issued 122,629 shares of our
common stock to RJB Management Company, Inc., an affiliate of our director,
Andrew Roscoe, at a purchase price of $4.562 per share. In connection with the
acquisition of ISDC, we also assumed a note payable to RJB Management Company,
Inc. in an aggregate principal amount of $121,792. On September 15, 1998, this
note was retired through the execution of a satisfaction and release agreement
and converted into cash and shares of our common stock. The note payable to RJB
Management Company, Inc. was satisfied by a cash payment of $101,371.
In November 1998, we entered into a financial support agreement with
Stephen F. Johnston, Sr. and DFW Capital Partners, L.P., pursuant to which Mr.
Johnston and DFW agreed to provide certain limited guaranties of our
indebtedness. In consideration of that agreement, we paid each of Mr. Johnston
and DFW $10,000 and agreed to issue warrants to Mr. Johnston and DFW in the
event that they were not released from the guaranty by certain dates. Pursuant
to this agreement, on April 1, 1999 and October 1, 1999, we issued warrants to
each of Mr. Johnston and DFW to purchase an aggregate of 75,718 shares at an
exercise price of $.01 per share. These warrants are exercisable at any time and
expire on April 1, 2009 and October 1, 2009, respectively. Mr. Johnston and DFW
also have registration rights with respect to the shares of common stock to be
issued upon exercise of the warrants as more fully described under the section
"Description of Capital Stock -- Registration Rights."
In a private placement during the period from June 1999 through August
1999, we sold an aggregate of 29,607 shares of Series C Convertible Preferred
Stock at a purchase price of $100.00 per share. In October 1999, January 2000,
and April 2000, we issued an aggregate of 30,932 additional shares of Series C
Preferred Stock in payment of accrued dividends at the rate of 6% per annum. The
Series C Preferred Stock is presently convertible into our common stock at a
conversion price of $2.7411 per share. Upon the closing of the offering, each
outstanding share of Series C Preferred Stock will convert into approximately
36.5 shares of our common stock, or an aggregate of 1,128,452 shares. The
holders of the Series C Preferred Stock also have registration rights with
respect to shares of our common stock to be issued upon conversion of the
preferred stock. These registration rights are more fully described under
"Description of Capital Stock --
38
<PAGE> 43
Registration Rights." The following table illustrates the number of shares of
Series C Preferred Stock we sold to our directors or entities affiliated with
our directors, executive officers, or our shareholders who hold more than 5% of
our capital stock. The aggregate value is calculated based on the initial public
offering price of $ .
<TABLE>
<CAPTION>
SHARES OF SERIES C AGGREGATE AGGREGATE
PREFERRED STOCK PURCHASE PRICE VALUE
------------------ -------------- ---------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Andrew Roscoe(1)........................... 516 $ 51,600
Lisa Roumell(2)............................ 1,500 150,000
ENTITIES AFFILIATED WITH DIRECTORS OR
EXECUTIVE OFFICERS
Clear Investors, LLC(3).................... 14,957 1,495,700
RJB Management Company(4).................. 1,068 106,800
OTHER 5% SHAREHOLDERS
DFW Capital Partners, L.P.(5).............. 10,071 1,007,100
</TABLE>
- ------------------------------
(1) An additional 19 shares of Series C Preferred Stock have been issued in
payment of accrued dividends, valued at $ .
(2) An additional 52 shares of Series C Preferred Stock have been issued in
payment of accrued dividends, valued at $ .
(3) An additional 663 shares of Series C Preferred Stock have been issued in
payment of accrued dividends, valued at $ . Mr. Johnston, our
Chairman and Chief Executive Officer, is a controlling member of Clear
Investors, LLC.
(4) An additional 45 shares of Series C Preferred Stock have been issued in
payment of accrued dividends, valued at $ . Mr. Roscoe, a member of
our Board of Directors is the and of RJB
Management, Inc.
(5) An additional 490 shares of Series C Preferred Stock have been issued in
payment of accrued dividends, valued at $ .
On November 1, 1999, we issued 39,000 shares and 36,000 shares,
respectively, of a new Series D Senior Redeemable Preferred Stock to Stratford
Capital Partners, L.P. and Stratford Equity Partners, L.P., at a purchase price
of $100.00 per share, for an aggregate purchase price of $7,500,000. The Series
D Preferred Stock is entitled to cumulative dividends in cash at the annual rate
of $8.00 per share, payable quarterly. In addition, any dividends committed to
be paid in kind on the Series D Preferred Stock carry a dividend rate of $11.00
per share. The holders of the Series D Preferred Stock have certain redemption
rights upon an event of default, the sale of the company or an initial public
offering of our common stock. The Series D Preferred Stock also carries certain
preferential rights upon the liquidation, dissolution or winding-up of our
company. In connection with the issuance of the Series D Preferred Stock, we
issued warrants to Stratford Capital Partners, L.P. and Stratford Equity
Partners, L.P. to purchase 775,713 shares and 716,042 shares, respectively, of
our common stock at an exercise price of $.01 per share, which warrants expire
on November 1, 2009. The holders of the Series D Preferred Stock also have
registration rights with respect to the shares of common stock issued upon
exercise of the warrants as described more fully under the section "Description
of Capital Stock -- Registration Rights." We intend to redeem all outstanding
shares of the Series D Preferred Stock with the proceeds of this offering.
On November 1, 1999, we issued senior subordinated notes to American
Capital Strategies, Ltd. in an aggregate principal amount of $13,000,000. These
notes bear interest at a rate of 12.75% and are due October 31, 2005. The note
purchase agreement provides for the future issuance, at our
39
<PAGE> 44
option, of additional senior subordinated notes in the aggregate principal
amount of $4.5 million, which would bear interest at a rate of the prime rate
plus 450 basis points and would mature on October 31, 2005. All notes authorized
under the note purchase agreement may be prepaid with a prepayment penalty equal
to a decreasing percentage of principal paid, such initial percentage equal to
5% of the outstanding principal amount through October 31, 2000. The holders of
the notes have certain rights upon an event of default, including a "change in
control" of the company, which includes this offering. Upon the occurrence of an
event of default triggered by a change of control, the holders of the notes,
may, at their option, declare the entire unpaid balance of the notes, plus
interest, due and payable. In connection with the issuance of the notes, we also
issued warrants to ACS to purchase 1,032,763 shares of our common stock at an
exercise price of $0.01 per share, which warrants expire on November 1, 2009.
Pursuant to the voting and co-sale agreement described below, ACS is entitled to
designate one member of the Board of Directors. ACS also has registration rights
with respect to the shares to be issued upon exercise of the warrants as
described more fully in "Description in Capital Stock -- Registration Rights."
We intend to redeem the notes for a redemption price of approximately $13
million with the proceeds of the offering.
In connection with the issuance of the Series A Preferred Stock to DFW, we
entered into a Voting and Co-Sale Agreement in November 1997 with DFW and
Stephen F. Johnston, Sr. The Voting and Co-Sale Agreement was amended and
restated in June and November 1999 to add Stratford, ACS and certain other
preferred shareholders as parties to the agreement. Under the Voting and Co-Sale
Agreement, the number of members of the Board of Directors was fixed at seven,
and each of DFW, Stratford and ACS is entitled to designate one member of the
Board of Directors. Further, upon the occurrence of certain events of default or
covenant violations, ACS would be entitled to designate two additional
directors. In addition, the Voting and Co-Sale Agreement provides that the
remaining members of the Board of Directors will consist of Mr. Johnston, Mr.
Riley, and two individuals designated by Mr. Johnston. Lisa Roumell has been
designated as DFW's representative since November 1997 and continues to serve as
a member of our Board of Directors. Stratford Capital Partners and Stratford
Equity Partners, as holders of the Series D Preferred Stock, have designated
John G. Farmer as their representative. ACS has designated Darin Winn as its
representative. The Voting and Co-Sale Agreement also provides that if Mr.
Johnston (or his affiliates) decides to sell more than 25% of his ownership
interest in the company, DFW, Stratford and ACS will have the right to elect to
sell, at the same price and/or the same terms as Mr. Johnston, a pro rata
portion of their shares of common stock, preferred stock, or shares issued upon
exercise of the warrants, as the case may be. Further, if either Mr. Johnston or
Mr. Riley receives an offer to sell their shares, he shall be required to offer
first to the Company, and subsequently to DFW, Stratford and ACS, the right to
purchase such shares on the same terms as contained in the offer received from
the third party. The Voting and Co-Sale Agreement will terminate upon the
completion of this offering.
40
<PAGE> 45
PRINCIPAL AND SELLING SHAREHOLDERS
The following table contains information about the beneficial ownership of
our common stock and preferred stock before and after our initial public
offering for:
- the selling shareholder(s);
- each person who beneficially owns more than five percent of our common
stock, Class A Preferred stock, or Series C Preferred Stock;
- each of our directors;
- the Named Executive Officers; and
- all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and represents sole or shared voting or
investment power with respect to securities. Except as indicated by footnote,
the persons named in the table below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
Shares of common stock underlying options or warrants that are currently
exercisable or exercisable within 60 days of April 30, 2000, are deemed to be
outstanding and to be beneficially owned by the person holding the options or
warrants for the purpose of computing the percentage ownership of that person,
but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Upon completion of the offering, all shares of
convertible preferred stock will be automatically converted into shares of
common stock.
The table assumes that the underwriters do not exercise their
over-allotment option. If the underwriters' over-allotment option is exercised
in full, shares of common stock will be outstanding after the
completion of this offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY BENEFICIALLY
OWNED BEFORE THE OWNED
OFFERING NUMBER OF AFTER THE OFFERING
----------------------- SHARES TO BE -----------------------
COMMON PERCENT OF SOLD IN THE COMMON PERCENT OF
NAME OF BENEFICIAL OWNER STOCK CLASS(1) OFFERING STOCK CLASS(1)
------------------------ --------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Stephen F. Johnston, Sr............. 2,823,502(2) 46.8%
Michael W. Riley.................... 154,965(3) 2.5
Lisa Roumell........................ 56,620(4) *
Darin Winn.......................... -- *
Andrew Roscoe....................... 23,518(5) *
John G. Farmer...................... -- *
William J. Loughman................. 60,000(6) *
David W. Hughes..................... 177,941(7) 3.0
RJB Management Company, Inc......... 171,467(8) 2.9
Clear Investments, LLC.............. 175,000 2.9
DFW Capital Partners, L.P........... 2,564,864(9) 43.1
Clear Investors, LLC................ 569,844(10) 9.6
Stratford Capital Partners, L.P..... 775,713(11) 11.5
Stratford Equity Partners, L.P...... 716,042(12) 10.7
American Capital Strategies, Ltd.... 1,032,763(13) 14.8
All directors and executive officers
as a group (7 persons)............ 3,095,087(14) 49.6%
</TABLE>
- ------------------------------
* Less than 1%.
(1) The percentages are based upon 2,720,917 shares of common stock issued and
outstanding as of April 30, 2000, as adjusted to reflect the conversion of
all outstanding shares of convertible preferred stock upon the completion
of this offering into 3,232,315 shares of common stock
41
<PAGE> 46
and shares of common stock outstanding after completion of
this offering (assuming no exercise of the underwriters' over-allotment
option).
(2) Includes 75,718 shares subject to immediately exercisable warrants, 177,941
shares which are held in a voting trust pursuant to which Mr. Johnston is
entitled to vote all shares owned by Mr. David W. Hughes and 569,844 shares
to be issued upon the conversion of 15,620 shares of Series C Preferred
Stock held by Clear Investors, LLC, of which Mr. Johnston is the
controlling member.
(3) Represents shares subject to immediately exercisable options.
(4) Represents shares to be issued upon the conversion of 1,552 shares of
Series C Preferred Stock held jointly with her husband.
(5) Includes 19,518 shares to be issued upon the conversion of 535 shares of
Series C Preferred Stock and 4,000 shares subject to immediately
exercisable options.
(6) Represents shares subject to immediately exercisable options.
(7) All of Mr. Hughes' shares are held in a voting trust pursuant to which Mr.
Johnston is entitled to vote all shares owned by Mr. Hughes.
(8) Includes 40,604 shares to be issued upon the conversion of 1,113 shares of
Series C Preferred Stock.
(9) Includes 75,718 shares subject to immediately exercisable warrants,
2,103,863 shares to be issued upon the conversion of 57,669 shares of Class
A Preferred Stock, and 385,283 shares to be issued upon the conversion of
10,561 shares of Series C Preferred Stock.
(10) Represents shares to be issued upon the conversion of 15,620 shares of
Series C Preferred Stock.
(11) Represents shares subject to immediately exercisable warrants.
(12) Represents shares subject to immediately exercisable warrants.
(13) Represents shares subject to immediately exercisable warrants.
(14) Includes 290,683 shares subject to immediately exercisable warrants and
options.
42
<PAGE> 47
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, we will be authorized to issue
100,000,000 shares of common stock, $.0001 par value per share, 100,000 shares
of Class A Convertible Preferred Stock, $.01 par value per share, and 10,000,000
shares of serial preferred stock, no par value per share. As of April 30, 2000,
after giving effect to the conversion of all outstanding convertible preferred
stock into common stock upon the closing of this offering, there were
outstanding 5,953,232 shares of common stock held of record by 14 shareholders.
This description is only a summary. You should refer to our articles of
incorporation and bylaws which have been filed with the Securities and Exchange
Commission as exhibits to our registration statement of which this prospectus
forms a part.
COMMON STOCK
Holders of our common stock are entitled to one vote per share on all
matters to be voted on by the shareholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of the common
stock are entitled to receive ratably such dividends as may be declared by the
board of directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, holders of the common stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Some
holders of our common stock have preemptive rights with respect to future
offerings of our securities, but these preemptive rights were waived in
connection with this offering and following this offering, no shareholder will
have any preemptive rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of convertible
preferred stock will be converted into 3,232,315 shares of common stock.
Class A Convertible Preferred Stock. Under our articles of incorporation,
we are authorized to issue 100,000 shares of our Class A Convertible Preferred
Stock. There are currently 57,669 shares of our Class A Preferred Stock
outstanding, all of which are held by DFW Capital Partners, L.P. Upon completion
of the offering, the 57,669 shares of Class A Preferred Stock which are
currently outstanding will be converted into 2,103,863 shares of common stock.
The holder of the Class A Preferred Stock has demand registration rights at any
time which allow the holder to require us to file a registration statement to
register its common stock to be issued upon the conversion. The holder of the
Class A Preferred Stock also has piggyback registration rights in the event that
we propose to register any of our securities for sale to the public, which
rights will continue after the conversion to common stock. Upon completion of
this offering, the holder of the Class A Preferred Stock (and the underlying
common stock) will have no preemptive rights with respect to future offerings of
our securities.
Series C Convertible Preferred Stock. We are authorized to issue 75,000
shares of our Series C Convertible Preferred Stock. There are currently 30,932
shares of our Series C Preferred Stock outstanding, which are held of record by
eight shareholders. Upon completion of this offering, the 30,932 shares of
Series C Preferred Stock which are currently outstanding will be converted into
1,128,452 shares of common stock. The holders of Series C Preferred Stock have
demand registration rights at any time after an initial public offering of our
common stock. The holders of Series C Preferred Stock also have piggyback
registration rights if the Company proposes to register any of its securities
for sale to the public. These registration rights continue after the conversion
to common stock. The holders of the Series C Preferred Stock do not have any
preemptive rights with respect to future offerings of our securities.
43
<PAGE> 48
Series D Senior Redeemable Preferred Stock. We are authorized to issue
100,000 shares of our Series D Senior Redeemable Preferred Stock, no par value
per share. There are currently 79,180 shares of the Series D Preferred Stock
outstanding, held by two shareholders of record. Upon completion of this
offering, we intend to redeem all outstanding shares of the Series D Preferred
Stock for an aggregate redemption price of approximately $7.9 million. See "Use
of Proceeds" for a more complete description of the intended uses of the
proceeds from this offering.
Following the conversion of our outstanding preferred stock, our articles
of incorporation will authorize us to issue 10,000,000 shares of preferred
stock. Our board of directors will have the authority, without further action by
shareholders, to fix the rights, preferences, privileges, qualifications and
restrictions granted to or imposed upon such preferred stock, including dividend
rights, conversion rights, voting rights, rights and terms of redemption,
liquidation preference and sinking fund terms, any or all of which may be
greater than the rights of the common stock. The issuance of preferred stock
could adversely affect the voting power of holders of common stock and reduce
the likelihood that such holders will receive dividend payments and payments
upon liquidation. The issuance of preferred stock could also have the effect of
decreasing the market price of the common stock. The issuance of preferred stock
could also have the effect of delaying, deterring or preventing a change in
control of our company. We have no present plans to issue any shares of
preferred stock following the offering.
WARRANTS
As of April 30, 2000, there were warrants outstanding to purchase an
aggregate of 2,675,954 shares of our common stock at an exercise price of $.01
per share. In April, July and October 1999, we issued warrants to purchase
75,718 shares of common stock at an exercise price of $.01 per share to each of
DFW Capital Partners, L.P. and Mr. Johnston in consideration of an agreement by
Mr. Johnston and DFW Capital Partners, L.P. to provide limited guaranties of our
indebtedness. All of these warrants are immediately exercisable. In connection
with our financing activities in November 1999, we issued warrants to purchase
an aggregate of 2,524,518 shares of common stock as follows: American Capital
Strategies, Ltd. (1,032,763 shares), Stratford Capital Partners, L.P. (775,713
shares), and Stratford Equity Partners, L.P. (716,042 shares). These warrants
are also immediately exercisable at an exercise price of $.01 per share, and
have a put feature that enables the holders, upon the occurrence of certain
events, to sell the warrants and any common stock issued upon exercise back to
us at fair value, up to a maximum aggregate put price of $22,720,662. The put
feature will expire upon completion of this offering.
REGISTRATION RIGHTS
Upon completion of the offering, the holders of shares of
common stock will be entitled to have such shares registered, subject to
limitations, under the Securities Act, pursuant to various registration rights
agreements. Under the terms of these agreements, if we propose to register any
of our securities under the Securities Act, either for our own account or for
the account of other security holders exercising registration rights, the
holders are entitled to notice of the registration and are entitled, subject to
limitations, to include shares in the registration. Further, upon completion of
the offering, the holders of the Class A Preferred Stock, the holders of the
Series C Preferred Stock, and the holders of warrants may require us to file a
registration statement under the Securities Act with respect to the shares of
common stock they receive upon conversion or exercise, as the case may be, and
we are required to use our best efforts to effect the requested registration.
Furthermore, these holders may require us to register their shares on Form S-3
when such form becomes available to us. Generally, we are required to bear all
registration expenses incurred in connection with any such registrations, but
not including any underwriting discounts and selling commissions. These rights
are subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such a
registration.
44
<PAGE> 49
ANTI-TAKEOVER PROVISIONS
Upon completion of the offering, our articles of incorporation and bylaws
will contain provisions that are intended to deter hostile takeover attempts.
Specific provisions of our articles of incorporation and bylaws could make it
more difficult to effect, or prevent completely, a change in control by means of
a tender offer, a proxy contest or otherwise that a shareholder might consider
favorable, and to remove incumbent officers and directors. These provisions are
intended to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of us to first negotiate
with us. We believe that the benefits of increased protection of our ability to
negotiate with the potential proponent of an unfriendly or unsolicited proposal
to acquire or restructure us outweigh the disadvantages of discouraging takeover
or acquisition proposals because, among other things, negotiation of these
proposals could result in an improvement of their terms.
Upon completion of the offering, our articles of incorporation and bylaws
will require that any action to be taken by our shareholders must be taken at a
duly called annual or special meeting of the shareholders and may not be taken
by a consent in writing. Our articles of incorporation and bylaws will also
provide that our board of directors will be divided into three classes, with
each class serving staggered three-year terms, so that approximately one-third
of the directors are elected each year. Staggering the terms of our directors
delays the time it would take shareholders to replace a majority of the
incumbent directors. Some proposals to amend the articles of incorporation and
the bylaws will require the approval of holders of a super-majority of all
outstanding stock. These provisions may have the effect of discouraging
takeovers and tactics used in proxy fights or delaying changes in control or in
our management.
These and other provisions contained in our articles of incorporation and
bylaws could delay or discourage certain types of transactions involving an
actual or potential change in control of us or our management (including
transactions in which shareholders might otherwise receive a premium for their
shares over then current prices) and may limit the ability of shareholders to
remove current management or approve transactions that shareholders may deem to
be in their best interests and, therefore, could adversely affect the price of
our common stock.
LIMITATIONS ON DIRECTORS LIABILITY AND INDEMNIFICATION
Our articles of incorporation limit the personal liability of our directors
to us and our shareholders to the maximum extent permitted by Georgia law.
Georgia law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for:
- any appropriation, in violation of his duties, of any business
opportunity of the company;
- acts or omissions which involve intentional misconduct or a knowing
violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
The limitation of liability does not apply to liabilities of our directors
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our articles of incorporation and bylaws also provide that we will
indemnify our directors and officers, and may indemnify our employees and other
agents, to the fullest extent permitted by law. We believe that indemnification
under our bylaws applies to negligent and grossly negligent acts of indemnified
parties. Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in the capacity as an officer, director, employee or other agent,
regardless of whether the articles of incorporation or bylaws would permit
indemnification. The indemnification provisions in our bylaws and articles of
45
<PAGE> 50
incorporation are not exclusive of other rights of indemnification that may be
available to our directors or officers under any agreement or vote of
shareholders or disinterested directors.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
THE NASDAQ STOCK MARKET'S NATIONAL MARKET
We have applied to list our common stock on the Nasdaq Stock Market's
National Market under the trading symbol "OTWO."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is First Union
National Bank.
46
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for our common stock will
develop or be sustained after this offering. As described below, no shares
currently outstanding will be available for sale immediately after this offering
due to contractual restrictions on resale. Sales of substantial amounts of our
common stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and our ability to raise equity capital in
the future.
Upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction under the Securities Act unless purchased by our affiliates.
The remaining shares of common stock held by existing
shareholders are restricted securities. Restricted securities may be sold in the
public markets only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 promulgated under
the Securities Act.
As a result of the lock-up agreements and the provisions of Rules 144,
144(k) and 701 described below, the above-described restricted shares will be
available for sale in the public market as follows:
- shares may be sold prior to 180 days from the date of this
prospectus;
- shares will have been held long enough to be sold under
Rule 144 or Rule 701 beginning 181 days after the date of this
prospectus, which we expect to be ; and
- the remaining shares may be sold under Rule 144 or 144(k) once they have
been held for the required time.
LOCK-UP AGREEMENTS
Some of our shareholders and option holders have agreed not to transfer or
dispose of, directly or indirectly, any shares of our common stock, or any
securities convertible into or exercisable or exchangeable for shares of our
common stock, for a period of 180 days after the date the registration statement
of which this prospectus is a part is declared effective. Transfers or
dispositions can be made sooner with the prior written consent of Chase
Securities Inc.
RULE 144
In general, under Rule 144, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell publicly within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this
offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner-of-sale provisions and
notice requirements, and to the public availability of certain current
information about us.
47
<PAGE> 52
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information or notice provisions of Rule 144 or the volume limitations discussed
above.
RULE 701
In general, under Rule 701, any of our employees, consultants or advisors
who purchases or receives shares from us in connection with a compensatory stock
purchase plan, option plan or other written agreement will be eligible to resell
their shares beginning 90 days after the date of this prospectus. Non-affiliates
will be able to sell their shares under Rule 144 without complying with the
holding period, public information, volume limitation or notice provisions of
Rule 144. Affiliates will be able to sell their shares under Rule 144 without
complying with the holding period requirements of Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of shares of
our common stock will be entitled to rights with respect to the registration of
their shares under the Securities Act. For a more complete description of the
registration rights relating to our common stock, see "Description of Capital
Stock -- Registration Rights." Except for shares purchased by affiliates,
registration of shares under the Securities Act would result in such shares
becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration.
STOCK OPTIONS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering approximately shares for sale
upon the exercise of outstanding stock options and warrants issued pursuant to
compensatory benefit plans or reserved for future issuance pursuant to our 1998
Stock Option Plan. The registration statement is expected to be filed and become
effective as soon as practicable after the closing of this offering.
Accordingly, shares registered under the registration statement will, subject to
Rule 144 volume limitations applicable to affiliates, be available for sale in
the public market beginning 180 days after the effective date of the
registration statement of which this prospectus is a part.
48
<PAGE> 53
PLAN OF DISTRIBUTION
We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., Credit Suisse First Boston Corporation and Thomas
Weisel Partners LLC are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares but is not responsible for the commitment
of any other underwriter to purchase shares. Under the terms and conditions of
the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Chase Securities Inc........................................
Credit Suisse First Boston Corporation......................
Thomas Weisel Partners LLC..................................
--------
Total.............................................
========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. We have agreed to indemnify the underwriters against
specified civil liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of such
liabilities.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to securities dealers at such price less a concession of
$ per share. The underwriters may also allow to dealers, and such
dealers may reallow, a concession not in excess of $ per share to other
dealers. After the shares are released for sale to the public, the
representatives may change the offering price and other selling terms at various
times.
The underwriters have informed us that the underwriters will not allow
discretionary account sales of the shares of common stock offered by this
prospectus.
We and the selling shareholders have granted the underwriters an
over-allotment option. This option, which is exercisable for up to 30 days after
the date of this prospectus, permits the underwriters to purchase a maximum of
additional shares from us and the selling shareholders to cover
over-allotments. If the underwriters exercise all or part of this option, they
will purchase shares covered by the option at the public offering price that
appears on the cover page of this prospectus, less the underwriting discount. If
this option is exercised in full, the total price to the public will be
$ million and the net proceeds to us will be approximately
$ million, assuming an offering price of $ per share. The
underwriters have severally agreed that, to the extent the over-allotment option
is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the above table.
49
<PAGE> 54
The following table provides information regarding the aggregate amount of
the discount to be paid to the underwriters by us. Such amount is shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares and assuming an offering price of $ .
<TABLE>
<CAPTION>
PAID BY US
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total.......................................................
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $ million.
We have agreed to indemnify each underwriter against all liabilities to
which it may become subject under the federal securities laws or other law,
including reimbursement of expenses, arising out of:
- any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, including the prospectus, or the
omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements not misleading, except
that there is no indemnification for specific information furnished by
the underwriters; and
- the directed share program under which the underwriters have reserved for
sale up to shares for purchase by our officers, directors,
employees and associates.
This indemnification obligation includes an obligation to contribute to any
payments that may be made by the underwriters in the event that indemnification
is not available.
Our executive officers and directors, and almost all of our current
shareholders, have agreed to a 180-day "lock up" with respect to an aggregate of
shares of common stock that they beneficially own, including
securities that are convertible into shares of common stock and securities that
are exchangeable or exercisable for shares of common stock. This means that,
with some exceptions, for a period of 180 days following the date of this
prospectus, such persons may not offer, sell, pledge, or otherwise dispose of
these securities without the prior written consent of Chase Securities Inc.
The underwriters have reserved for sale up to shares for
purchase by employees, directors, and some other persons associated with us.
These reserved shares will be sold at the public offering price that appears on
the cover of this prospectus. The number of shares available for sale to the
general public in the offering will be reduced to the extent reserved shares are
purchased by these persons. The underwriters will offer to the general public,
on the same terms as other shares offered by this prospectus, any reserved
shares that are not purchased by these persons.
, is administering the directed share program as it
relates to our employees and directors, and is administering
the program as it relates to other persons associated with us. We provided to
and a list of persons we would like to
participate in the directed share program. After reviewing the prospective list
of participants, and will distribute a
letter to their prospective participants asking if those persons would like to
submit indications of interest to participate in the program. These
communications will be accompanied or proceeded by a prospectus that meets the
requirements of Section 10 of the Securities Act. If there are indications of
interest by prospective participants to purchase, in aggregate, more than the
number of shares allocated to the program, then we will determine who can
participate and to what extent.
Prior to this offering, there has been no public market for the common
stock. Consequently the offering price for the common stock will be determined
by negotiations between us and the
50
<PAGE> 55
underwriters and will not necessarily be related to our asset value, net worth
or other established criteria of value. The factors to be considered in such
negotiations, in addition to prevailing market conditions, will include the
history of and prospects for the industry in which we compete, an assessment of
our management, our prospects, our capital structure, prevailing market
conditions, our results of operations in recent periods and several other
factors as may be deemed relevant.
Rules of SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of shares is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:
- Stabilizing Transactions. The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of shares, so
long as stabilizing bids do not exceed a specified maximum.
- Over-Allotments and Syndicate Covering Transactions. The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.
- Penalty Bids. If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transaction. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither we nor the underwriters make any representation or prediction as to
the effect that the transaction described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
One or more members of the underwriting selling group may make copies of
the preliminary prospectus available over the Internet to customers through its
or their Websites. The representatives expect to allocate a limited number of
shares to such member or members of the selling group for sale to brokerage
account holders.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has acted as a lead or co-manager on numerous
filed public offerings of equity securities. Thomas Weisel Partners LLC does not
have any direct material relationship with us or any of our officers, directors
or other controlling persons, except with respect to its contractual
relationship with us pursuant to the underwriting agreement entered into in
connection with this offering.
LEGAL MATTERS
Smith, Gambrell & Russell, LLP, Atlanta, Georgia will pass upon the
validity of the shares of common stock offered by this prospectus and certain
other legal matters. Alston & Bird LLP Atlanta, Georgia, will pass upon certain
legal matters for the underwriters.
EXPERTS
The consolidated financial statements of o2wireless Solutions, Inc. and
subsidiaries as of December 31, 1998 and 1999 and for each of the years in the
three-year period ended December 31, 1999, have been included herein and in the
registration statement in reliance upon
51
<PAGE> 56
the report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
The financial statements of Cellular Technology International, Inc. for the
years ended December 31, 1997 and 1998 have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Communications Development Systems, Inc. for
the period from January 1, 1998 through June 9, 1998, have been included herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The combined financial statements of TWR Group for the period from January
1, 1999 through October 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The combined financial statements of TWR Group for the years ended December
31, 1997 and 1998 have been included herein and in the registration statement in
reliance upon the report of Jain & Jain, P.C., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933, with respect to the
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the registration statement and the exhibits and
schedules. Items are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to us and our common stock offered
hereby, reference is made to the registration statement and the exhibits and
schedules filed as a part thereof. Statements contained in this prospectus as to
the contents or provisions of any contract or other document filed as an exhibit
referred to herein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference. A copy of the registration statement may be inspected without
charge at the public reference facilities maintained by the SEC in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. You may obtain information about the SEC's public
reference facilities by calling the SEC at 1-800- SEC-0330. Copies of all or any
part of the registration statement may be obtained from such offices upon the
payment of the fees prescribed by the SEC. The SEC maintains a Website at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
As a result of this offering, we will have to comply with the full
informational requirements of the Securities and Exchange Act of 1934. We will
fulfill our obligations with respect to such requirements by filing periodic
reports and other information with the SEC. We intend to furnish our
shareholders with annual reports containing consolidated financial statements
certified by an independent public accounting firm.
52
<PAGE> 57
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
O2WIRELESS SOLUTIONS, INC. (FORMERLY CLEAR HOLDINGS, INC.)
AND SUBSIDIARIES:
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998, and 1999...................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1997, 1998, and
1999................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998, and 1999...................... F-6
Notes to Consolidated Financial Statements................ F-7
CELLULAR TECHNOLOGY INTERNATIONAL, INC.:
Independent Auditors' Report.............................. F-27
Statements of Income for the Years Ended December 31, 1997
and 1998............................................... F-28
Statements of Stockholders' Equity for the Years Ended
December 31, 1997 and 1998............................. F-29
Statements of Cash Flows for the Years Ended December 31,
1997 and 1998.......................................... F-30
Notes to Financial Statements............................. F-31
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.:
Independent Auditors' Report.............................. F-34
Statement of Operations for the Period from January 1,
1998 through June 9, 1998.............................. F-35
Statement of Stockholders' Equity for the Period from
January 1, 1998 through June 9, 1998................... F-36
Statement of Cash Flows for the Period from January 1,
1998 through June 9, 1998.............................. F-37
Notes to Financial Statements............................. F-38
TWR GROUP:
Independent Auditors' Report -- KPMG LLP.................. F-40
Independent Auditors' Report -- Jain & Jain, P.C.......... F-41
Combined Statements of Earnings for the Years Ended
December 31, 1997 and 1998 and for the period from
January 1, 1999 through October 31, 1999............... F-42
Combined Statements of Stockholder's Equity for the Years
Ended December 31, 1997 and 1998 and for the period
from January 1, 1999 through October 31, 1999.......... F-43
Combined Statements of Cash Flows for the Years Ended
December 31, 1997 and 1998 and for the period from
January 1, 1999 through October 31, 1999............... F-44
Notes to Combined Financial Statements.................... F-45
O2WIRELESS SOLUTIONS, INC.:
Pro Forma Condensed Combined Financial Information -- Pro
Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1999 (Unaudited)........... F-48
</TABLE>
F-1
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
The Board of Directors
o2wireless Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of o2wireless
Solutions, Inc. (formerly Clear Holdings, Inc.) and subsidiaries (the "Company")
as of December 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the years
in the three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of o2wireless
Solutions, Inc. and subsidiaries as of December 31, 1998 and 1999 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
As discussed in note 1(j) to the consolidated financial statements, the
Company changed its method of accounting for organization costs in 1999.
/s/ KPMG LLP
Atlanta, Georgia
April 14, 2000
F-2
<PAGE> 59
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of
$1,615,928 in 1999...................................... $ 185,548 $ 2,509,270
Accounts receivable:
Contract revenues receivable, net of allowance for
doubtful accounts of $105,770 and $872,200 in 1998 and
1999, respectively..................................... 4,746,974 19,878,962
Other receivables....................................... 32,565 305,654
----------- ------------
Total accounts receivable............................. 4,779,539 20,184,616
----------- ------------
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 3).......................... 2,094,943 5,704,100
Prepaid expenses.......................................... 163,645 154,146
Inventories, net of obsolescence reserve of $321,243...... -- 1,081,143
Deferred income taxes (note 12)........................... -- 403,000
----------- ------------
Total current assets.................................. 7,223,675 30,036,275
----------- ------------
Property and equipment, net of accumulated depreciation of
$744,462 and $1,576,637 in 1998 and 1999, respectively
(notes 4, 6, and 7)....................................... 2,152,171 5,001,859
Intangible assets, net (note 5)............................. 9,542,548 22,529,517
Deferred income taxes (note 12)............................. 111,000 1,339,000
Other assets................................................ 161,621 566,200
----------- ------------
$19,191,015 $ 59,472,851
=========== ============
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS'
EQUITY
Current liabilities:
Affiliate notes payable, current portion (note 6)......... $ 400,000 $ 500,000
Current portion of other indebtedness (note 7)............ 842,531 1,072,476
Accounts payable.......................................... 3,098,195 9,676,950
Accrued expenses.......................................... 559,282 1,857,329
Accrued earn-out (note 2(c)).............................. -- 4,000,000
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 3).......................... 185,202 920,233
----------- ------------
Total current liabilities............................. 5,085,210 18,026,988
----------- ------------
Affiliate notes payable, less current portion (note 6)...... 1,166,667 766,667
Other long-term indebtedness, less current portion (note
7)........................................................ 8,984,505 23,692,153
Common stock put warrants for 2,524,518 shares (notes 7(b)
and 11)................................................... -- 9,031,003
----------- ------------
Total liabilities..................................... 15,236,382 51,516,811
----------- ------------
Redeemable preferred stock:
Class A redeemable convertible preferred stock, $.01 par
value; 100,000 shares authorized; 50,000 shares and
56,817 shares issued and outstanding in 1998 and 1999,
respectively; redeemable at $100 per share (note 8)..... 4,875,046 5,299,903
Series C redeemable convertible preferred stock, no par
value; 75,000 shares authorized and 30,479 shares issued
and outstanding (note 10)............................... -- 3,047,900
Series D senior redeemable preferred stock, no par value;
100,000 shares authorized and 75,000 shares issued and
outstanding (note 11)................................... -- 2,612,641
----------- ------------
4,875,046 10,960,444
----------- ------------
Stockholders' equity (deficit) -- (notes 14 and 15):
Serial preferred stock, no par value; 5,000,000 shares
authorized; no shares issued............................ -- --
Series B convertible preferred stock, $50 par value;
31,000 shares authorized, issued, and outstanding (note
9)...................................................... 1,550,000 --
Common stock, $.0001 par value; 15,000,000 shares
authorized; 2,712,717 shares and 2,712,917 shares issued
and outstanding in 1998 and 1999, respectively.......... 271 271
Additional paid-in capital................................ 3,477,487 3,260,951
Accumulated deficit....................................... (5,948,171) (6,265,626)
----------- ------------
Total stockholders' deficit........................... (920,413) (3,004,404)
Commitments and contingencies (notes 2, 8, 10, 11, and 13)
----------- ------------
$19,191,015 $ 59,472,851
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 60
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 6,003,086 $24,485,078 $48,630,800
----------- ----------- -----------
Operating expenses:
Cost of revenues.......................................... 5,078,466 19,722,764 35,918,902
Selling, general, and administrative expenses............. 2,092,207 4,835,345 9,517,092
Depreciation and amortization............................. 192,397 1,398,039 2,120,207
----------- ----------- -----------
Operating (loss) income.............................. (1,359,984) (1,471,070) 1,074,599
Other income (expense):
Interest income........................................... 6,538 15,496 19,571
Interest expense.......................................... (243,149) (902,576) (2,342,808)
Other..................................................... 91,098 -- 82,339
----------- ----------- -----------
Loss before income taxes, extraordinary item, and
cumulative effect of change in accounting
principle.......................................... (1,505,497) (2,358,150) (1,166,299)
Income tax (benefit) expense (note 12)...................... (145,054) 44,941 (1,225,942)
----------- ----------- -----------
(Loss) income before extraordinary item and
cumulative effect of change in accounting
principle.......................................... (1,360,443) (2,403,091) 59,643
Extraordinary item -- loss on extinguishment of
indebtedness, net of income tax benefit of $170,619 (notes
7 and 12)................................................. -- -- (255,918)
----------- ----------- -----------
Loss before cumulative effect of change in accounting
principle.......................................... (1,360,443) (2,403,091) (196,275)
Cumulative effect of changing from deferral of organization
costs to expensing costs as incurred (note 1(j)).......... -- -- (121,180)
----------- ----------- -----------
Net loss............................................. (1,360,443) (2,403,091) (317,455)
Preferred stock dividends and accretion of discount on
redeemable preferred stock................................ (8,993) (413,157) (632,234)
----------- ----------- -----------
Net loss applicable to common stockholders........... $(1,369,436) $(2,816,248) $ (949,689)
=========== =========== ===========
Net loss per common share (note 1(n)):
Basic and diluted:
Loss per share before extraordinary item and accounting
change............................................... $ (0.57) $ (1.05) $ (0.21)
Effect of extraordinary item............................ -- -- (0.10)
Effect of accounting change............................. -- -- (0.04)
----------- ----------- -----------
Basic and diluted loss per common share................. $ (0.57) $ (1.05) $ (0.35)
=========== =========== ===========
Weighted-average common shares outstanding (note 1(n)):
Basic and diluted......................................... 2,388,218 2,682,252 2,712,717
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 61
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
<TABLE>
<CAPTION>
SERIES B TOTAL
CONVERTIBLE COMMON STOCK ADDITIONAL STOCKHOLDERS'
PREFERRED ------------------ PAID-IN ACCUMULATED EQUITY
STOCK SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
----------- --------- ------ ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996................... $ -- 2,352,941 $235 $ 577,585 $ (2,184,637) $(1,606,817)
Conversion of stockholder notes payable........ -- -- -- 1,628,753 -- 1,628,753
Purchase of ISDC (note 2(a))................... -- 306,572 31 1,398,550 -- 1,398,581
Accretion of discount on Class A redeemable
convertible preferred stock.................. -- -- -- (8,993) -- (8,993)
Net loss....................................... -- -- -- -- (1,360,443) (1,360,443)
---------- --------- ---- ---------- ------------ -----------
Balance at December 31, 1997................... -- 2,659,513 266 3,595,895 (3,545,080) 51,081
Purchase of Comdev (note 2(b))................. 1,550,000 -- -- -- -- 1,550,000
Conversion of stockholder notes payable (note
6)........................................... -- 53,204 5 294,749 -- 294,754
Class A redeemable convertible preferred stock
dividend (note 8)............................ -- -- -- (335,000) -- (335,000)
Accretion of discount on Class A redeemable
convertible preferred stock.................. -- -- -- (78,157) -- (78,157)
Net loss....................................... -- -- -- -- (2,403,091) (2,403,091)
---------- --------- ---- ---------- ------------ -----------
Balance at December 31, 1998................... 1,550,000 2,712,717 271 3,477,487 (5,948,171) (920,413)
Exercise of employee stock options............. -- 200 -- 602 -- 602
Class A redeemable convertible preferred stock
dividend (note 8)............................ -- -- -- (346,841) -- (346,841)
Conversion of Series B convertible preferred
stock to notes payable (note 9).............. (1,550,000) -- -- -- -- (1,550,000)
Series C convertible preferred stock dividend
(note 10).................................... -- -- -- (88,035) -- (88,035)
Accretion of discount on Class A redeemable
preferred stock.............................. -- -- -- (78,157) -- (78,157)
Accretion of discount on Series D redeemable
preferred stock.............................. -- -- -- (119,201) -- (119,201)
Issuance of warrants for loan guarantees (note
15).......................................... -- -- -- 415,096 -- 415,096
Net loss....................................... -- -- -- -- (317,455) (317,455)
---------- --------- ---- ---------- ------------ -----------
Balance at December 31, 1999................... $ -- 2,712,917 $271 $3,260,951 $ (6,265,626) $(3,004,404)
========== ========= ==== ========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 62
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,360,443) $(2,403,091) $ (317,455)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 192,397 1,398,039 2,120,207
Gain on fixed asset disposals........................... -- (1,683) --
Accretion of loan discount.............................. -- -- 93,917
Deferred income tax benefit............................. (111,614) -- (1,238,767)
Extraordinary loss -- write-off of loan costs........... -- -- 255,918
Write off of organization costs......................... -- -- 121,180
Changes in operating assets and liabilities:
Accounts receivable................................... (749,900) (1,077,268) (9,852,515)
Costs and estimated earnings in excess of billings on
uncompleted contracts.............................. 695,590 (961,771) (3,015,626)
Inventories........................................... -- -- 21,070
Prepaid expenses...................................... 117,964 (26,481) (91,616)
Organization costs.................................... (25,160) (130,271) --
Other assets.......................................... (98,679) (53,553) (64,345)
Accounts payable...................................... 739,606 1,175,321 4,490,144
Accrued expenses...................................... (408,280) (338,739) 111,757
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................. 939,848 (932,068) 715,231
----------- ----------- -----------
Net cash used in operating activities.............. (68,671) (3,351,565) (6,650,900)
----------- ----------- -----------
Cash flows used in investing activities:
Purchases of property and equipment....................... (87,379) (464,978) (1,469,329)
Proceeds on fixed asset disposals......................... -- 19,914 --
Acquisition of Minerich and ISDC, net of $411,395 cash
acquired................................................ (4,315,410) (104,602) --
Acquisition of Comdev, net of $291,945 cash acquired...... -- (3,365,438) --
Acquisition of Cell Tech, net of $709,862 cash acquired... -- -- (974,686)
Acquisition of TWR Group, net of $1,353,533 cash
acquired................................................ -- -- (8,735,288)
Purchase of MTG, net of $144,410 cash acquired............ -- -- (124,317)
----------- ----------- -----------
Net cash used in investing activities.............. (4,402,789) (3,915,104) (11,303,620)
----------- ----------- -----------
Cash flows from financing activities:
Issuance of Class A redeemable convertible preferred
stock................................................... 4,452,896 -- --
Repayment of notes payable converted from Series B
preferred stock......................................... -- -- (1,550,000)
Issuance of Series C convertible preferred stock.......... -- -- 2,960,700
Issuance of Series D senior redeemable preferred stock and
warrants................................................ -- -- 7,197,316
Preferred stock dividends................................. -- -- (976)
Exercise of stock options................................. -- -- 602
Proceeds from (repayment of) various notes payable, net... 609,678 (2,603,121) (4,433,558)
Proceeds from (repayment of) Fleet Facility, net.......... -- 9,262,500 (9,262,500)
Proceeds from borrowings under Wachovia Facility.......... -- -- 15,169,966
Issuance of Tranche A notes and warrants.................. -- -- 13,000,000
Payment of loan costs for refinancing..................... -- -- (2,803,308)
----------- ----------- -----------
Net cash provided by financing activities.......... 5,062,574 6,659,379 20,278,242
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents...................................... 591,114 (607,290) 2,323,722
Cash and cash equivalents at beginning of year.............. 201,724 792,838 185,548
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 792,838 $ 185,548 $ 2,509,270
=========== =========== ===========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 216,328 $ 716,993 $ 2,066,292
=========== =========== ===========
Noncash investing and financing activities:
Conversion of stockholder notes to additional paid-in
capital................................................. $ -- $ 294,754 $ --
=========== =========== ===========
Conversion of Series B preferred stock to notes payable... $ -- $ -- $ 1,550,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 63
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998, AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) ORGANIZATION AND BASIS OF PRESENTATION
o2wireless Solutions, Inc. (formerly Clear Holdings, Inc.) -- (the
"Company") is headquartered in Atlanta, Georgia. On November 12, 1997, Clear
Communications Group, Inc. was merged into American Communications Group, Inc.
("ACCI"), an affiliated company under common control, and ACCI changed its name
to Clear Communications Group, Inc. ("Clear Group"). The combination of these
entities was accounted for as a transaction between entities under common
control using historical costs in a manner similar to a pooling of interests.
On November 20, 1997, Clear Group acquired all of the outstanding stock of
ISDC, Inc. ("ISDC") in a purchase transaction, and substantially all the assets
and liabilities of the construction division of Minerich, Inc. ("Minerich").
On June 9, 1998, Clear Group acquired all of the outstanding stock of
Communications Development Systems, Inc. ("Comdev") in a purchase transaction.
On July 10, 1998, Clear Group became a wholly owned subsidiary of Clear
Holdings, Inc., a newly formed company, pursuant to a one-for-one exchange of
shares of Company common stock for each of the outstanding shares of Clear
Group's common stock. The combination of these entities was accounted for as a
transaction between entities under common control using historical costs in a
manner similar to a pooling of interests.
On January 15, 1999, the Company acquired all of the outstanding stock of
Cellular Technology International, Inc. ("Cell Tech") in a purchase transaction.
On November 1, 1999, the Company acquired all of the outstanding stock of
TWR Telecom, Inc. ("TTI"), and its subsidiaries, and Specialty Drilling, Inc.
("SDI"), collectively ("TWR Group"), in a purchase transaction. Also on this
date, the Company purchased substantially all of the assets and liabilities of
McKenzie Telecommunications Group, Inc. ("MTG").
In May 2000, Clear Holdings, Inc. changed its name to o2wireless Solutions,
Inc.
(B) DESCRIPTION OF BUSINESS
The Company provides comprehensive integrated network solutions to all
sectors of the global wireless telecommunications industry that enables its
customers to plan, design, deploy, and maintain their wireless networks. It also
offers business planning and consulting services to wireless telecommunications
industry participants.
(C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
o2wireless Solutions, Inc. and its wholly owned subsidiaries, ISDC, Clear Group,
Comdev, Cell Tech, TWR Telecom, Inc., and Specialty Drilling, Inc. from the
respective dates of acquisition. All significant intercompany balances and
transactions have been eliminated in consolidation.
(D) CONTRACT REVENUE AND COST RECOGNITION
Revenue on time and materials contracts is recognized as services are
rendered.
Revenue on fixed price contracts is recognized on the
percentage-of-completion method based on the ratio of costs incurred to date to
estimated total costs to complete the contracts. These
F-7
<PAGE> 64
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
estimates are reviewed on a contract-by-contract basis, and are revised
periodically throughout the life of the contract such that adjustments to the
results of operations relating to these revisions are reflected in the period of
revision. Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenues recognized in excess of amounts billed. Billings in excess
of costs and estimated earnings on uncompleted contracts represents billings in
excess of revenues recognized.
(E) CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
(F) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the average cost method for all inventories. The inventories are primarily
composed of raw materials for use in the manufacture of tower lighting systems.
(G) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. Significant
additions which extend lives are capitalized. Normal maintenance and repair
costs are expensed as incurred.
(H) GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 10 years, the
expected period of benefit. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows using a
discount rate reflecting the Company's average cost of funds. The assessment of
the recoverability of goodwill will be impacted if estimated future operating
cash flows are not achieved.
(I) OTHER INTANGIBLE ASSETS
Other intangible assets represent organization costs and wireless tower
design rights, which are amortized on a straight-line basis primarily over five
years, and loan financing costs, which are amortized over the terms of the
related debt agreements as an adjustment to interest cost.
(J) ORGANIZATION COSTS
Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants Statement of Position 98-5, Reporting on the Costs
of Start-up Activities ("SOP 98-5"), which requires that start-up costs be
expensed as incurred.
F-8
<PAGE> 65
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
Adoption of SOP 98-5 required the write-off of $121,180 related to
previously capitalized and unamortized organization costs.
(K) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amounts of the assets exceed the fair values of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
(L) INCOME TAXES
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(M) STOCK OPTION PLANS
The Company accounts for its stock option plans in accordance with the
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS No. 123"). SFAS No. 123 encourages companies
to recognize as expense over the vesting period the fair value of all
stock-based awards on the grant date. Alternatively, SFAS No. 123 allows
entities to apply the provisions of Accounting Principles Board Opinion No. 25
Accounting for Stock Issued to Employees, ("APB No. 25") and provide pro forma
net earnings and pro forma earnings per share disclosures as if the
fair-value-based method defined in SFAS No. 123 had been applied. In accordance
with APB No. 25, and related interpretations, compensation expense is recorded
only to the extent that the market price of the underlying stock at the date of
grant exceeds the exercise price. The Company has elected to apply the
provisions of APB No. 25 and provide the pro forma disclosures required by SFAS
No. 123.
(N) EARNINGS (LOSS) PER SHARE
The Company calculates earnings (loss) per share in accordance with SFAS
No. 128, Earnings Per Share. Under SFAS No. 128, basic earnings (loss) per share
is determined by dividing net earnings (loss) applicable to common stockholders
by the weighted average common shares outstanding during the period. Diluted
earnings (loss) per share reflects the effects of potentially dilutive
securities and other common stock equivalents. Due to losses applicable to
common stockholders, potentially dilutive securities and other common stock
equivalents are not included in the computation of diluted per share amounts as
the effects would be anti-dilutive.
F-9
<PAGE> 66
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(O) COMMON STOCK PUT WARRANTS
Common stock put warrants issued by the Company allow the holders to sell
back to the Company at fair value any stock purchased under the warrants at
various dates in accordance with the respective agreements. Accordingly, the
warrants are considered liabilities and are recorded at fair value in the
accompanying consolidated balance sheets. The fair value of the warrants was
determined using the Black-Scholes pricing model. Any changes in fair value
during the period are recorded as components of the results of operations.
(P) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities as of the balance sheet date and revenues and
expenses during the reporting period to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(Q) COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and presentation of comprehensive income or
loss and its components in a full set of financial statements. Comprehensive
income or loss consists of net income or loss and all other gains and losses
that are excluded from net income by current accounting standards, and is
presented in the statement of stockholders' equity. SFAS No. 130 requires only
additional disclosures in the financial statements and does not affect the
Company's financial position or results of operations. The Company has no
"other" comprehensive income or loss to report for the years ended December 31,
1997, 1998, or 1999.
(R) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosure About Fair Value of Financial Instruments,
requires that fair values be disclosed for the Company's financial instruments.
The carrying amounts of cash, accounts receivable, accounts payable and accrued
expenses, approximate fair value due to the short-term nature of these
instruments. The carrying amounts reported for the Company's line of credit and
notes payable to banks approximate their fair value because the underlying
instruments earn interest at rates and terms comparable to current terms offered
to the Company for instruments of similar risk. The fair values of affiliate
notes payable and senior subordinated notes payable are not estimable due to
their related party nature.
(S) SEGMENT REPORTING
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, geographic areas, and major customers. An operating segment is defined
as a component of an enterprise that engages in business activities from which
it may earn revenues and incur expenses, and about which separate financial
information is regularly evaluated by the chief operating decision maker in
deciding how to allocate resources. The Company operates and manages its
business as a single segment.
F-10
<PAGE> 67
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(T) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued SFAS No.
137, which postpones the mandatory adoption date of SFAS No. 133 by the Company
until January 1, 2001.
SFAS No. 133 requires that all derivatives be recognized on the balance
sheet at their fair value. On the date the derivative contract is entered into,
SFAS No. 133 requires that the Company designate the derivative as (i) a fair
value hedge, (ii) a cash flow hedge, (iii) a foreign currency hedge, (iv) a net
investment in a foreign operation, or (v) a trading instrument. The Company has
entered into an interest rate swap agreement which it classifies as a cash flow
hedge. The Company does not have any other derivative instruments and does not
expect that its adoption of SFAS No. 133 on January 1, 2001 will have a
significant effect on its consolidated financial position or results of
operations.
In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation ("FIN No. 44"). FIN No. 44
clarifies the application of APB No. 25, Accounting for Stock Issued to
Employees, to certain areas of stock based compensation. Among other issues, FIN
No. 44 clarifies the accounting consequences of a modification to the terms of a
fixed stock option award. FIN No. 44 is effective July 1, 2000 but covers
specific events, such as option repricing, which occurred after either December
15, 1998 or January 12, 2000.
During 1999, the Company repriced certain employee incentive stock options.
If these options are still outstanding as of July 1, 2000, such options will be
subject to variable accounting treatment, with any excess of the market value of
the shares underlying the options over the exercise price of the options
reflected as compensation expense in the statement of operations. The Company
expects that most or all of these repriced options will be exercised before July
1, 2000, and consequently will not require accounting as modified options under
FIN No. 44.
(U) RECLASSIFICATIONS
Certain amounts in the 1997 and 1998 consolidated financial statements have
been reclassified to conform with the presentation adopted in 1999.
2. ACQUISITIONS
(a) On November 20, 1997, Clear Group issued 306,572 shares of its common
stock at a price of $4.562 (the original conversion price of the Class A Stock)
for a purchase price of $1,398,581 in exchange for all of the outstanding shares
of ISDC. The Company also incurred $96,626 in acquisition costs. ISDC, located
in Frederick, Maryland, provides engineering, project management, and
construction services for wireless communications site development. The excess
of purchase price over the fair value of the net assets acquired was $1,630,618
and has been recorded as goodwill. Pursuant to the merger agreement, notes
payable totaling $618,848 at November 20, 1997 assumed from ISDC in connection
with the purchase were satisfied in full on September 15, 1998.
Also on November 20, 1997, Clear Group acquired substantially all the
assets and liabilities of Minerich for a total purchase price of $6,734,781. The
purchase price consisted of $4,657,673 in cash, a $2,000,000 note payable to
Minerich, Inc. (note 6) and $77,108 in acquisition costs.
F-11
<PAGE> 68
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
Minerich, located in Richmond, Kentucky, provides engineering, project
management, and construction services for wireless communications site
development. The assets acquired included wireless tower design rights valued at
$750,000. The excess of purchase price over the fair value of the net assets
acquired was $2,614,446 and has been recorded as goodwill.
The acquisitions of ISDC and Minerich have been accounted for under the
purchase method of accounting and, accordingly, the results of operations were
recorded from the date of acquisition. The fair values of the assets purchased
and the liabilities assumed by Clear Group are set forth below:
<TABLE>
<S> <C>
Current assets.............................................. $ 4,157,607
Property and equipment...................................... 1,968,352
Intangibles................................................. 750,000
Goodwill.................................................... 4,245,064
Liabilities assumed......................................... (2,891,035)
-----------
Purchase price of ISDC and Minerich......................... $ 8,229,988
===========
</TABLE>
(b) On June 9, 1998, the Company purchased all of the issued and
outstanding shares of Comdev for a total purchase price of $5,207,383. The
purchase price consisted of $3,510,000 in cash, $1,550,000 in Series B
convertible preferred stock (note 9) and $147,383 in acquisition costs. Comdev,
located in West Caldwell, New Jersey, provides project management and
construction services for wireless communications site development. The excess
of purchase price over the fair value of the net assets acquired was $4,879,650
and has been recorded as goodwill.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the results of operations were recorded from the
date of acquisition.
The fair values of the assets purchased and the liabilities assumed by the
Company are set forth below:
<TABLE>
<S> <C>
Current assets.............................................. $ 962,786
Property and equipment...................................... 119,930
Goodwill.................................................... 4,879,650
Liabilities assumed......................................... (754,983)
----------
Purchase price of Comdev.................................... $5,207,383
==========
</TABLE>
(c) On January 15, 1999, the Company purchased all of the issued and
outstanding shares of Cell Tech, a Charlotte, North Carolina based company, for
a total initial purchase price of $1,684,548. The initial purchase price
consisted of $1,386,000 in cash and $298,548 of acquisition costs. An earn-out
payment of up to $5,000,000, subject to certain adjustments as defined in the
purchase agreement, is required. The form of the earn-out payment may be in
publicly traded equity securities of the Company if the Company has registered
any class of its securities under the Securities Exchange Act of 1934 ("a Going
Public Event"); or cash payments of up to $500,000 with any excess to be paid in
the form of a promissory note. The Company has accrued an additional $4,000,000
of goodwill for this earn-out payment as of December 31, 1999, based on
management's estimate of the amount to be paid. Any future earn-out payment will
be recorded as additional goodwill and amortized over the remaining life.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the results of operations have been included since
January 1, 1999.
F-12
<PAGE> 69
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
The fair values of the assets purchased and the liabilities assumed by the
Company are set forth below:
<TABLE>
<S> <C>
Current assets.............................................. $2,213,251
Property and equipment...................................... 44,881
Initial goodwill............................................ 176,512
Liabilities assumed......................................... (750,096)
----------
Initial purchase price of Cell Tech......................... $1,684,548
==========
</TABLE>
(d) On November 1, 1999, the Company purchased all of the issued and
outstanding shares of TWR Group, a Houston, a group of Texas based companies,
for an initial purchase price of $10,088,821. The initial purchase price
consisted of $9,907,829 in cash and $180,992 of acquisition costs. An earn-out
payment of up to $3,300,000 may be required based on the excess of EBITDA of the
TWR Group, over $3,500,000, if any, for the fiscal year ended December 31, 1999.
The Company continues to negotiate with the seller and is currently unable to
estimate the amount of earn-out, if any, that will be paid.
An additional payment of up to $2,300,000 is payable on January 1, 2001,
subject to a right to offset by the Company in the event of any indemnification
claims allowed under the purchase agreement. Any such amount shall be paid
one-third in cash and two-thirds in publicly traded equity securities of the
Company if the Company has a "Going Public Event". In the event no Going Public
Event has occurred, the payment shall be in secured subordinated convertible
promissory notes.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the results of operations have been included since
November 1, 1999.
All future earn-out and additional payments, if any, will be recorded as
additional goodwill and amortized over the remaining life.
The purchase price was allocated to the assets purchased and the
liabilities assumed based upon the fair values determined by the Company as set
forth below:
<TABLE>
<S> <C>
Current assets.............................................. $ 7,262,993
Property and equipment...................................... 2,157,105
Initial goodwill............................................ 6,286,009
Liabilities assumed......................................... (5,617,286)
-----------
Purchase price of TWR Group................................. $10,088,821
===========
</TABLE>
(e) Also on November 1, 1999, the Company purchased substantially all of
the assets and liabilities of MTG, a Phoenix, Arizona company, for an initial
purchase price of $268,727. The initial purchase price consisted of $200,000 in
cash, and $68,727 of acquisition costs. An earn-out payment based on the excess
of fiscal year 2000 EBITDA over a predetermined amount is payable the first year
following closing. The earn-out is payable in publicly traded equity securities
of the Company or, in the event no Going Public Event has occurred, in common
stock of the Company or by issuance of an unsecured subordinated promissory note
at the election of the Company.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the results of operations have been included since
November 1, 1999.
F-13
<PAGE> 70
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
Any future payments will be recorded as additional goodwill and amortized
over the remaining life.
The purchase price was allocated to the assets purchased and the
liabilities assumed based upon the fair values determined by the Company as set
forth below:
<TABLE>
<S> <C>
Current assets.............................................. $ 440,600
Property and equipment...................................... 10,548
Initial goodwill............................................ 1,556,889
Liabilities assumed......................................... (1,739,310)
-----------
Purchase price of MTG....................................... $ 268,727
===========
</TABLE>
(f) Unaudited pro forma results of operations (in thousands, except per
share data) for the years ended December 31, 1998 and 1999, assuming the 1998
and 1999 acquisitions occurred as of January 1, 1998 are as follows:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Revenues.................................................... $59,522 $70,238
Loss before extraordinary item and cumulative effect of
change in accounting principle............................ (4,700) (2,037)
Net loss.................................................... (4,700) (2,414)
Net loss per share.......................................... $ (1.86) $ (0.89)
======= =======
</TABLE>
3. CONTRACTS IN PROGRESS
The Company's costs, earnings, and billings on uncompleted contracts at
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Costs incurred on uncompleted contracts..................... $ 7,528,412 $ 21,806,333
Estimated earnings.......................................... 2,967,286 6,030,488
Less billings to date....................................... (8,585,957) (23,052,954)
----------- ------------
Total.................................................. $ 1,909,741 $ 4,783,867
=========== ============
Included in the accompanying balance sheets:
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. $ 2,094,943 $ 5,704,100
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. (185,202) (920,233)
----------- ------------
Total.................................................. $ 1,909,741 $ 4,783,867
=========== ============
</TABLE>
F-14
<PAGE> 71
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS 1998 1999
------------ ---------- -----------
<S> <C> <C> <C>
Land................................................... -- $ 55,100 $ 117,100
Buildings.............................................. 40 319,814 634,541
Leasehold improvements................................. 4 - 5 15,542 110,316
Vehicles............................................... 3 - 7 1,211,648 2,434,458
Furniture, fixtures, and equipment..................... 3 - 10 1,294,529 3,282,081
---------- -----------
Total property and equipment......................... 2,896,633 6,578,496
Less accumulated depreciation.......................... (744,462) (1,576,637)
---------- -----------
Net property and equipment........................... $2,152,171 $ 5,001,859
========== ===========
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets at December 31, 1998 and 1999 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS 1998 1999
------------ ---------- -----------
<S> <C> <C> <C>
Goodwill, net of accumulated amortization of $703,863
and $1,769,506 for 1998 and 1999, respectively....... 10 $8,420,851 $19,374,618
Tower design rights, net of accumulated amortization of
$176,020 and $312,500 for 1998 and 1999,
respectively......................................... 5 573,980 437,500
Organization costs, net of accumulated amortization of
$34,251 for 1998..................................... 5 121,180 --
Loan costs, net of accumulated amortization of $60,963
and $85,909 for 1998 and 1999, respectively.......... 5 - 6 426,537 2,717,399
---------- -----------
$9,542,548 $22,529,517
========== ===========
</TABLE>
6. AFFILIATE NOTES PAYABLE
Affiliate notes payable consist of the following at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Note payable to Minerich, Inc., resulting from the
acquisition of Minerich (note 2). The note, which bears
interest at the prime rate (8.25% at December 31, 1999),
is payable in 60 monthly principal payments of $33,333
plus interest, beginning on January 1, 1998. Principal and
interest due under the note may be reduced or deferred for
certain tax obligations of Minerich paid by the Company
pursuant to the Minerich purchase agreement. The note is
secured by certain equipment purchased from Minerich...... $1,566,667 $1,266,667
Less current portion........................................ 400,000 500,000
---------- ----------
Total noncurrent portion.................................. $1,166,667 $ 766,667
========== ==========
</TABLE>
F-15
<PAGE> 72
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. AFFILIATE NOTES PAYABLE -- (CONTINUED)
Required principal repayments on the affiliate notes payable are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 500,000
2001........................................................ 400,000
2002........................................................ 366,667
----------
$1,266,667
==========
</TABLE>
On August 28, 1998, a $125,747 note payable to RJB Management Company,
Inc., an affiliated company, and three notes totaling $493,101 payable to former
ISDC stockholders were retired through the execution of individual Satisfaction
and Release Agreements (the "Agreements") and converted to cash and common stock
in the Company. The balances of the notes payable to the affiliated company and
the three stockholders at conversion were $101,371 and $399,679, respectively. A
cash payment of $101,371 was made to RJB Management Company, Inc. to repay this
indebtedness. A cash payment of $104,925 was made and 53,204 shares of $.0001
par value common stock valued at $294,754 were issued to the three stockholders
under the terms of their Agreements.
7. OTHER LONG-TERM INDEBTEDNESS
The Company's long-term indebtedness at December 31, 1998 and 1999 is
comprised of the following:
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Bank revolving lines of credit.............................. $9,750,000 $ 4,742,367
Bank term loan.............................................. -- 10,500,000
Senior subordinated notes, net of discount of $4,233,210.... -- 8,766,790
Notes payable on vehicle and equipment purchases............ 77,036 755,472
---------- -----------
Total long-term debt...................................... 9,827,036 24,764,629
Less current portion of long-term debt...................... (842,531) (1,072,476)
---------- -----------
Long-term indebtedness.................................... $8,984,505 $23,692,153
========== ===========
</TABLE>
(A) BANK CREDIT FACILITIES
On November 1, 1999, the Company completed a refinancing of its credit
facilities and replaced its previous $25 million facility from Fleet National
Bank (the "Fleet Facility") with a $25 million facility from Wachovia Bank N.A.
(the "Wachovia Facility"). The Fleet Facility was composed of a $10 million
revolving working capital facility and a $15 million build-to-suit facility with
interest rates based on the greater of the prime rate, the federal funds rate,
or LIBOR, plus an applicable margin ranging from 1.25% to 3.75% depending on
certain financial ratios, as defined. The outstanding balance at December 31,
1998 under the Fleet Facility was $9,750,000. The weighted-average interest rate
was 9.7% at December 31, 1998. A loss of $426,537 was realized in 1999 upon
extinguishment of this indebtedness.
The Wachovia Facility is composed of the following: (a) a $10,500,000 term
loan; (b) an $11,500,000 revolving working capital facility; and (c) a
$3,000,000 acquisition loan facility. The term loan is repayable over 57
installments with any remaining unpaid principal or interest due on the final
installment. At December 31, 1999, $4,742,367 was outstanding under the
revolving working
F-16
<PAGE> 73
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LONG-TERM INDEBTEDNESS -- (CONTINUED)
capital facility. All loans are payable in full on November 1, 2004. The terms
of the credit agreement require specified levels of profitability and
debt-to-net worth ratios. In addition, the covenants limit the Company's ability
to sell its assets or merge with or acquire other businesses. The covenants also
limit capital expenditures and prohibit the Company from paying dividends on its
common stock or incurring additional indebtedness. As of December 31, 1999, the
interest rate for the loans was based on LIBOR plus a margin of 3%. The weighted
average interest rate at December 31, 1999 was 8.82%.
(B) SENIOR SUBORDINATED NOTES
On November 1, 1999, the Company executed an agreement with American
Capital Strategies, Ltd. ("ACS") to issue up to $17,500,000 in senior
subordinated notes, designated as $13,000,000 Tranche A notes (the "Notes") and
$4,500,000 Tranche B notes. The Company issued $13,000,000 of Tranche A notes at
closing. All Notes bear interest at a fixed rate of 12.75% per annum and require
compliance with certain financial covenants. Repayment of principal commences on
December 1, 2004 at $1,083,333 per month with payment in full for all
outstanding principal and interest due on October 31, 2005.
In connection with the issuance of the Tranche A notes, ACS received
warrants to purchase 1,032,763 shares of common stock (the "Warrants") with an
exercise price of $.01. The Warrants were valued in total at $4,327,127 using
the Black-Scholes pricing model based on an estimated fair value of $4.60 per
common share and have been recorded as a discount from the face value of the
Notes. The discount of $4,327,127 will be accreted during the term of the Notes
as additional interest expense. The Company recorded approximately $94,000 in
related interest expense during 1999.
The Warrants have certain anti-dilution rights and allow the holder to
purchase the Company's common stock over a period of 10 years from the date of
closing. Additional warrants may be issued in connection with any Tranche B
notes.
The Warrants also contain a put option enabling ACS to sell the outstanding
Warrants and any converted common stock back to the Company at fair value at the
earliest of (a) the date five years from November 1, 1999; (b) the date of
payment in full of all outstanding principal, interest, and fees of the Notes;
(c) sale or major change in control (as defined), of the Company or its material
assets; (d) a material event of default under the Notes; or (e) the redemption
of the Class A Stock, Series C Stock, or Series D Stock.
(C) NOTES PAYABLE
In addition to the credit facilities and affiliate notes payable, the
Company also has various notes payable arising from vehicle and equipment
purchases. These notes bear interest at varying rates, require monthly
installments of principal and interest, and are secured by vehicles and
equipment.
F-17
<PAGE> 74
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LONG-TERM INDEBTEDNESS -- (CONTINUED)
The aggregate maturities of the Company's long-term indebtedness are as
follows:
<TABLE>
<CAPTION>
NOTES REVOLVING LINE TRANCHE A
YEAR ENDING DECEMBER 31, PAYABLE TERM LOAN OF CREDIT NOTES TOTAL
- ------------------------ -------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
2000.......................... $155,076 $ 917,400 $ -- $ -- $ 1,072,476
2001.......................... 129,439 1,916,737 -- -- 2,046,176
2002.......................... 379,245 2,458,330 -- -- 2,837,575
2003.......................... 43,540 2,499,996 -- -- 2,543,536
2004.......................... 48,172 2,707,537 4,742,367 1,083,333 8,581,409
Thereafter.................... -- -- -- 11,916,667 11,916,667
Less unamortized discount..... -- -- -- (4,233,210) (4,233,210)
-------- ----------- ---------- ----------- -----------
Total....................... $755,472 $10,500,000 $4,742,367 $ 8,766,790 $24,764,629
======== =========== ========== =========== ===========
</TABLE>
8. CLASS A REDEEMABLE CONVERTIBLE PREFERRED STOCK
On November 19, 1997, the Company issued 50,000 shares of Redeemable Class
A Convertible Preferred Stock ("Class A Stock") in a private placement for total
proceeds of $5 million. The Class A Stock accrues dividends at the rate of $6
per share per year. The dividends are payable quarterly beginning January 2,
1998 either in cash or, at the election of the Board of Directors, in shares of
Class A Stock valued at $100 per share. Prior to November 19, 1999, the Board of
Directors may elect to accrue, rather than pay the dividends. Unpaid dividends
accrue interest at the rate of 6% per year and are cumulative. Subsequent to
November 19, 1999, any dividend not paid in cash on the dividend payment date
must be paid in shares of Class A Stock. Furthermore, the Company is restricted
from either paying cash dividends on the Company's common stock or purchasing
and redeeming the Company's common stock until all unpaid dividends on the Class
A Stock are paid. Dividends accumulated but not declared as of December 31, 1998
totaled approximately $335,000.
During 1999, the Company had incurred a total of $681,841 in accumulated
unpaid dividends which was converted to 6,817 shares of Class A Stock with the
remaining balance of $141 paid in cash.
At the option of the holder, each share of Class A Stock is convertible
into shares of the Company's common stock at a conversion rate equal to the
number of shares of Class A Stock surrendered multiplied by $100 and divided by
$2.7411. Additionally, the Class A Stock will automatically convert upon an
initial public offering involving the sale of the Company's common stock at a
price of not less than 2.5 times the conversion price in effect at that time,
and in which gross proceeds of the offering, as defined, are at least $15
million.
The holders may redeem the Class A Stock for cash at any time after
November 19, 2004, or earlier upon the occurrence of certain significant events,
at a redemption price of $100 per share plus all accrued dividends and unpaid
interest to the date of payment. If certain significant corporate events have
not occurred as of November 19, 2003, the holders have the option to put the
Class A Stock to the Company at fair value as determined by an independent
appraisal.
The holders of the Class A Stock are entitled to vote, on the basis of one
vote for each full share of common stock into which their respective shares of
Class A stock are convertible, on any matter submitted to the stockholders for a
vote.
F-18
<PAGE> 75
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SERIES B CONVERTIBLE PREFERRED STOCK
The Company authorized 31,000 shares of Series B Convertible Preferred
Stock ("Series B Stock") with a total value of $1,550,000 for issuance in the
purchase of Comdev on June 9, 1998.
On June 3, 1999, the Company elected to convert the Series B Stock to
promissory notes in the principal amounts of $581,250 and $968,750, earning
interest at the prime rate per annum, payable to the two former principals of
Comdev. On November 8, 1999, the aggregated outstanding principal and interest
since issuance of the promissory notes was paid in full.
10. SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
During 1999, the Company, in conjunction with DFW Capital Partners, LP and
Clear Investors, LLC, both related parties, executed a preferred stock purchase
agreement for the purpose of issuing and selling up to 75,000 shares of Series C
convertible preferred stock ("Series C Stock") to existing holders of the
Company's common and preferred stock. As of December 31, 1999, a total of 29,607
shares at $100 each had been issued for a total consideration of $2,960,700.
The holders of the Series C Stock are entitled to a dividend of $6 per
share per annum payable quarterly in cash, or at the election of the Company, in
shares of Series C Stock; however, no cash dividends are payable until all terms
of the Series D Stock (note 11) are satisfied. As of December 31, 1999, there
was approximately $88,035 in accumulated unpaid dividends on the Series C Stock.
As required by the agreement, the Company issued 872 shares of Series C Stock at
a value of $100, totaling $87,200, and $835 in cash for fractional shares in
payment of the dividends.
At any time, the holders of Series C Stock can convert all or a portion of
their shares to common stock of the Company, at a conversion rate equal to the
number of shares of Series C Stock surrendered multiplied by $100 and divided by
$2.7411. The Series C Stock is automatically converted to common stock if the
Company completes an initial public offering with gross proceeds of at least $15
million. Upon completion of such an offering, the 30,479 shares of Series C
Stock would be converted to approximately 1,112,000 shares of common stock.
At the holder's option, Series C Stock can be redeemed at $100 per share,
plus any unpaid dividends, on the first to occur of the following: (a)
completion of a public offering resulting in proceeds of not less than $15
million; (b) consolidation or merger into an acquiring company; (c) sale of
substantially all assets of the Company; (d) the occurrence of a transaction or
series of transactions in which the beneficial owners of the Company are no
longer such or (e) the earlier to occur of either the 180th day following the
last to occur of (i) the put closing date in the Series D Stock agreement (see
note 11); (ii) the put option closing date stated in the ACS agreement; (iii)
the stated redemption date for Series D Stock; and (iv) payment in full of the
ACS Notes, or May 1, 2007.
The holders of the Series C Stock are entitled to vote, on the basis of one
vote for each full share of common stock into which their respective shares of
Series C stock are convertible, on any matter submitted to the stockholders for
a vote.
In the event of liquidation or dissolution of the Company, the Series C
Stock has a liquidation value of $100 per share plus any unpaid dividends.
However, the shares are subordinated to the liquidation rights of the Class A
Stock and Series D Stock.
11. SERIES D SENIOR REDEEMABLE PREFERRED STOCK
On November 1, 1999, the Company executed a securities agreement with
Stratford Capital Partners, LP and Stratford Equity Partners, LP (collectively
"Stratford Partners") to issue up to
F-19
<PAGE> 76
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SERIES D SENIOR REDEEMABLE PREFERRED STOCK -- (CONTINUED)
100,000 shares of the Company's Series D senior redeemable preferred stock
("Series D Stock"), and certain detachable common stock warrants (the "Stratford
Warrants") collectively (the "Securities"). At closing, for a total of
$7,500,000, the Company issued to Stratford Partners 75,000 shares of the Series
D Stock at $100 per share, along with Stratford Warrants to purchase 1,491,755
common shares for a price of $0.01 each. The Stratford Warrants were valued at
$4,703,876 with a corresponding reduction to the recorded value of the Series D
Stock. In connection with the Series D stock issuance, offering costs of
$302,684 were incurred. The resulting discount of $5,006,560 from redemption
value on the Series D Stock will be accreted to November 1, 2006, the earliest
fixed redemption date. The Company recorded $119,201 of related accretion in
1999.
The holders of the Series D Stock are entitled to a dividend of $8 per
share per annum payable quarterly on the last day of each quarter beginning
January 31, 2000. The dividends are cumulative and are payable in cash, or at
the election of the Company, in shares of Series D Stock, until October 31,
2001, after which all dividends are required to be paid in cash. If the Company
elects to pay the dividends in shares of Series D stock, the dividend rate
increases to $11 per share. No cash dividends may be declared or paid on common
stock or any other capital stock, unless and until all cumulative dividends on
outstanding Series D Stock are paid in cash. As of December 31, 1999, no
accumulated dividends had been recorded by the Company relating to the Series D
Stock.
The Series D Stock is not convertible into common stock; however,
redemption by the holder is allowed at a liquidation value of $100 per share,
plus any accrued and unpaid dividends, on the first to occur of the following:
(a) event of default, as defined; (b) a qualified public offering, as defined;
(c) November 1, 2006; or (d) any sale of the Company, as defined. The Company is
permitted to redeem the Series D Stock at any time at a redemption price of $100
per share in amounts not less than $750,000. The Series D Stock ranks senior to
all other capital stock of the Company. The holders of the Series D Stock also
have the right to appoint one director to the Company's Board of Directors.
The Stratford Warrants are exercisable at any time through expiration on
November 1, 2009. The Stratford Warrants also contain anti-dilution provisions
and enable Stratford Partners to put back to the Company at fair value any stock
purchased under these warrants at the earliest occurrence of the following: (a)
November 1, 2005; (b) the date of material default; or (c) the date on which all
Series D Stock is redeemed with respect to any mandatory redemption allowed the
holders of the shares.
The Securities also contain "unlocking rights" that provide, in certain
circumstances, Stratford Partners with the right to put all, or less than all,
of the Securities to the Company at fair value.
12. INCOME TAXES
Prior to November 12, 1997, Clear Group elected to be taxed as an S
Corporation under the Internal Revenue Code. In connection with the combination
described in note 1(a), the Company became a C Corporation for Federal and state
income tax purposes. No pro forma income tax provision is disclosed for the
period from January 1, 1997 through November 11, 1997, as if the Company had
been a C Corporation, since Clear Group recorded a loss before income taxes
during this period, and it was not considered more likely than not that the tax
benefits of these losses would be realized.
F-20
<PAGE> 77
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES -- (CONTINUED)
Income tax expense (benefit) for the years ended December 31, 1997, 1998,
and 1999 consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ------- -----------
<S> <C> <C> <C>
Current income tax expense (benefit):
Federal................................................... $ -- $ -- $ --
State..................................................... -- 44,941 12,825
--------- ------- -----------
-- 44,941 12,825
--------- ------- -----------
Deferred income tax expense (benefit):
Federal................................................... (122,127) -- (1,304,000)
State..................................................... (22,927) -- (105,386)
--------- ------- -----------
(145,054) -- (1,409,386)
--------- ------- -----------
Total.................................................. $(145,054) $44,941 $(1,396,561)
========= ======= ===========
</TABLE>
A reconciliation of the expected income tax benefit (based on the federal
statutory rate of 34%) to the actual income tax (benefit) expense follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Expected income tax benefit................................ $(511,869) $(801,771) $ (582,765)
Nondeductible goodwill amortization........................ 6,211 37,198 113,631
Other nondeductible items.................................. 2,230 22,372 103,830
State income tax, net of federal effect.................... (15,133) (121,904) (61,090)
S corporation losses not subject to corporate income tax... 373,507 -- --
Change in valuation allowance.............................. -- 942,000 (942,000)
Other, net................................................. -- (32,954) (28,167)
--------- --------- -----------
$(145,054) $ 44,941 $(1,396,561)
========= ========= ===========
</TABLE>
The income tax effect of temporary differences that give rise to
significant portions of the Company's deferred tax assets and liabilities at
December 31, 1998 and 1999 is presented below:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards.......................... $1,001,000 $1,296,000
Allowance for doubtful accounts........................... 42,000 368,000
Amortization of goodwill.................................. -- 244,000
Other..................................................... 104,000 145,000
---------- ----------
Total gross deferred tax assets........................ 1,147,000 2,053,000
Less valuation allowance.................................. (942,000) --
---------- ----------
Deferred tax assets.................................... 205,000 2,053,000
Deferred income tax liability -- principally due to
differences in the book and tax bases of property and
equipment................................................. (94,000) (311,000)
---------- ----------
Net deferred income tax asset.......................... $ 111,000 $1,742,000
========== ==========
</TABLE>
The valuation allowance for deferred tax assets at December 31, 1998 and
1999 was $942,000 and $0, respectively. The net change in the total valuation
allowance for the years ended December 31, 1998 and 1999 was an increase
(decrease) of $942,000 and ($942,000), respectively. In
F-21
<PAGE> 78
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES -- (CONTINUED)
assessing the realizability of deferred income tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
income tax assets will not be realized. The ultimate realization of deferred
income tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based on these criteria, management has decided to remove the
valuation allowance against net deferred income tax assets as of December 31,
1999.
At December 31, 1999, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $3,241,000 which are available to
offset future taxable income, if any, through 2019.
Approximately $2,700,000 of the net operating loss carryforwards that the
Company may use to offset taxable income in future years is limited as a result
of an ownership change, as defined under Internal Revenue Code Section 382
("Section 382"), which occurred with the Company's sale of Series C Preferred
Stock in August 1999.
13. COMMITMENTS AND CONTINGENCIES
(A) LEASES
During December 1999, the Company entered into an agreement with a member
of senior management for the rental of its Northeast regional office. The lease
is classified as an operating lease and provides for minimum annual rentals of
$128,973 through 2004, with an option for annual extensions. Lease expense
incurred in 1999 under this agreement was approximately $11,000.
In November 1999, the Company entered into an agreement with the former
owner of an acquired subsidiary for the rental of its Southwest regional office.
The lease is classified as an operating lease and provides for minimum annual
rentals of $192,000 through 2002, with an option for annual extensions. Lease
expense incurred in 1999 under this agreement was approximately $14,000.
In February 1998, the Company entered into an agreement with the majority
stockholder for the rental of its corporate headquarters. The lease is
classified as an operating lease and provides for minimum annual rentals of
approximately $182,000 through May 2003. The lease allows for cancellation after
three years with 180 days' notification. Lease expense was approximately
$137,000 and $182,000 in 1998 and 1999, respectively.
During 1999, the Company rented its Central regional office from its
majority stockholder for the period January 1, 1999 to March 1, 1999 and
incurred approximately $30,000 of lease expense under the agreement. On March 1,
1999, the Company purchased the office for $325,000 and terminated the rental
agreement.
The Company also purchased approximately $300,000 of equipment from an
affiliated company of the majority stockholder during 1999.
F-22
<PAGE> 79
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
In addition, the Company has commitments with unrelated parties under
operating leases, principally for office space, warehouse space, and equipment.
These unrelated lease agreements generally cover a period of one to five years.
The following summarizes the approximate future minimum lease payments
under all noncancelable operating lease agreements:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $1,392,000
2001........................................................ 1,117,000
2002........................................................ 776,000
2003........................................................ 366,000
2004........................................................ 150,000
----------
Total............................................. $3,801,000
==========
</TABLE>
Total lease expense for 1997, 1998, and 1999 approximated $86,000,
$407,000, and $809,000, respectively.
(B) LEGAL MATTERS
In the normal course of business, the Company is subject to certain
administrative proceedings and litigation. In management's opinion, the outcome
of such matters will not materially affect the financial position and results of
operations of the Company.
14. STOCK OPTIONS
Pursuant to an employment agreement with an officer, 76,643 stock options
were granted on July 24, 1997 with an exercise price of $.00000246 per share. As
of December 31, 1999, none of such options were exercisable. The options are
exercisable on the first to occur of any of the following events: (a) on the
fifth year anniversary of the date of initial employment; (b) the expiration of
any lockup or other contractual restriction imposed on the sale of the option
shares by an underwriter pursuant to a public offering of the Company's common
stock; or (c) the closing date of a sale or merger of the Company, resulting in
a change of control of at least 50% of the common stock of the Company. The
options expire ten years after grant, or earlier under certain circumstances.
The Company's 1998 Stock Option Plan (the "Plan") was adopted by the Board
of Directors on July 10, 1998. Under the Plan, the Company can grant incentive
and nonqualified options to directors, officers, and employees. During 1999, the
Company increased the number of shares of common stock authorized for issuance
under the Plan to 1 million. The Company also increased the number of shares
issued under the Plan to 570,500 and repriced 500,215 options granted prior to
November 1, 1999 to $3.02. The exercise price of options granted under the Plan
may not be less than 110% of the fair market value of the common stock on the
grant date. Options granted under the Plan have a five-year vesting period and
expire five years after vesting, or earlier under certain conditions. As of
December 31, 1999, 535,715 options were outstanding under the Plan.
During 1999, 147,059 stock options previously granted to a former officer
of the Company in conjunction with an employment agreement were forfeited and
retired upon the resignation of the officer from the Company.
F-23
<PAGE> 80
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTIONS -- (CONTINUED)
Stock option activity, including options granted to officers outside of the
Plan, for the years ended December 31, 1997, 1998, and 1999 is as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996............................ -- $--
Granted..................................................... 472,167 1.59
Forfeited................................................... -- --
-------- -------
Outstanding at December 31, 1997............................ 472,167 1.59
Granted..................................................... 110,250 3.02
Forfeited................................................... (34,000) 3.02
-------- -------
Outstanding at December 31, 1998............................ 548,417 1.79
Granted..................................................... 247,000 4.11
Forfeited................................................... (182,859) 0.62
Exercised................................................... (200) 3.02
-------- -------
Outstanding at December 31, 1999............................ 612,358 $ 3.08
======== =======
</TABLE>
The following table summarizes information concerning stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF AVERAGE CONTRACTUAL AVERAGE AS OF AVERAGE
SHARES EXERCISE REMAINING LIFE EXERCISE DECEMBER 31, EXERCISE
OUTSTANDING PRICES (IN YEARS) PRICE 1999 PRICE
----------- ------------ ------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
535,715 $3.02 - 5.62 8.7 $ 3.08 108,786 $ 3.02
76,643 0.00000246 7.6 0.00000246 -- --
------- ------------ --- ----------- ------- -----------
612,358 $0.01 - 5.62 8.6 $ 3.08 108,786 $ 3.02
======= ============ === =========== ======= ===========
</TABLE>
Disclosures of pro forma net income (loss) and earnings (loss) per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock option grants under the fair value method of
that statement. The fair value for stock options granted was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk free interest rate..................................... 5.71% 5.17% 6.33%
Volatility.................................................. 0 0 0
Dividend yield.............................................. 0 0 0
Expected life in years...................................... 5 years 5 years 5 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
option is amortized to expense over the options' vesting period, which includes
actual vesting entitlements during the year. The weighted-average fair value of
options granted was $0.25, $0.41, and $0.72 during 1997, 1998, and 1999,
respectively.
F-24
<PAGE> 81
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTIONS -- (CONTINUED)
The Company's pro forma net loss and loss per share using the fair value
based method of accounting of SFAS No. 123 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma net loss.................................. $(1,372,013) $(2,511,091) $ (505,455)
Pro forma basic and diluted loss per share.......... (0.57) (0.94) (0.19)
</TABLE>
The effect on net loss and loss per share may not be indicative of the
effects in future years as options vest over several years and the Company
continues to grant stock options to new employees.
15. WARRANTS
On November 20, 1997, the Company agreed to issue warrants to purchase
112,665 shares of the Company's common stock to a corporation in consideration
for services rendered in connection with the issuance of the Company's Class A
Stock. Each warrant enables the holder to purchase one share of common stock for
$4.79. The warrants expire five years from the issuance date. The estimated
value of the warrants was $20,652 and was included in the issuance costs of the
Class A Stock. As of December 31, 1999, the Company believes it has fulfilled
its obligation to the aforementioned corporation and does not expect to issue
these warrants. The corporation is disputing this position and the Company
expects this matter will be resolved through arbitration.
During 1999, the Company issued warrants to purchase 75,718 shares of
common stock to each of its largest stockholder and the holder of its Class A
Stock. The warrants were issued in exchange for collateral provided by these
stockholders relating to the Company's then outstanding credit facility. Each
warrant enables the holder to purchase one share of common stock for $.01. The
warrants expire at various times during 2009. The value of the warrants was
recorded as additional interest expense. The estimated value of the warrants is
$415,096 based on an estimated fair value of $2.7411 per common share at the
date of issuance.
16. SEGMENT AND CUSTOMER INFORMATION
The Company operates and manages its business as a single segment. The
Company provides comprehensive integrated network solutions to service providers
in the wireless telecommunications industry.
The following is a summary of revenues by geographic area. Revenue from
external customers is based on selling location.
<TABLE>
<CAPTION>
UNITED
STATES OTHER CONSOLIDATED
----------- -------- ------------
<S> <C> <C> <C>
Year ended December 31, 1997............................ $ 6,003,086 $ -- $ 6,003,086
Year ended December 31, 1998............................ $24,485,078 $ -- $24,485,078
Year ended December 31, 1999............................ $47,794,050 $836,750 $48,630,800
</TABLE>
For the year ended December 31, 1997, revenues from three unaffiliated
customers totaled approximately 62% of revenues. For the year ended December 31,
1998, revenues from one unaffiliated customer totaled approximately 10% of
revenues. For the year ended December 31, 1999, revenues from three unaffiliated
customers totaled approximately 36% of revenues. There
F-25
<PAGE> 82
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT AND CUSTOMER INFORMATION -- (CONTINUED)
were no other unaffiliated individual customers that accounted for more than 10%
of total revenues in 1997, 1998 or 1999.
17. SUBSEQUENT EVENTS
On January 11, 2000, the Company entered into an interest rate swap
agreement with Wachovia Bank, N.A. to swap interest payments from a floating
rate of LIBOR to a fixed interest payment of 7.25% on a notional principal of
$6.25 million. The swap agreement terminates on January 7, 2003. The Company
does not use derivative financial instruments for speculative or trading
purposes. The net amount paid or received will be recorded as an adjustment to
interest expense over the term of the agreement. The Company's accounting
policies for this instrument are based on the Company's designation of such
instrument as a hedging transaction against the Company's debt.
F-26
<PAGE> 83
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Clear Holdings, Inc.:
We have audited the accompanying statements of income, stockholders' equity
and cash flows of Cellular Technology International, Inc. ("Cell Tech") for the
years ended December 31, 1997 and 1998. These financial statements are the
responsibility of Cell Tech's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Cellular
Technology International, Inc. for the years ended December 31, 1997 and 1998 in
conformity with generally accepted accounting principles.
KPMG LLP
Atlanta, Georgia
May 5, 2000
F-27
<PAGE> 84
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Contract revenues........................................... $7,539,020 5,570,067
Cost of revenues............................................ 6,581,053 3,936,122
---------- ---------
Gross profit...................................... 957,967 1,633,945
Selling, general, and administrative expenses............... 1,119,229 588,272
Depreciation and amortization............................... 74,316 53,840
---------- ---------
Operating (loss) profit........................... (235,578) 991,833
Other income (expense):
Interest income........................................... 56,868 47,702
Interest expense.......................................... (2,408) (4,900)
Other..................................................... (1,298) 14,347
---------- ---------
(Loss) income before income taxes................. (182,416) 1,048,982
Income tax benefit (expense) -- (note 2).................... 30,000 (437,000)
---------- ---------
Net (loss) income................................. $ (152,416) 611,982
========== =========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 85
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
------ --------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996.............................. $500 1,637,959 1,638,459
Net loss.................................................. -- (152,416) (152,416)
---- --------- ---------
Balance at December 31, 1997.............................. 500 1,485,543 1,486,043
Net income................................................ -- 611,982 611,982
---- --------- ---------
Balance at December 31, 1998.............................. $500 2,097,525 2,098,025
==== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 86
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $(152,416) 611,982
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization.......................... 74,316 53,840
Deferred income tax benefit............................ (230,000) (314,000)
Changes in assets and liabilities:
Accounts receivable.................................. 726,754 (99,215)
Inventories.......................................... 258,907 90,327
Prepaid expenses..................................... 62,166 --
Other assets......................................... (430) (49,301)
Accounts payable..................................... (269,858) (278,415)
Accrued expenses and other liabilities............... (60,845) 164,816
--------- --------
Net cash provided by operating activities......... 408,594 180,034
--------- --------
Cash flows used in investing activities:
Purchases of property and equipment....................... (36,374) (7,147)
Disposals of property and equipment....................... 7,500 --
--------- --------
Net cash used in investing activities............. (28,874) (7,147)
--------- --------
Cash flows used in financing activities -- principal
payments of notes payable................................. (13,702) (8,079)
--------- --------
Net increase in cash and cash equivalents......... 366,018 164,808
Cash and cash equivalents at beginning of year.............. 178,937 544,955
--------- --------
Cash and cash equivalents at end of year.................... $ 544,955 709,763
========= ========
Supplemental disclosure of cash paid during the year for:
Interest.................................................. $ 2,408 4,900
========= ========
Income taxes.............................................. $ 595,350 208,156
========= ========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 87
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) ORGANIZATION AND BASIS OF PRESENTATION
Cellular Technology International, Inc. ("Cell Tech") was incorporated in
Missouri in 1993. On January 15, 1999, Clear Holdings, Inc. acquired all of the
outstanding stock of Cellular Technology International, Inc. for $1,386,000 in
cash. The purchase agreement also includes a requirement that former Cell Tech
stockholders will receive an earn-out payment of up to $5,000,000 based on 1999
earnings of Cell Tech, subject to certain adjustments.
(B) DESCRIPTION OF BUSINESS
Cell Tech contracts with U.S.-based companies for projects worldwide,
primarily in North America, South America, and Eastern Europe. Cell Tech is
engaged in the installation, inspection, testing, and maintenance of cellular
telephone systems.
(C) CONTRACT REVENUE AND COST RECOGNITION
Most of Cell Tech's contracts are billed on a time and expense basis and
revenues are recognized as services are provided.
Revenue on fixed fee construction contracts is recognized on the
percentage-of-completion method based on the ratio of costs incurred to date to
estimated total costs of the contracts. These estimates are reviewed on a
contract-by-contract basis, and are revised periodically throughout the life of
the contract such that adjustments to the results of operations relating to
these revisions are reflected in the period of revision. Contract costs include
all direct material and labor costs and those indirect costs related to contract
performance. Selling, general, and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
(D) CASH EQUIVALENTS
Cell Tech considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
(E) DEPRECIATION
Depreciation is determined using an accelerated method. Significant
additions which extend lives are capitalized. Normal maintenance and repair
costs are expensed as incurred.
(F) COMPREHENSIVE INCOME
On January 1, 1998, Cell Tech adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
consists of net income and all other gains and losses that are excluded from net
income or loss by current accounting standards, and is presented in the
statement of stockholders' equity. The statement requires only additional
disclosures in the financial statements and does not affect Cell Tech's
financial position or results of operations. Cell Tech has no other
comprehensive income to report for the years ended December 31, 1997 and 1998.
F-31
<PAGE> 88
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(G) INCOME TAXES
Cell Tech uses the asset and liability method to account for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(H) USE OF ESTIMATES
Management of Cell Tech has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenues and expenses
during the reporting period to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates.
2. INCOME TAXES
Income tax (benefit) expense consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- --------- --------
<S> <C> <C> <C>
Year ended December 31, 1997:
Federal................................................... $167,000 $(192,000) $(25,000)
State..................................................... 33,000 (38,000) (5,000)
-------- --------- --------
$200,000 $(230,000) $(30,000)
======== ========= ========
Year ended December 31, 1998:
Federal................................................... $628,000 $(262,000) $366,000
State..................................................... 123,000 (52,000) 71,000
-------- --------- --------
$751,000 $(314,000) $437,000
======== ========= ========
</TABLE>
A reconciliation of income tax (benefit) expense to the amount computed by
applying the statutory Federal income tax rate of 34% to (loss) income before
taxes for the years ended December 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Income tax (benefit) expense at Federal statutory rate...... $(62,021) $356,654
State income tax (benefit) expense, net of Federal effect... (3,000) 47,000
Permanent nondeductible items............................... 34,000 34,000
Other, net.................................................. 1,021 (654)
-------- --------
Actual income tax (benefit) expense......................... $(30,000) $437,000
======== ========
</TABLE>
3. EMPLOYEE BENEFIT PLAN
Cell Tech operates a 401(k) plan for substantially all employees. Cell Tech
matches employee contributions at its discretion. Contributions amounted to
approximately $16,000 and $33,000 in 1997 and 1998, respectively.
F-32
<PAGE> 89
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) REVENUE FROM MAJOR CUSTOMERS
For the year ended December 31, 1997, one customer accounted for 81% of
revenues.
For the year ended December 31, 1998, revenues from one unaffiliated
customer totaled approximately 10% of contract revenues. There was no other
unaffiliated individual customer that accounted for more than 10% of total
revenues during 1998.
F-33
<PAGE> 90
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Clear Holdings, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Communications Development Systems, Inc. ("Comdev")
for the period from January 1, 1998 through June 9, 1998. These financial
statements are the responsibility of Comdev's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Communications Development Systems, Inc. for the period from January 1, 1998
through June 9, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Atlanta, Georgia
May 5, 2000
F-34
<PAGE> 91
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.
STATEMENT OF OPERATIONS
PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 9, 1998
<TABLE>
<S> <C>
Contract revenues........................................... $1,725,625
Cost of revenues............................................ 1,367,114
----------
Gross profit...................................... 358,511
Selling, general, and administrative expenses............... 751,419
Depreciation and amortization............................... 19,440
----------
Operating loss.................................... (412,348)
Other income (expense):
Interest income........................................... 8,496
Interest expense.......................................... (13,716)
Rental income............................................. 23,750
Other..................................................... 4,200
----------
Net loss.......................................... $ (389,618)
==========
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE> 92
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 9, 1998
<TABLE>
<CAPTION>
TOTAL
CAPITAL TREASURY RETAINED STOCKHOLDERS'
STOCK STOCK EARNINGS EQUITY
------- -------- --------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998....................... $1,000 $(870) $ 986,277 $ 986,407
Net loss......................................... -- -- (389,618) (389,618)
Distributions.................................... -- -- (257,758) (257,758)
------ ----- --------- ---------
Balance at June 9, 1998.......................... $1,000 $(870) $ 338,901 $ 339,031
====== ===== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE> 93
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 9, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(389,618)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 19,440
Increase in allowance for doubtful accounts............ 5,770
Changes in assets and liabilities:
Accounts receivable.................................. 493,602
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... 124,881
Prepaid expenses..................................... 10,013
Other receivables.................................... (20,434)
Deposits............................................. (1,156)
Other assets......................................... (572)
Accounts payable..................................... (2,760)
Accrued expenses..................................... (37,486)
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... 101,360
---------
Net cash provided by operating activities......... 303,040
---------
Cash flows from financing activities:
Principal payments on notes payable....................... (16,297)
Distributions to shareholders............................. (257,758)
---------
Net cash used in financing activities............. (274,055)
---------
Net increase in cash and cash equivalents......... 28,985
Cash and cash equivalents at beginning of period............ 262,960
---------
Cash and cash equivalents at end of period.................. $ 291,945
=========
Supplemental disclosure of cash flow information -- cash
paid during the period for interest....................... $ 13,716
=========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE> 94
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1998 THROUGH JUNE 9, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) ORGANIZATION AND BASIS OF PRESENTATION
Communications Development Systems, Inc. ("Comdev") was incorporated in New
Jersey in 1992. On June 9, 1998, Clear Communications Group, Inc. acquired all
of the outstanding stock of Communications Development Systems, Inc. for
$5,060,000, consisting of $3,510,000 in cash and $1,550,000 of Clear
Communications Group, Inc. Series B convertible preferred stock.
(B) DESCRIPTION OF BUSINESS
Comdev is located in West Caldwell, New Jersey, and provides project
management and construction services for wireless communications site
development.
(C) CONTRACT REVENUE AND COST RECOGNITION
Revenue on fixed price construction contracts is recognized on the
percentage-of-completion method based on the ratio of costs incurred to date to
estimated total costs of the contracts. These estimates are reviewed on a
contract-by-contract basis and are revised periodically throughout the life of
the contract such that adjustments to the results of operations relating to
these revisions are reflected in the period of revision. Contract costs include
all direct material and labor costs and those indirect costs related to contract
performance. Selling, general, and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
(D) CASH EQUIVALENTS
Comdev considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
(E) DEPRECIATION
Depreciation is determined using the straight-line method over the
estimated useful lives of the assets. Significant additions which extend lives
are capitalized. Normal maintenance and repair costs are expensed as incurred.
(F) COMPREHENSIVE INCOME
On January 1, 1998, Comdev adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
consists of net income or loss and all other gains and losses that are excluded
from net income by current accounting standards, and is presented in the
statement of stockholders' equity. The statement requires only additional
disclosures in the financial statements and does not affect Comdev's financial
position or results of operations. Comdev has no "other" comprehensive income to
report for the period from January 1, 1998 through June 9, 1998.
(G) INCOME TAXES
Comdev has elected to be taxed as a S Corporation under the Internal
Revenue Code. As such, all federal and state tax liabilities are the
responsibility of the stockholders, and not of Comdev.
F-38
<PAGE> 95
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(H) USE OF ESTIMATES
Management of Comdev has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenues and expenses
during the reporting period to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates.
2. STOCKHOLDER NOTES PAYABLE
During 1998, Comdev had notes payable to stockholders. The notes, which
were due on demand, bore interest at the prime rate. During the period from
January 1, 1998 through June 9, 1998, the interest rate ranged from 8.0% to
8.5%, with weighted average of 8.25% per annum. In connection with the sale of
Comdev on June 9, 1998, the outstanding principal and all accrued interest was
paid in full.
3. REVENUE FROM MAJOR CUSTOMERS
For the period from January 1, 1998 through June 9, 1998, revenues from one
unaffiliated customer totaled approximately 10% of contract revenues. There was
no other unaffiliated individual customer that accounted for more than 10% of
total revenues.
F-39
<PAGE> 96
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Clear Holdings, Inc.:
We have audited the accompanying combined statements of earnings,
stockholder's equity, and cash flows of TWR Group for the period from January 1,
1999 through October 31, 1999. These combined financial statements are the
responsibility of TWR Group's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
TWR Group for the period from January 1, 1999 through October 31, 1999 in
conformity with generally accepted accounting principles.
KPMG LLP
Atlanta, Georgia
May 5, 2000
F-40
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Clear Holdings, Inc.:
We have audited the accompanying combined statements of earnings,
stockholder's equity, and cash flows of TWR Group for the years ended December
31, 1997 and 1998. These combined financial statements are the responsibility of
TWR Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined results of operations and cash
flows of TWR Group for the years ended December 31, 1997 and 1998 in conformity
with generally accepted accounting principles.
Jain & Jain, P.C.
Houston, Texas
March 10, 1999, except as to Note 1(a)
which is as of May 5, 2000
F-41
<PAGE> 98
TWR GROUP
COMBINED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1997 AND 1998
AND FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH OCTOBER 31, 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Contract revenues....................................... $18,850,209 $19,099,281 $15,061,269
Sales of lighting systems............................... 4,069,977 5,422,827 5,405,991
----------- ----------- -----------
22,920,186 24,522,108 20,467,260
----------- ----------- -----------
Cost of contract revenues............................... 12,516,676 13,593,060 11,123,943
Cost of sales of lighting systems....................... 2,599,805 3,590,682 3,739,586
----------- ----------- -----------
15,116,481 17,183,742 14,863,529
----------- ----------- -----------
Gross profit.................................. 7,803,705 7,338,366 5,603,731
Selling, general, and administrative expenses........... 5,851,417 6,147,401 4,547,606
Depreciation and amortization........................... 470,191 602,603 347,702
----------- ----------- -----------
Operating income.............................. 1,482,097 588,362 708,423
Other income (expense):
Gain on sale of assets................................ -- 96,950 --
Interest income....................................... 17,944 161,504 6,408
Interest expense...................................... (212,560) (317,877) (428,012)
Other................................................. -- -- 17,164
----------- ----------- -----------
Income before taxes........................... 1,287,481 528,939 303,983
Income tax expense -- (note 3).......................... (505,000) (67,508) --
----------- ----------- -----------
Net income.................................... $ 782,481 $ 461,431 $ 303,983
=========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-42
<PAGE> 99
TWR GROUP
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1998
AND FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH OCTOBER 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
-------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997................... $102,000 $ 378,967 $2,227,133 $2,708,100
Net income................................... -- -- 782,481 782,481
Dividends.................................... -- -- (54,000) (54,000)
-------- ---------- ---------- ----------
Balance at December 31, 1997................. 102,000 378,967 2,955,614 3,436,581
Net income................................... -- -- 461,431 461,431
-------- ---------- ---------- ----------
Balance at December 31, 1998................. 102,000 378,967 3,417,045 3,898,012
Net income................................... -- -- 303,983 303,983
Conversion of stockholder notes payable...... -- 1,972,450 -- 1,972,450
Capital contribution by stockholder.......... -- 250,000 -- 250,000
-------- ---------- ---------- ----------
Balance at October 31, 1999.................. $102,000 $2,601,417 $3,721,028 $6,424,445
======== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE> 100
TWR GROUP
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1998
AND FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH OCTOBER 31, 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 782,481 $ 461,431 $ 303,983
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 470,191 602,603 347,702
Gain on sale of assets.............................. -- (96,950) --
Bad debt expense.................................... -- -- 789,288
Write-off of investment............................. -- -- 15,726
Changes in assets and liabilities:
Accounts receivable............................... 1,775,405 (1,699,837) (215,927)
Costs and estimated earnings in excess of billings
on uncompleted contracts....................... 63,126 (22,224) (341,915)
Prepaid expenses.................................. (100,545) 111,112 364,817
Inventories....................................... (129,043) (81,095) (101,041)
Other assets...................................... 79,075 (312,200) 324,102
Accounts payable.................................. (1,450,799) 731,560 391,374
Accrued expenses.................................. (497,997) -- (267,481)
Billings in excess of costs and estimated earnings
on uncompleted contracts....................... -- -- 19,800
Other liabilities................................. -- 4,649 90,087
----------- ----------- ----------
Net cash provided by (used in) operating
activities................................... 991,894 (300,951) 1,720,515
----------- ----------- ----------
Cash flows used in investing activities:
Purchases of property and equipment.................... (813,740) (1,013,963) (301,825)
Investments in marketable securities................... (10,379) -- --
Advances (repayments) on notes receivable from related
company............................................. (855,932) (1,921,232) 139,452
Investment in related company.......................... (4,482) (11,244) --
Proceeds from sale of assets........................... -- 516,488 --
----------- ----------- ----------
Net cash used in investing activities.......... (1,684,533) (2,429,951) (162,373)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds of notes payable.............................. 1,864,336 2,413,681 --
Principal payments of notes payable.................... (873,127) (1,078,009) (179,134)
Proceeds of affiliate notes payable.................... -- 1,386,322 --
Principal payments of affiliate notes payable.......... (63,872) -- (373,851)
Capital contribution by stockholder.................... -- -- 250,000
Dividends.............................................. (54,000) -- --
----------- ----------- ----------
Net cash provided by (used in) financing
activities................................... 873,337 2,721,994 (302,985)
----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents.................................. 180,698 (8,908) 1,255,157
Cash and cash equivalents at beginning of period......... (73,414) 107,284 98,376
----------- ----------- ----------
Cash and cash equivalents at end of period............... $ 107,284 $ 98,376 $1,353,533
=========== =========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest................. $ 208,906 $ 240,000 $ 442,072
=========== =========== ==========
Cash paid during the year for income taxes............. $ 613,755 $ 22,508 $ --
=========== =========== ==========
Noncash investing and financing activity -- conversion of
stockholder notes to additional paid-in capital........ $ -- $ -- $1,972,450
=========== =========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE> 101
TWR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1998
AND THE PERIOD FROM JANUARY 1, 1999 THROUGH OCTOBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the financial
statements of TWR Telecom, Inc. and its subsidiaries, TWR Lighting, Inc., TWR
Communications, Inc., and Rooker Tower Company, and an affiliate, Specialty
Drilling, Inc. (collectively referred to as "TWR Group").
On November 1, 1999, each of the affiliated companies comprising TWR Group
was acquired by Clear Holdings, Inc. for an initial aggregate purchase price of
$9,907,829 in cash. An earn-out payment of up to $3,300,000 may be required
based on the excess of EBITDA of TWR Group, and certain related entities over
which Clear Holdings, Inc. has purchase options, over $3,500,000, if any, for
the fiscal year ended December 31, 1999.
An additional payment of $2,300,000 is payable January 1, 2001, subject to
a right to offset by the Company in the event of any indemnification claims
allowed under the purchase agreement. Any such amount shall be paid one-third in
cash and two-thirds in publicly traded equity securities of the Company if the
Company has a "Going Public Event". In the event no Going Public Event has
occurred, the payment shall be in secured subordinated convertible promissory
notes.
(B) DESCRIPTION OF BUSINESS
TWR Group constructs wireless telecommunications towers and manufactures
lighting systems for such towers located principally in the United States.
(C) PRINCIPLES OF COMBINATION
Due to common control and management, the accompanying combined financial
statements reflect the combination of the financial statements of each company
mentioned in note 1(a). All material intercompany balances and transactions have
been eliminated in the combination.
(D) CONTRACT REVENUE AND COST RECOGNITION
Revenue on fixed price contracts is recognized on the
percentage-of-completion method based on the ratio of costs incurred to date to
estimated total costs to complete the contracts. These estimates are reviewed on
a contract-by-contract basis, and are revised periodically throughout the life
of the contract such that adjustments to the profit resulting from these
revisions are reflected in the period of revision. Contract costs include all
direct material and labor costs and those indirect costs related to contract
performance. Selling, general, and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
Revenues related to sales of lighting systems are recognized when the
lighting systems are delivered.
(E) CASH EQUIVALENTS
TWR Group considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
F-45
<PAGE> 102
TWR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(F) DEPRECIATION
Depreciation is determined using the straight-line method over the
estimated useful lives of the assets. Significant additions which extend lives
are capitalized. Normal maintenance and repair costs are expensed as incurred.
(G) COMPREHENSIVE INCOME
On January 1, 1998, TWR Group adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
consists of net income or loss and all other gains and losses that are excluded
from net income or loss by current accounting standards, and is presented in the
statement of stockholder's equity. The statement requires only additional
disclosures in the financial statements and does not affect TWR Group's
financial position or results of operations. TWR Group has no "other"
comprehensive income to report for the years ended December 31, 1997 and 1998 or
for the period from January 1, 1999 through October 31, 1999.
(H) INCOME TAXES
Since July 1, 1997, TWR Telecom, Inc. and its subsidiaries have all been S
Corporations under the Internal Revenue Code. Specialty Drilling, Inc. was an S
Corporation since its inception in 1996. As such, all federal and state income
tax liabilities are the responsibility of the stockholders, and not of TWR
Group. Prior to July 1, 1997, the taxable companies comprising TWR Group were
taxed as C Corporations, and the 1997 income statement includes an income tax
provision for the period prior to the S election. During 1997, TWR Group had
income subject to income taxes of $1,292,909.
(I) USE OF ESTIMATES
Management of TWR Group has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenues and expenses
during the reporting period to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates.
2. RELATED PARTY TRANSACTIONS
TWR Group conducts its operations from facilities leased from the sole
stockholder at an annual rent of $198,000. The lease terminated on November 1,
1999 upon the sale of TWR Group. In 1997, 1998 and 1999, TWR Group earned
interest income from advances to TWR Family of Companies, LLC, ("TFOC") an
affiliated company, of $17,944, $158,461 and $0, respectively. For those same
years, TWR Group incurred interest on loans to affiliates of $45,608, $103,233
and $163,989 respectively. Research and development costs incurred in 1997, 1998
and 1999 amounted to $60,000, $0, and $0, respectively, and related to
development costs in TWR Lighting, Inc. In 1997, 1998 and 1999, TWR Group sold
labor, equipment and materials to affiliated companies in Mexico and Brazil in
the amounts of $0, $702,000 and $274,000, respectively.
F-46
<PAGE> 103
TWR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES
Income tax expense for the years ended December 31, 1997, 1998 and 1999
consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current income tax expense:
Federal................................................... $450,000 $ 3,375 $ --
State..................................................... 55,000 64,133 --
-------- -------- --------
$505,000 $ 67,508 $ --
======== ======== ========
</TABLE>
A reconciliation of the expected tax expense (based on the federal
statutory rate of 34%) to the actual tax expense is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Expected income tax expense................................. $437,744 $ 179,840 $ 103,354
State income tax, net of federal expense.................... 36,300 42,328 --
Nondeductible items......................................... 30,956 -- --
S Corporation earnings not subject to taxes................. -- (154,660) (103,354)
-------- --------- ---------
$505,000 $ 67,508 $ --
======== ========= =========
</TABLE>
(4.) REVENUE FROM MAJOR CUSTOMERS
For 1997 and 1998, revenues from one unaffiliated customer totaled
approximately 46% and 44% of revenues, respectively. For the period from January
1, 1999 through October 31, 1999, revenues from one unaffiliated customer
totaled approximately 29% of contract revenues.
F-47
<PAGE> 104
O2WIRELESS SOLUTIONS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed combined statement of
operations of o2wireless Solutions, Inc. and subsidiaries for the year ended
December 31, 1999 gives effect to the acquisition of McKenzie Telecommunications
Group, Inc. ("MTG") and TWR Group on November 1, 1999, using the purchase method
of accounting, as if the acquisitions had occurred on January 1, 1999. The
historical results of operations of o2wireless Solutions, Inc. and subsidiaries
include the results of operations of MTG and TWR Group since November 1, 1999.
The pro forma results are not necessarily indicative of what would have occurred
had these acquisitions been consummated as of January 1, 1999, or of future
operations of the combined companies. The pro forma condensed combined financial
information should be read in conjunction with the separate financial statements
and related notes of o2wireless Solutions, Inc. and subsidiaries and TWR Group,
included elsewhere in this Prospectus.
PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL FOR THE TEN-MONTH PERIOD
ENDED OCTOBER 31, 1999
HISTORICAL -----------------------------------
O2WIRELESS MCKENZIE
SOLUTIONS, INC. TELECOMMUNICATIONS PRO FORMA PRO FORMA
AND SUBSIDIARIES GROUP, INC. TWR GROUP ADJUSTMENTS COMBINED
---------------- -------------------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues........................... $48,631 $1,140 $20,467 $ -- $70,238
Cost of revenues................... 35,919 726 14,863 -- 51,508
Selling, general, and
administrative expenses.......... 9,517 1,328 4,623 -- 15,468
Depreciation and amortization...... 2,120 25 348 654(A) 3,147
------- ------ ------- -------
Operating income (loss).... 1,075 (939) 633 115
Other income:
Interest income.................. 20 -- 6 -- 26
Interest expense................. (2,343) -- (428) (1,769)(B) (4,540)
Other income..................... 82 -- 92 174
------- ------ ------- -------
Loss before income taxes,
extraordinary item, and
cumulative effect of
accounting change........ (1,166) (939) 303 (4,225)
Income taxes....................... (1,226) -- -- (962)(C) (2,188)
------- ------ ------- -------
Loss before extraordinary
item and cumulative
effect of accounting
change................... 60 (939) 303 (2,037)
Preferred stock dividends and
accretion........................ (632) -- -- (632)
------- ------ ------- -------
Loss applicable to common
shareholders before
extraordinary item and
cumulative effect of
accounting change........ $ (572) -- -- $(2,669)
======= =======
Basic and diluted loss per common
share before extraordinary item
and cumulative effect of
accounting change................ $ (0.21) $ (0.98)
======= =======
Weighted average shares
outstanding...................... 2,713 2,713
======= =======
</TABLE>
- ------------------------------
(A) Represents the assumed additional amortization of goodwill on the
acquisitions of McKenzie Telecommunications Group, Inc. and TWR Group based
on a 10-year useful life.
(B) Reflects the assumed additional interest cost related to borrowings required
to fund the acquisitions, using an effective rate of 20.5% per annum.
(C) Reflects the pro forma tax effects of applying a 40% tax rate to the
earnings and losses of MTG and TWR Group and reflects the tax effects of
additional interest costs.
F-48
<PAGE> 105
Graphics depicting convergence of technological forces (voice, data, broadband,
m-commerce) and market forces (competition, technological change, customer
acceptance, outsourcing) with "o2wireless Solutions integrated network
solutions" in a circle in the middle followed by the following language:
o2WIRELESS SOLUTIONS STANDS AT THE CONVERGENCE OF MARKET FORCES AND
EMERGING TECHNOLOGIES
<PAGE> 106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
O2WIRELESS SOLUTIONS, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CHASE H&Q
CREDIT SUISSE FIRST BOSTON
THOMAS WEISEL PARTNERS LLC
-------------------
, 2000
-------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
WHICH IS CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING
OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND
SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF
THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.
THROUGH AND INCLUDING , 2000, THE 25TH DAY AFTER COMMENCEMENT OF
THE OFFERING, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 107
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC registration fee........................................ $22,770
-------
NASD filing fees............................................ *
-------
Printing and engraving expenses............................. *
-------
Legal fees and expenses..................................... *
-------
Accounting fees and expenses................................ *
-------
Miscellaneous............................................... *
-------
Total............................................. $ *
=======
</TABLE>
- ------------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Amended and Restated Articles of Incorporation (the "Articles") and
Bylaws provide that each person who is or was a director of officer of the
Company, or each such person who is or was serving at our request as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise (including the estate or personal representative of such person),
shall be indemnified by us to the fullest extent permitted by the Georgia
Business Corporation Code ("GBCC"), or any other applicable laws as presently or
hereafter in effect. The right to indemnification granted by the Articles and
the Bylaws includes the right to be paid, in advance, expenses incurred in
defending a proceeding. The right to indemnification will not be exclusive of
any other rights to which any person seeking indemnification may otherwise be
entitled, and shall be applicable to matters otherwise within its scope.
Subsection (a) of Section 14-2-851 of the GBCC provides that a corporation
may indemnify an individual who is a party to a proceeding because he or she is
or was a director against liability incurred in the proceeding if (1) such
individual conducted himself or herself in good faith; and (2) such individual
reasonably believed (A) in the case of conduct in his or her official capacity,
that such conduct was in the best interest of the corporation; (B) in all other
cases, that such conduct was at least not opposed to the best interest of the
corporation; and (C) in the case of a criminal proceeding, that the individual
had no reasonable cause to believe such conduct was unlawful. Subsection (d) of
Section 14-2-851 of the GBCC provides that a corporation may not indemnify a
director in connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred in connection with any proceeding if it
is determined that the director has met the relevant standard of conduct, or in
connection with any proceeding with respect to conduct for which he or she was
adjudged liable on the basis of personal benefit was improperly received by him
or her, whether or not involving action in his or her official capacity.
Notwithstanding the foregoing, pursuant to Section 14-2-854 of the GBCC, a court
may order a corporation to indemnify a director or advance for expenses if the
court determines, in view of all the relevant circumstances, that ii is fair and
reasonable to indemnify the director or to advance expenses to the director,
even if the director has not met the relevant standard of conduct set forth in
subsection (a) of Section 14-2-851 of the GBCC, or was adjudged liable in a
proceeding referred
II-1
<PAGE> 108
to in paragraph (1) or (2) of subsection (d) of Section 14-2- 851 of the GBCC,
but if the director was adjudged so liable, the indemnification shall be limited
to reasonable expenses incurred in connection with the proceeding.
Section 14-2-852 of the GBCC provides that a corporation shall indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he or she was a party because he or she was a
director of the corporation against reasonable expenses incurred by the director
in connection with the proceeding.
Section 14-2-856 of the GBCC provides that a corporation shall not
indemnify a director for any liability incurred in a proceeding in which the
director is adjudged liable to the corporation or is subjected to injunctive
relief in favor of the corporation: (1) for any appropriation, in violation of
the director's duties, of any business opportunity of the corporation; (2) for
acts or omissions which involve intentional misconduct or a knowing violation of
the law; (3) for the types of liability set forth in Section 14-2-832 of the
GBCC (which provides for liability for unlawful distributions to shareholders);
or (4) for any transaction from which he or she receives an improper personal
benefit.
Section 14-2-857 of the GBCC provides that a corporation may indemnify and
advance expenses to an officer of the corporation who is a party to a proceeding
because he or she is an officer of the corporation to the same extent as a
director; and if he or she is not a director, to such further extent as may be
provided by the articles of incorporation or the by-laws, a resolution of the
board of directors, or contract, except for liability arising out of conduct
that constitutes: (1) appropriation, in violation of his or her duties, of any
business opportunity of the corporation; (2) acts or omissions which involve
intentional misconduct or a knowing violation of the law; (3) the types of
liability set forth in Section 14-2-832 of the GBCC (which provides for
liability for unlawful distributions to shareholders); or (4) receipt of an
improper personal benefit. An officer of a corporation who is not a director is
entitled to mandatory indemnification under Section 14-2-852 of the GBCC, and
may apply to a court under Section 14-2-854 of the GBCC for indemnification or
advances for expenses, in each case to the same extent as a director may be
entitled to indemnification or advances for expenses under those provisions.
Finally, a corporation may also indemnify and advance expenses to an employee or
agent who is not a director to the extent, consistent with public policy, that
may be provided by its articles of incorporation, bylaws, general or specific
action of its board of directors, or contract.
Lastly, our directors and officers are insured against certain liabilities
which they make incur in their capacity under a liability insurance policy that
we carry.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1997, we have sold and issued the following unregistered
securities:
On January 1, 1997, we issued the equivalent (after giving effect to a
subsequent stock split) of approximately 352,823 shares of our common stock to
David W. Hughes, formerly one of our executive officers and a holder of more
than 5% of our common stock, at a purchase price of approximately $.01 per
share. In addition, on November 20, 1997, we issued 117.5 additional shares of
our common stock to Mr. Hughes at a purchase price of $.01 per share.
On November 20, 1997, we sold 50,000 shares of our Class A Convertible
Preferred Stock to DFW Capital Partners, L.P. at a purchase price of $100.00 per
share for an aggregate purchase price of $5,000,000. In October 1999, January
2000, and April 2000, an additional 7,669 shares of Class A Preferred Stock were
issued to DFW Capital Partners, L.P., in payment of accrued dividends at the
rate of 6% per annum. The Class A Preferred Stock is presently convertible into
our common stock at a conversion price of $2.7411 per share.
Also on November 20, 1997, in connection with the acquisition of the
outstanding stock of our subsidiary, ISDC, Inc., we issued 306,572 shares of its
common stock at a purchase price of $4.562
II-2
<PAGE> 109
per share for an aggregate purchase price of $1,398,581. In connection with the
acquisition of ISDC, we also assumed a note payable to RJB Management Company,
Inc. in the aggregate principal amount of $125,747 and three notes totaling
$493,101 to three former shareholders of ISDC. In August 1998, these notes were
retired through the execution of satisfaction and release agreements and
converted into cash and shares of our common stock. The note payable to RJB
Management Company, Inc. was satisfied by a cash payment of $101,371. The notes
payable to the three shareholders were satisfied by a cash payment of $104,925
and the issuance of 53,204 shares of common stock, valued at a price of $5.54
per share.
On June 9, 1998, we purchased all of the issued and outstanding shares of
Communications Development Systems, Inc. ("ComDev") for a total purchase price
of $5,207,383. In connection with the acquisition of ComDev, we issued 31,000
shares of Series B Convertible Preferred Stock at a price of $450 per share for
an aggregate purchase price of $1,550,000.
In a private placement during the period from June 1999 through August
1999, we sold an aggregate of 29,607 shares of Series C Convertible Preferred
Stock at a purchase price of $100 per share for an aggregate purchase price of
$2,960,700 to eight investors in the following amounts:
<TABLE>
<CAPTION>
SHARES OF SERIES C AGGREGATE
PREFERRED STOCK PURCHASE PRICE
------------------ --------------
<S> <C> <C>
Andrew Roscoe............................................. 516 $ 51,600
Lisa Roumell and Mark Rosenthall.......................... 1,500 150,000
Clear Investors, LLC...................................... 14,957 1,495,700
RJB Management Company.................................... 1,068 106,800
DFW Capital Partners, L.P................................. 10,071 1,007,100
Donald DeMuth............................................. 750 75,000
The Hofe Family Limited Liability Partnership............. 414 41,400
Mark Malick............................................... 331 33,100
</TABLE>
In October 1999, January 2000, and April 2000, we issued an aggregate of
1,325 additional shares of Series C Preferred Stock in payment of accrued
dividends at the rate of 6% per annum. The Series C Preferred Stock is presently
convertible into our common stock at a conversion price of $2.7411 per share.
On November 1, 1999, we issued 39,000 shares and 36,000 shares,
respectively, of its Series D Senior Redeemable Preferred Stock to Stratford
Capital Partners, L.P. and Stratford Equity Partners, L.P. at a purchase price
of $100 per share, for an aggregate purchase price of $7,500,000. In January
2000 and April 2000, we issued an aggregate of 4,918 additional shares in
payment of accrued dividends at the rate of 11% per annum. In connection with
the issuance of the Series D Preferred Stock, we issued warrants to Stratford
Capital Partners, L.P. and Stratford Equity Partners, L.P. to purchase 775,713
shares and 716,042 shares, respectively, of our common stock at an exercise
price of $.01 per share, which warrants expire on November 1, 2009.
Also, on November 1, 1999, we issued senior subordinated notes to American
Capital Strategies, Ltd. ("ACS") in an aggregate principal amount of $13,000,000
("Tranche A Notes"). The Tranche A Notes bear interest at a rate of 12.75% per
annum and are due October 31, 2005. The note purchase agreement provides for the
future issuance, at our option, of Tranche B Notes in the aggregate principal
amount of $4.5 million, which would bear interest at a rate of the prime rate
plus 450 basis points per annum and would mature on October 31, 2005. In
connection with the issuance of the Tranche A Notes, we also issued warrants to
ACS to purchase 1,032,763 shares of its common stock at an exercise price of
$0.01 per share, which warrants expire on November 1, 2009.
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Regulation D promulgated thereunder.
II-3
<PAGE> 110
The recipients represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities. All recipients either received adequate
information about us or had access, through employment or other relationships,
to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits:
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Stock Purchase Agreement, dated January 25, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., and Myron Berehulke, John
Dunmire, Scott Durkee, Rich Hanafin, and Dale Stickney for
the purchase and sale of all of the issued and outstanding
capital stock of Cellular Technology International, Inc.
2.2 -- Stock Purchase Agreement, dated August 20, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., George A. Jackson and the
TWR Family of Companies, LLC for the purchase and sale of
all of the issued and outstanding capital stock of TWR
Telecom, Inc. and Specialty Drilling, Inc., as amended.
2.3 -- Asset Purchase Agreement, dated November 1, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., McKenzie
Telecommunications Group, Inc. and Rhonda McKenzie for the
purchase and sale of substantially all of the assets of
McKenzie Telecommunications Group, Inc.
3.1 -- Amended and Restated Articles of Incorporation of o2wireless
Solutions (formerly Clear Holdings, Inc.), as amended, as
currently in effect.
3.2 -- Second Amended and Restated Articles of Incorporation of
o2wireless Solutions (formerly Clear Holdings, Inc.), to be
effective prior to closing of the offering.*
3.3 -- Bylaws of o2wireless Solutions (formerly Clear Holdings,
Inc.), as currently in effect.
3.4 -- Amended and Restated Bylaws of o2wireless Solutions
(formerly Clear Holdings, Inc.), to be effective prior to
closing of the offering.*
4.1 -- Specimen Common Stock Certificate.*
4.2 -- See Exhibits 3.1 and 3.3 for provisions of the Amended and
Restated Articles of Incorporation, as amended, and Bylaws
of o2wireless Solutions (formerly Clear Holdings, Inc.)
defining rights of the holders of the common stock of
o2wireless Solutions (formerly Clear Holdings, Inc.).
4.3 -- Credit Agreement, dated November 1, 1999, by and among Clear
Communications Group, Inc., o2wireless Solutions (formerly
Clear Holdings, Inc.), TWR Telecom, Inc., TWR Lighting,
Inc., Rooker Tower Company, Clear Program Management, Inc.,
Specialty Drilling, Inc., Cellular Technology International,
Inc., Communications Development Systems, Inc., Clear Tower
Corporation, ISDC, Inc., and various lenders and Wachovia
Bank, N.A.
4.4 -- Revolving Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
4.5 -- Acquisition Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
</TABLE>
II-4
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
4.6 -- Term Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
4.7 -- Revolving Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
4.8 -- Acquisition Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
4.9 -- Term Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
4.10 -- Note and Equity Purchase Agreement, dated November 1, 1999,
as amended, by and among Clear Communications Group, Inc.,
o2wireless Solutions (formerly Clear Holdings, Inc.), TWR
Telecom, Inc., TWR Lighting, Inc., Rooker Tower Company,
Clear Program Management, Inc., Specialty Drilling, Inc.,
Cellular Technology International, Inc., Communications
Development Systems, Inc., Clear Tower Corporation, ISDC,
Inc., and American Capital Strategies, Ltd.
4.11 -- Form of Common Stock Purchase Warrant, dated November 1,
1999, issued to American Capital Strategies, Ltd. by
o2wireless Solutions (formerly Clear Holdings, Inc.).
4.12 -- Form of Tranche A Notes due October 31, 2005 from Clear
Communications Group, Inc. to American Capital Strategies,
Ltd.
4.13 -- Form of Common Stock Purchase Warrant, dated November 1,
1999, issued to Stratford Capital Partners, L.P. and
Stratford Equity Partners, L.P. by o2wireless Solutions
(formerly Clear Holdings, Inc.).
5.1 -- Opinion of Smith, Gambrell & Russell, LLP.*
10.1 -- 1998 Stock Option Plan, as amended.
10.2 -- Form of Incentive Stock Option Agreement pursuant to the
1998 Stock Option Plan, as amended.
10.3 -- Preferred Stock Purchase Agreement, dated June 24, 1999, by
and among o2wireless Solutions (formerly Clear Holdings,
Inc.), DFW Capital Partners, L.P., Clear Investors, LLC,
Stephen F. Johnston, Sr. and other persons electing to
subscribe.
10.4 -- Securities Purchase Agreement, dated November 1, 1999, as
amended, by and among Stratford Capital Partners, L.P.,
Stratford Equity Partners, L.P., and o2wireless Solutions
(formerly Clear Holdings, Inc.).
10.5 -- Registration Rights Agreement, dated November 1, 1999, by
and among Stratford Capital Partners, L.P., Stratford Equity
Partners, L.P., RJB Management Company, Inc., DFW Capital
Partners, L.P., Lisa Roumell, Mark Rosenthal, Donald DeMuth,
Mark Malick, Andrew Roscoe, Hofe Family Limited Partnership,
Clear Investors, LLC, Stephen F. Johnston, Sr. and
o2wireless Solutions (formerly Clear Holdings, Inc.).
10.6 -- Registration Rights Agreement dated November 1, 1999 by and
among Clear Communications Group, Inc., o2wireless Solutions
(formerly Clear Holdings, Inc.), TWR Telecom, Inc., TWR
Lighting, Inc., Rooker Tower Company, Clear Program
Management, Inc., Specialty Drilling, Inc., Cellular
Technology International, Inc., Communications Development
Systems, Inc., Clear Tower Corporation, ISDC, Inc., and
American Capital Strategies, Ltd. (included as Article 11 to
Exhibit 4.10).
21.1 -- List of Subsidiaries.
</TABLE>
II-5
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2 -- Consent of KPMG LLP with respect to the consolidated
financial statements of o2wireless Solutions, Inc. (formerly
Clear Holdings, Inc.) and subsidiaries.
23.3 -- Consent of KPMG LLP with respect to the financial statements
of Cellular Technology International, Inc.
23.4 -- Consent of KPMG LLP with respect to the financial statements
of Communications Development Systems, Inc.
23.5 -- Consent of KPMG LLP with respect to the financial statements
of TWR Group.
23.6 -- Consent of Jain & Jain, P.C. with respect to the financial
statements of TWR Group.
24.1 -- Power of Attorney (included in original signature page to
this Registration Statement).
27.1 -- Financial Data Schedule (for SEC use only).
27.2 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ------------------------------
* To be filed by amendment.
B. Financial Statement Schedules:
The following financial statement schedule is included as part of this
Registration Statement immediately following the signature page:
Schedule II -- Valuation and Qualifying Accounts
Independent Auditors' Report
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions, are not
applicable or the information has been provided in financial statements (or
notes thereto) included in this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant
II-6
<PAGE> 113
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 114
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form S-1 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Atlanta,
Fulton County, State of Georgia, on the 9th day of May, 2000.
O2WIRELESS SOLUTIONS, INC.
By: /s/ STEPHEN F. JOHNSTON, SR.
------------------------------------
Stephen F. Johnston, Sr.
Chairman and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEPHEN F. JOHNSTON, SR. Chairman of the Board and Chief May 9, 2000
- --------------------------------------------------- Executive Officer (Principal
Stephen F. Johnston, Sr. Executive Officer) and Director
/s/ WILLIAM J. LOUGHMAN Executive Vice President, May 9, 2000
- --------------------------------------------------- Secretary, Treasurer and Chief
William J. Loughman Financial Officer (Principal
Financial and Accounting Officer)
/s/ MICHAEL W. RILEY President, Chief Operating Officer May 9, 2000
- --------------------------------------------------- and Director
Michael W. Riley
/s/ JOHN FARMER Director May 9, 2000
- ---------------------------------------------------
John Farmer
/s/ ANDREW ROSCOE Director May 9, 2000
- ---------------------------------------------------
Andrew Roscoe
/s/ LISA ROUMELL Director May 9, 2000
- ---------------------------------------------------
Lisa Roumell
/s/ DARIN WINN Director May 9, 2000
- ---------------------------------------------------
Darin Winn
</TABLE>
II-8
<PAGE> 115
INDEPENDENT AUDITORS' REPORT
The Board of Directors
o2wireless Solutions, Inc.:
Under date of April 14, 2000, we reported on the consolidated balance
sheets of o2wireless Solutions, Inc. (formerly Clear Holdings, Inc.) and
subsidiaries (the "Company") as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1999,
which are included in the prospectus. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
As discussed in note 1(j) to the consolidated financial statements, the
Company changed its method of accounting for organization costs in 1999.
/s/ KPMG LLP
Atlanta, Georgia
April 14, 2000
<PAGE> 116
SCHEDULE II
O2WIRELESS SOLUTIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------
ALLOWANCE BAD RECOVERIES ACQUIRED RECEIVABLES
AT BEGINNING DEBT OF PREVIOUS THROUGH WRITTEN- ALLOWANCE AT
OF PERIOD EXPENSE WRITE-OFFS ACQUISITION OFF END OF PERIOD
------------ ------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful
receivables:
1997....................... -- -- -- -- -- --
1998....................... -- 100,000 -- 5,770 -- 105,770
1999....................... l05,770 65,000 -- 794,288 (92,858) 872,200
</TABLE>
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------
ALLOWANCE RECOVERIES ACQUIRED INVENTORY
AT BEGINNING OF PREVIOUS THROUGH WRITTEN- ALLOWANCE AT
OF PERIOD EXPENSE WRITE-OFFS ACQUISITION OFF END OF PERIOD
------------ ------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for obsolete
inventories:
1997....................... -- -- -- -- -- --
1998....................... -- -- -- -- -- --
1999....................... -- -- -- 321,243 -- 321,243
</TABLE>
<PAGE> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Stock Purchase Agreement, dated January 25, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., and Myron Berehulke, John
Dunmire, Scott Durkee, Rich Hanafin, and Dale Stickney for
the purchase and sale of all of the issued and outstanding
capital stock of Cellular Technology International, Inc.
2.2 -- Stock Purchase Agreement, dated August 20, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., George A. Jackson and the
TWR Family of Companies, LLC for the purchase and sale of
all of the issued and outstanding capital stock of TWR
Telecom, Inc. and Specialty Drilling, Inc., as amended.
2.3 -- Asset Purchase Agreement dated, November 1, 1999, by and
among o2wireless Solutions (formerly Clear Holdings, Inc.),
Clear Communications Group, Inc., McKenzie
Telecommunications Group, Inc. and Rhonda McKenzie for the
purchase and sale of substantially all of the assets of
McKenzie Telecommunications Group, Inc.
3.1 -- Amended and Restated Articles of Incorporation of o2wireless
Solutions (formerly Clear Holdings, Inc.), as amended, as
currently in effect.
3.2 -- Second Amended and Restated Articles of Incorporation of
o2wireless Solutions (formerly Clear Holdings, Inc.), to be
effective prior to closing of the offering.*
3.3 -- Bylaws of o2wireless Solutions (formerly Clear Holdings,
Inc.), as currently in effect.
3.4 -- Amended and Restated Bylaws of o2wireless Solutions
(formerly Clear Holdings, Inc.), to be effective prior to
closing of the offering.*
4.1 -- Specimen Common Stock Certificate.*
4.2 -- See Exhibits 3.1 and 3.3 for provisions of the Amended and
Restated Articles of Incorporation, as amended, and Bylaws
of o2wireless Solutions (formerly Clear Holdings, Inc.)
defining rights of the holders of the common stock of
o2wireless Solutions (formerly Clear Holdings, Inc.).
4.3 -- Credit Agreement, dated November 1, 1999, by and among Clear
Communications Group, Inc., o2wireless Solutions (formerly
Clear Holdings, Inc.), TWR Telecom, Inc., TWR Lighting,
Inc., Rooker Tower Company, Clear Program Management, Inc.,
Specialty Drilling, Inc., Cellular Technology International,
Inc., Communications Development Systems, Inc., Clear Tower
Corporation, ISDC, Inc., and various lenders and Wachovia
Bank, N.A.
4.4 -- Revolving Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
4.5 -- Acquisition Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
4.6 -- Term Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to First Union National Bank.
4.7 -- Revolving Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
4.8 -- Acquisition Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
4.9 -- Term Loan Note, dated November 1, 1999, from Clear
Communications Group, Inc. to Wachovia Bank, N.A.
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
4.10 -- Note and Equity Purchase Agreement, dated November 1, 1999,
as amended, by and among Clear Communications Group, Inc.,
o2wireless Solutions (formerly Clear Holdings, Inc.), TWR
Telecom, Inc., TWR Lighting, Inc., Rooker Tower Company,
Clear Program Management, Inc., Specialty Drilling, Inc.,
Cellular Technology International, Inc., Communications
Development Systems, Inc., Clear Tower Corporation, ISDC,
Inc., and American Capital Strategies, Ltd.
4.11 -- Form of Common Stock Purchase Warrant, dated November 1,
1999, issued to American Capital Strategies, Ltd. by
o2wireless Solutions (formerly Clear Holdings, Inc.).
4.12 -- Form of Tranche A Notes due October 31, 2005 from Clear
Communications Group, Inc. to American Capital Strategies,
Ltd.
4.13 -- Form of Common Stock Purchase Warrant, dated November 1,
1999, issued to Stratford Capital Partners, L.P. and
Stratford Equity Partners, L.P. by o2wireless Solutions
(formerly Clear Holdings, Inc.).
5.1 -- Opinion of Smith, Gambrell & Russell, LLP.*
10.1 -- 1998 Stock Option Plan, as amended.
10.2 -- Form of Incentive Stock Option Agreement pursuant to the
1998 Stock Option Plan, as amended.
10.3 -- Preferred Stock Purchase Agreement, dated June 24, 1999, by
and among o2wireless Solutions (formerly Clear Holdings,
Inc.), DFW Capital Partners, L.P., Clear Investors, LLC,
Stephen F. Johnston, Sr. and other persons electing to
subscribe.
10.4 -- Securities Purchase Agreement, dated November 1, 1999, as
amended, by and among Stratford Capital Partners, L.P.,
Stratford Equity Partners, L.P., and o2wireless Solutions
(formerly Clear Holdings, Inc.).
10.5 -- Registration Rights Agreement, dated November 1, 1999, by
and among Stratford Capital Partners, L.P., Stratford Equity
Partners, L.P., RJB Management Company, Inc., DFW Capital
Partners, L.P., Lisa Roumell, Mark Rosenthal, Donald DeMuth,
Mark Malick, Andrew Roscoe, Hofe Family Limited Partnership,
Clear Investors, LLC, Stephen F. Johnston, Sr. and
o2wireless Solutions (formerly Clear Holdings, Inc.).
10.6 -- Registration Rights Agreement dated November 1, 1999 by and
among Clear Communications Group, Inc., o2wireless Solutions
(formerly Clear Holdings, Inc.), TWR Telecom, Inc., TWR
Lighting, Inc., Rooker Tower Company, Clear Program
Management, Inc., Specialty Drilling, Inc., Cellular
Technology International, Inc., Communications Development
Systems, Inc., Clear Tower Corporation, ISDC, Inc., and
American Capital Strategies, Ltd. (included as Article 11 to
Exhibit 4.10).
21.1 -- List of Subsidiaries.
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2 -- Consent of KPMG LLP with respect to the consolidated
financial statements of o2wireless Solutions, Inc. (formerly
Clear Holdings, Inc.) and subsidiaries.
23.3 -- Consent of KPMG LLP with respect to the financial statements
of Cellular Technology International, Inc.
23.4 -- Consent of KPMG LLP with respect to the financial statements
of Communications Development Systems, Inc.
23.5 -- Consent of KPMG LLP with respect to the financial statements
of TWR Group.
23.6 -- Consent of Jain & Jain, P.C. with respect to the financial
statements of TWR Group.
24.1 -- Power of Attorney (included in original signature page to
this Registration Statement).
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
27.1 -- Financial Data Schedule (for SEC use only).
27.2 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ------------------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
CLEAR HOLDINGS, INC.,
CLEAR COMMUNICATIONS GROUP, INC.,
AND
MYRON BEREHULKE,
JOHN DUNMIRE,
SCOTT DURKEE,
RICK HANAFIN,
AND DALE STICKNEY
FOR THE PURCHASE AND
SALE OF ALL ISSUED AND OUTSTANDING
CAPITAL STOCK OF
CELLULAR TECHNOLOGY INTERNATIONAL, INC.
DATED AS OF JANUARY 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - Sale of Stock.........................................................................................1
1.1 Sale of Stock...................................................................................1
1.2 Purchase Price..................................................................................1
1.3 All Deliveries to Representative................................................................2
1.4 Audits of Company Financial Statements..........................................................2
1.5 Dispute Resolution..............................................................................2
1.6 Adjustment of Earn-Out Payment..................................................................3
1.7 Form of Earn-Out Payment........................................................................4
1.8 Time and Place of Closing.......................................................................4
1.9 Deliveries at Closing...........................................................................4
1.10 Earn-Out Closing................................................................................5
1.11 Restrictive Legend..............................................................................5
ARTICLE II - Representations and Warranties of the Shareholders...................................................6
2.1 Corporate.......................................................................................6
2.2 Authorization; Validity.........................................................................7
2.3 No Violation....................................................................................7
2.4 Financial Statements............................................................................8
2.5 Absence of Undisclosed Liabilities..............................................................8
2.6 Title to Properties; Encumbrances...............................................................9
2.7 Inventory.......................................................................................9
2.8 Compliance with Laws...........................................................................10
2.9 Litigation.....................................................................................12
2.10 Contracts and Commitments......................................................................12
2.11 Real Estate....................................................................................14
2.12 Accounts Receivable............................................................................16
2.13 Trade Rights...................................................................................16
2.14 Broker's or Finder's Fees......................................................................16
2.15 Employee Benefit Plans.........................................................................16
2.16 Employment Compensation........................................................................18
2.17 Labor Matters..................................................................................18
2.18 Tax Maters.....................................................................................18
2.19 Insurance......................................................................................19
2.20 Bonds and Other Surety.........................................................................20
2.21 Liens..........................................................................................21
2.22 Funds Held In Trust............................................................................21
2.23 Current Projects...............................................................................22
2.24 Absence of Certain Changes.....................................................................22
2.25 Major Customers and Suppliers..................................................................24
2.26 Product Warranty and Product Liability.........................................................24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
2.27 No Subsidiaries................................................................................25
2.28 Assets Necessary to Business...................................................................25
2.29 Securities Laws Matters........................................................................25
2.30 Power of Attorney..............................................................................26
ARTICLE III - Representations and Warranties of Buyer............................................................26
3.1 Due Incorporation and Qualification............................................................26
3.2 Authorization..................................................................................26
3.3 Capitalization.................................................................................26
3.4 Non-Contravention..............................................................................27
3.5 Authority of Buyer.............................................................................27
3.6 Litigation.....................................................................................27
3.7 Qualified Plan.................................................................................27
3.8 Financial Statements...........................................................................27
3.9 Broker's or Finder's Fees......................................................................27
ARTICLE IV - Covenants...........................................................................................28
4.1 Conduct of Business............................................................................28
4.2 Preservation of Business.......................................................................29
4.3 Notice of Events...............................................................................29
4.4 Examination and Inspections....................................................................29
4.5 Third Party Consents...........................................................................30
4.6 Properties.....................................................................................30
4.7 Books and Records..............................................................................30
4.8 Material Contracts.............................................................................30
4.9 Vacation Pay and Bonus Accruals................................................................30
4.10 Environmental Audits and Other Investigations..................................................30
4.11 Employment Agreement with Shareholders.........................................................31
4.12 Shareholders Restrictive Covenant Agreements...................................................31
4.13 Securities Law Matters.........................................................................31
4.14 Attainment of Tax Clearance Certificates.......................................................31
4.15 Employment Agreements with Key Employees.......................................................31
4.16 Tax Matters....................................................................................31
4.17 Reinstatement of Company in Missouri...........................................................32
ARTICLE V - Conditions Precedent to Obligation of Buyer to Close.................................................32
5.1 Completion of Due Diligence Investigation......................................................32
5.2 Procurement of Financing.......................................................................32
5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A.
and Fleet National Bank........................................................................33
5.4 Representations and Covenants..................................................................33
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
5.5 Litigation.....................................................................................33
5.6 No Material Adverse Change.....................................................................33
5.7 Good Standing Certificates, Etc................................................................33
5.8 Consents.......................................................................................33
5.9 Employment Consulting and Restrictive Covenants Agreements.....................................33
5.10 Agreements with Key Employees..................................................................33
5.11 Release of Liabilities.........................................................................33
5.12 Resolutions....................................................................................34
5.13 Governmental Permits and Approvals.............................................................34
5.14 Shareholder's Certificate......................................................................34
5.15 Opinion of Counsel to the Shareholders.........................................................34
5.16 Other Documents................................................................................34
ARTICLE VI - Conditions Precedent to Obligation of the Shareholders to Close.....................................34
6.1 Completion of Due Diligence Investigation......................................................34
6.2 Litigation.....................................................................................35
6.3 No Material Adverse Change.....................................................................35
6.4 Consents.......................................................................................35
6.5 Representations and Warranties.................................................................35
6.6 Governmental Permits and Approvals.............................................................35
6.7 Resolutions....................................................................................35
6.8 Good Standing Certificates, Etc................................................................35
6.9 Officer's Certificate..........................................................................35
6.10 Opinion of Counsel to Buyer....................................................................36
6.11 Other Documents................................................................................36
ARTICLE VII - Indemnification....................................................................................36
7.1 Survival.......................................................................................36
7.2 Indemnification by the Shareholders............................................................36
7.3 Indemnification by Buyer.......................................................................36
7.4 Limitation of Claims...........................................................................37
7.5 Procedures.....................................................................................37
ARTICLE VIII- Termination of Agreement...........................................................................39
8.1 Termination....................................................................................39
8.2 Pots-Termination Obligations...................................................................39
ARTICLE IX - Miscellaneous.......................................................................................39
9.1 Further Action.................................................................................39
9.2 Announcements..................................................................................40
9.3 Assignment; Parties in Interest................................................................40
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
9.4 Law Governing Agreement........................................................................40
9.5 Amendment and Modification.....................................................................40
9.6 Notice.........................................................................................40
9.7 Expenses.......................................................................................41
9.8 Payment of Finder's Fee........................................................................41
9.9 Entire Agreement...............................................................................42
9.10 Counterparts...................................................................................42
9.11 Headings.......................................................................................42
9.12 Guaranty by Clear .............................................................................42
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Exhibits
<S> <C>
Exhibit A Form of Promissory Note
Exhibit B Form of Investment Letter
Exhibit C Form of Employment Agreement with Shareholders
Exhibit D Form of Shareholders Restrictive Covenants Agreement
Exhibit E Form of Employment Agreements with Selected Employees
Exhibit F Form of Employee Restrictive Covenants Agreements
Exhibit G Opinion of Counsel to the Shareholders
Exhibit H Opinion of Counsel to Buyer
Schedules
Schedule 1.6(b) Definition of Adjusted Gross Profit
Schedule 1.6(d) Definition of Gross Margin
Schedule 2.1(e) Authorized Capital Stock
Schedule 2.3 No Violation
Schedule 2.4 Company Statements
Schedule 2.5 Undisclosed Liabilities
Schedule 2.6(a) Title to Assets
Schedule 2.6(b) Condition of Property
Schedule 2.7 Inventory
Schedule 2.8(a) Compliance with Laws
Schedule 2.8(b) Licenses and Permits
Schedule 2.8(c) Environmental Matters
Schedule 2.9 Litigation
Schedule 2.10(a) Real Property Leases
Schedule 2.10(b) Personal Property Leases
Schedule 2.10(d) Sales Commitments
Schedule 2.10(e) Contracts with Certain Persons
Schedule 2.10(h) Loan Agreements
Schedule 2.10(j) Contracts Subject to Renegotiation
Schedule 2.10(l) Other Material Contracts
Schedule 2.10(m) No Default
Schedule 2.11(a) Real Property
Schedule 2.12(a) Accounts Receivable Schedule
Schedule 2.12(b) Accounts Receivable Aging
Schedule 2.15(a) Employee Benefit Plans
Schedule 2.16 Employment Compensation
Schedule 2.17 Labor Matters
Schedule 2.18(b) Tax Return Filed
Schedule 2.19(a) Insurance
Schedule 2.19(b) Worker's Compensation Claims
Schedule 2.20(a) Bond Qualification
Schedule 2.20(b) Surety
Schedule 2.20(c) Claims or Notices of Default
Schedule 2.20(d) Current Default
Schedule 2.20(e) Indemnity of Sureties
Schedule 2.21 Liens
Schedule 2.22 Funds Held in Trust
Schedule 2.23(a) Current Projects
Schedule 2.23(b) Current Projects not on Schedule
Schedule 2.23(c) Current Projects not on Budget
Schedule 2.23(d) Payment of Subcontractors
Schedule 2.24 Certain Changes
Schedule 2.25(a) Major Customers
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
Schedule 2.25(b) Major Suppliers
Schedule 2.26 Warranties
Schedule 2.28 Title to Assets
Schedule 3.3 Capitalization
Schedule 3.5 Authority of Buyer
Schedule 3.6 Litigation
Schedule 3.8 Buyer's Statements
Schedule 4.9 Vacation Pay and Bonus Accruals
Schedule 4.15 Selected Employees
</TABLE>
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 15th day of January, 1999
(the "Agreement"), by and among CLEAR HOLDINGS, INC. (together with its
successors and assigns, "Clear"), CLEAR COMMUNICATIONS GROUP, INC., a Georgia
corporation ("Buyer"), and Myron Berehulke, John Dunmire, Scott Durkee, Rick
Hanafin and Dale Stickney (collectively, the "Shareholders" and each
individually a "Shareholder"), being all of the shareholders of CELLULAR
TECHNOLOGY INTERNATIONAL, INC., a Missouri corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of construction and
installation of telecommunication equipment and related telecommunication
support services;
WHEREAS, the Shareholders own all of the issued and outstanding shares
of the capital stock of the Company (the "Company Stock"); and
WHEREAS, the Shareholders desire to sell, and Buyer desires to
purchase, the Company Stock pursuant to this Agreement (the "Acquisition"); and
WHEREAS, it is the intention of the parties hereto that upon
consummation of the purchase and sale of the Company Stock pursuant to this
Agreement, Buyer shall own all of the issued and outstanding shares of capital
stock of the Company;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
ARTICLE I
Sale of Stock
1.1 Sale of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), the Shareholders shall
sell, assign, transfer and deliver the Company Stock to Buyer, and Buyer shall
purchase the Company Stock from the Shareholders.
1.2 Purchase Price. Upon the terms and subject to the conditions
of this Agreement, and in consideration of the sale, assignment, transfer,
conveyance and delivery of the Company Stock, Buyer will deliver or cause to be
delivered to Rick Hanafin, as representative for the Shareholders (the
"Representative"):
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(a) at the Closing, an amount equal to $1,386,000 (the
"Closing Payment") in immediately available funds, by wire transfer to an
account designated by the Representative not later than three business days
prior to the Closing; and
(b) on a date to be elected by Buyer, which date shall
be on or before April 30, 2000 (the "Earn-Out Date"), an amount equal to
$3,000,000.00, subject to adjustment as set forth in Section 1.6 and in the
form determined pursuant to Section 1.7 hereof (the "Earn-Out Payment"),
provided, however, that the Earn-Out Payment shall in no event be less than $0
or greater than $5,000,000.00. (The sum of the Closing Payment and the Earn-Out
Payment is sometimes hereinafter referred to as the "Purchase Price".)
1.3 All Deliveries to Representative. All payments or deliveries
to be made by the Buyer pursuant to this Agreement shall be made exclusively to
the Representative, and any payment or delivery so made to the Representative
shall constitute full performance of the Buyer's obligations to the
Shareholders, or any of them, hereunder. The Buyer shall not bear any
responsibility for allocation of particular payments or deliveries among the
Shareholders, provided, however, that, in the event the Buyer delivers Notes
(as defined below) to the Representative, the Buyer will deliver to the
Representative Notes with such principal amounts (the aggregate of which shall
not exceed the amount calculated pursuant to Section 1.7(b) hereof) as shall
have been requested by the Representative not later than 5 days prior to the
Earn-Out Date.
1.4 Audits of Company Financial Statements. The Shareholders have
previously delivered to the Buyer the reviewed balance sheet and reviewed
statement of income of the Company as of the close of business on October 31,
1998 prepared by BDO Seidman, L.L.P. and set forth in Schedule 2.4 hereof
(collectively, the "Company Statements"). Following the Closing, the Buyer (a)
may, at its sole election, cause KPMG Peat Marwick, L.L.P. ("KPMG") to prepare
and deliver to the Representative, on behalf of the Shareholders, an audited
balance sheet and an audited statement of income of the Company as of the
fiscal year of the Company ending on October 31, 1998 (collectively, the "1998
Statements"), (the 1998 Statements to be delivered to the Representative not
later than May 31, 1999) and (b) shall cause KPMG to prepare and deliver (prior
to March 31, 2000) to the Representative, on behalf of the Shareholders, an
audited balance sheet and an audited statement of income of the Company for the
calendar year ending December 31, 1999 (collectively, the "1999 Statements"),
each in accordance with generally accepted accounting principles and applying
the "percentage of completion" method of accounting ("GAAP"). (Each of the 1998
Statements and the 1999 Statements may be referred to hereinafter as an
"Audited Statement".)
1.5 Dispute Resolution. Within 30 days after the delivery of any
Audited Statement, the Representative shall notify Buyer in writing of any
objections to such Audited Statement, specifying in reasonable detail any such
objections, and if the Representative fails to notify the Buyer in writing
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<PAGE> 10
of any objections within such period the Shareholders shall be deemed to have
agreed to such Audited Statement. If the Representative does not so object or
if the Shareholders and the Buyer agree on the resolution of all such
objections, the Audited Statement (with any such changes as may have been
agreed) shall be final and binding. The Shareholders and the Buyer shall
negotiate in good faith to attempt to resolve any such objections, provided
that the Representative and the Buyer shall each have the right, at any time,
to unilaterally terminate in writing all discussions with respect to such
objections or changes. Not later than ten business days after either the
Representative or the Buyer shall have terminated such discussions, all such
disputed items shall be submitted for resolution to a certified public
accounting firm of national standing designated by the Shareholders and the
Buyer (the "Auditor"), which Auditor shall be independent of and have no
ongoing business relationship with any of the Shareholders, Buyer or their
respective affiliates. The Shareholders and the Buyer shall each (i) cooperate
fully with the Auditor and furnish to the Auditor such work papers and other
documents and information as the Auditor may request, (ii) bear 50% of the fees
and expenses of the Auditor, and (iii) be afforded an opportunity to present to
the Auditor any material it deems relevant and to discuss the matters in
dispute with the Auditor. The Shareholders and the Buyer shall use reasonable
efforts to cause the report of the Auditor to be rendered within 15 days of its
appointment, and the Auditor's determination as to the appropriateness and
extent of changes (if any) to the Audited Statement shall be final and binding.
1.6 Adjustment of Earn-Out Payment. The Earn-Out Payment shall
be:
(a) reduced, on a dollar-for-dollar basis, by the
amount, if any, by which the item shareholders' equity, as set forth in the
1998 Statements, shall be less than the same item as set forth in the Company
Statements;
(b) reduced by $2.712523 for each dollar, if any, by
which Adjusted Gross Profit (as defined in Schedule 1.6(b) hereof), for the
period covered by the 1999 Statements, shall be less than $1,844,129;
(c) increased by $2.712523 for each dollar, if any, by
which Adjusted Gross Profit, for the period covered by the 1999 Statements,
shall be greater than $1,844,129; and
(d) reduced by 1% for each percentage point, if any, by
which Gross Margin (as defined in Schedule 1.6(d) hereof), for the period
covered by the 1999 Statements, shall be less than 30.37%, provided, however,
that no adjustment pursuant to this subsection (d) shall be made until the
deviation of Gross Margin for the period covered by the 1999 Statements from
30.37% shall exceed 5 percentage points, and any such adjustment shall be made
only with respect to the excess of such deviation above the five percentage
point threshold.
For illustrative purposes only, an example of each of the adjustments
to the Earn-Out
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Payment contemplated by this Section is set forth in Schedule 1.6 hereto.
1.7 Form of Earn-Out Payment. The Earn-Out Payment shall be
delivered to the Representative in the form determined pursuant to the
following:
(a) in the event that, prior to the Earn-Out Date, Clear
shall have (i) listed any of its equity securities on a national securities
exchange or automated quotation and (ii) become a reporting company pursuant to
the Securities Exchange Act of 1934 (a "Going Public Event"), the Earn-Out
Payment shall take the form of such number of the publicly traded equity
securities of Clear (the "Public Stock") as shall be determined by dividing the
dollar amount of the Earn-Out Payment by the average, for the 30 consecutive
trading days (or such lesser number of trading days as shall have elapsed
subsequent to the Going Public Event) ending on the fifth trading day prior to
the Earn- Out Date, of the closing asked price for a share of Public Stock, as
reported by an authoritative source designated by Buyer (or, if such
information is not available, the closing sales price therefor) (the "Average
Price"), and rounding up to the nearest whole share.
(b) in the event that, prior to the Earn-Out Date, no
Going Public Event shall have occurred, the Earn-Out Payment shall be made in
cash, provided, however, that if the Earn-Out Payment exceeds the amount of
$500,000.00, the excess of the Earn-Out Payment over such amount shall be paid
in the form of one or more promissory notes of Clear (the "Notes") in the form
of, and containing the terms set forth in, Exhibit A hereto, and in the
respective principal amounts requested by the Representative pursuant to
Section 1.3 hereof.
(c) Anything to the contrary herein notwithstanding: (i)
the amount of any Earn- Out Payment payable in cash shall be reduced by
$100,000 (but not below zero), (ii) the amount of any Earn-Out Payment payable
in Notes shall be reduced by $100,000 (but not below zero), and (iii) the
amount of any Earn-Out Payment payable in Public Stock shall be reduced by the
number of shares of Public Stock equal to the quotient of $200,000 divided by
the Average Price.
1.8 Time and Place of Closing. The parties shall use their
reasonable efforts to cause the closing of the transactions contemplated by
this Agreement (the "Closing") to take place at 10:00 a.m. on January 22, 1999,
or at such other time as the Parties may mutually agree (the date on which the
Closing actually occurs, the "Closing Date"). The place of the Closing shall be
at the offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100,
1230 Peachtree Street, N.E., Atlanta, Georgia, or such other location as may be
mutually agreed by the Parties.
1.9 Deliveries at Closing. (a) Deliveries by the Shareholders. At
the Closing, the Representative, on behalf of the Shareholders, shall deliver
to Buyer:
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(i) stock certificates representing all of the
Company Stock, endorsed in blank or accompanied by stock powers executed in
blank;
(ii) the documents referred to in Sections 5.7,
5.8, 5.9, 5.10, 5.12, 5.14, 5.15 and 5.16 hereof; and
(iii) the Investment Letter set forth in Exhibit
B hereto.
(b) Deliveries by Buyer. At the Closing, the Buyer shall
deliver to the Shareholders:
(i) the Closing Payment; and
(ii) the documents referred to in Sections 6.4,
6.7, 6.8, 6.9, 6.10 and 6.11 hereof.
1.10 Earn-Out Closing. On the Earn-Out Date, Buyer and the
Shareholders shall hold a closing (the "Earn-Out Closing") at the location of
the Closing, or such other place as the parties may mutually agree. At the
Earn-Out Closing, Buyer shall deliver to the Shareholders the Earn-Out Payment,
and, in the event the Earn-Out Payment consists of Public Stock or Notes, each
of the Shareholders shall deliver to Buyer an Investment Letter substantially
in the form set forth in Exhibit B hereto, executed by each such Shareholder as
of the Earn-Out Date.
1.11 Restrictive Legend. The Public Stock and the Notes, if any,
to be issued pursuant to this Agreement shall be "restricted securities", as
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") and each certificate representing any such securities shall
bear any legend or legends required by applicable state securities laws or
otherwise, as well as a legend substantially similar to the following:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE, INCLUDING THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON CERTAIN
EXEMPTIVE PROVISIONS OF SAID ACTS. SAID SECURITIES CANNOT BE SOLD OR
TRANSFERRED UNLESS, IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
THE ISSUER, ANY SUCH SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION; AND (2) IN A TRANSACTION WHICH IS
EXEMPT UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
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EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION
WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS."
ARTICLE II
Representations and Warranties of the Shareholders
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Buyer shall rely thereon, the Shareholders hereby jointly and severally
represent and warrant to Buyer, as of the date hereof and as of the Closing
Date (but, for the avoidance of doubt, not as of any date subsequent to the
Closing Date), as set forth below. (Information set forth in the Schedules
attached hereto specifically refers to the article and section of this
Agreement to which such information is responsive.)
2.1 Corporate.
(a) Organization. The Company has been administratively
dissolved in the State of Missouri for the sole reason that it has failed to
file required annual reports and fees. (All of the representations and
warranties in this Article II shall be deemed modified as of the date of this
Agreement only, by the preceding sentence.) The Company was incorporated on
November 29, 1993 and has not elected to be taxed as an "S - corporation". No
entity has ever merged with or been consolidated into the Company.
(b) Corporate Power. The Company has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as and where such is now being conducted. The Company is
duly qualified or otherwise authorized as a foreign corporation to transact
business and is in good standing in each jurisdiction in which a failure to be
so qualified would have a Material Adverse Effect (as defined in Section 2.24
hereof).
(c) Subsidiaries. The Company does not currently own,
and has never owned, directly or indirectly, any capital stock or other equity
securities of any corporation or have any direct or indirect equity or other
ownership interest in any entity or business.
(d) Corporate Documents, Etc. Copies of the certificate
or articles of incorporation and bylaws of the Company, including any
amendments thereto, which have been delivered by the Company to Buyer are true,
correct and complete copies of such instruments as presently in effect. The
corporate minute book and stock records of the Company which have been
furnished to Buyer for inspection are true, correct and complete in all
material respects and accurately reflect all material corporate action taken by
the Company, including all transactions and
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<PAGE> 14
actions with respect to the capital stock of the Company.
(e) Capitalization and Title to Company Stock. The
authorized capital stock of the Company is as set forth in Schedule 2.1(e). No
shares of such capital stock are issued and outstanding except for shares
identified in Schedule 2.1(e). The shares of capital stock of the Company are
owned of record and beneficially by the Shareholders in the amounts set forth
in Schedule 2.1(e), which sets forth the address of each of the Shareholders.
All shares of capital stock identified on Schedule 2.1(e) are validly issued,
fully paid and nonassessable and the Shareholders have full power and authority
to convey, free and clear of all liens, encumbrances, equities, restrictions,
claims and obligations of every kind ("Encumbrances"), all such shares of
capital stock and, upon delivery of such shares of capital stock, as provided
in Section 1.9, Buyer will acquire good and marketable title to the capital
stock of the Company, free and clear of all Encumbrances. Except as set forth
on Schedule 2.1(e), there are no (i) securities convertible into or
exchangeable for any of the capital stock or other securities of the Company,
(ii) options, warrants or other rights to purchase or subscribe to capital
stock or other securities of the Company, or securities which are convertible
into or exchangeable for capital stock or other securities of the Company or
(iii) contracts, commitments, agreements, understandings or arrangements of any
kind relating to the issuance, sale or transfer of any capital stock or other
equity securities of the Company, any such convertible or exchangeable
securities or any such options, warrants or other rights. Schedule 2.1(e) sets
forth, with respect to each issuance of stock of the Company, the date of
issuance, the purchaser(s), and the consideration received therefor. Except as
set forth on Schedule 2.1(e), no person or entity has, or ever has had, any
ownership interest in the assets, properties or business of the Company. There
are no options, contracts, commitments, agreements, understandings or
arrangements of any kind to purchase any ownership interest in the Company or
any of its properties, business or assets.
2.2 Authorization; Validity. The execution and delivery of this
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Instruments") and the performance of the obligations
set forth herein and therein, have been duly authorized by the Board of
Directors of the Company and the Shareholders, and no other or further
corporate act on the part of the Company or the Shareholders is necessary
therefor. The Shareholders have unanimously approved the Acquisition. This
Agreement has been duly and validly executed and delivered by the Shareholders
and is, and when executed and delivered the Ancillary Instruments to be
executed and delivered by the Company or the Shareholders pursuant hereto will
be, legal, valid and binding obligations of each such person or entity,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally, and by general equitable
principles.
2.3 No Violation. Except as set forth on Schedule 2.3, no
consent, authorization or
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<PAGE> 15
approval of, or declaration, filing or registration with, any governmental,
administrative or regulatory body, or any consent, authorization or approval of
any other third party, is necessary in order to enable the Shareholders to
enter into and perform their obligations under this Agreement and to consummate
the transactions contemplated hereby, and neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will:
(a) be in violation of the articles of incorporation or
bylaws of the Company or constitute a breach of the terms of any evidence of
indebtedness or agreement relating to the Company's business to which the
Company is a party;
(b) cause a default under any mortgage or deed of trust
or other lien, charge or encumbrance to which any asset of the Company or the
Company Stock is subject or under any contract relating to the Company's
business to which the Company is a party, or permit the termination of any such
contract by another person;
(c) result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any asset of the Company or
the Company Stock under any agreement or commitment to which the Company is
bound;
(d) accelerate, or constitute an event entitling, or
which would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of the Company or a Shareholder to accelerate the maturity of any
such indebtedness;
(e) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality binding on
the Company or a Shareholder; or
(f) violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to the properties or
business of the Company.
2.4 Financial Statements. Attached as Schedule 2.4 are copies of
the Company Statements. The Company Statements were prepared from the books and
records of the Company in a manner conforming to GAAP and fairly present the
financial condition of the Company as of the date thereof.
2.5 Absence of Undisclosed Liabilities. All liabilities,
commitments or obligations of the Company with respect to the Company's
business (whether secured or unsecured and whether accrued, absolute,
contingent, direct or indirect or otherwise and whether due or to become due)
are set forth or adequately reserved against in the Company Statements, except
for commercial liabilities and obligations incurred since the date of the
Company Statements in the ordinary course of business and consistent with past
practice and which will not have a Material Adverse Effect. The total of
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<PAGE> 16
all liabilities in respect of accounts payable incurred since the date of the
Company Statements does not exceed $250,000. Except as set forth on Schedule
2.5 hereto and to the extent described in the Company Statements, the
Shareholders have no knowledge of any basis for the assertion against the
Company of any liability, and there are no circumstances, conditions,
happenings, events or arrangements, contractual or otherwise, known to the
Shareholders which may likely give rise to liabilities, except commercial
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice.
2.6 Title to Properties; Encumbrances.
(a) Merchantable Title. Except as set forth in Schedule
2.6 (a), the Company has good and merchantable title to all of its assets,
businesses and properties used or useful in the Company's business and
necessary to permit the Company to carry on the Company's business as presently
conducted, and with respect to real property leased by the Company for use in
the Company's business, good and marketable leasehold estates or lessee's
interests, including, without limitation, all such properties (tangible and
intangible) reflected in the Company Statements (except for inventory disposed
of in the ordinary course of business since the date of such Company
Statements) free and clear of all mortgages, liens (statutory or otherwise),
security interests, claims, pledges, licenses, equities, options, conditional
sales contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, mineral rights, charges
or Encumbrances of any nature whatsoever (collectively, "Liens") except, in the
case of real property identified on Schedule 2.11(a), for Liens for taxes not
yet due or which are being contested in good faith by appropriate proceedings
(and which have been sufficiently accrued or reserved against in the Company
Statements), municipal and zoning ordinances and easements for public
utilities, none of which interfere with the use of the property as currently
utilized (the "Permitted Liens"). None of the assets, business or properties of
the Company used or useful in the Company's business are subject to any
restrictions with respect to the transferability thereof and title thereto will
not be affected in any way by the transactions contemplated hereby other than
as disclosed in Schedule 2.6(a).
(b) Condition. Except as set forth on Schedule 2.6(b),
all property and assets owned or utilized by the Company in the Company's
business are in good operating condition and repair (except such minor defects
as do not interfere with the use thereof in the conduct of the normal
operations of the Company), have been maintained consistent with the standards
generally followed in the industry and were sufficient to carry on the
Company's business as conducted during the preceding twelve (12) months.
2.7 Inventory. All inventory of the Company is reflected on
Schedule 2.7, and all such inventory consists of a quality and quantity useable
and saleable in the ordinary course of business not later than the first
anniversary of the Closing Date (except for immaterial amounts and except as
otherwise indicated on Schedule 2.7) and has a commercial value at least equal
to the value shown on Schedule 2.7, which value has been established in
accordance with generally accepted accounting
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<PAGE> 17
principles at the lower of cost or market. All inventory of the Company with
respect to the Company's business is located on Real Property (as hereinafter
defined) of the Company.
2.8 Compliance with Laws.
(a) Compliance. Except as set forth on Schedule 2.8(a),
the Company (including all of its operations, practices, properties, real or
personal, owned or leased, and assets) is in compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations (collectively, "Laws") violation of which, if uncured, would have a
Material Adverse Effect, including without limitation, Laws applicable to the
offer or sale of securities, discrimination in employment, the Americans with
Disabilities Act, occupational safety and health, trade practices, competition
and pricing, product warranties, zoning, building and sanitation, employment,
retirement and labor relations, product advertising and the Environmental Laws
(as hereinafter defined). The Company has not at any time owned any Real
Property (as hereinafter defined). Any Real Property is unconditionally zoned a
classification that allows its current use, and such zoning is not being
challenged by legal process, and no change or modification thereof is being
sought by any person or entity, including, but not limited to, governmental or
quasi-governmental authorities. Except as set forth in Schedule 2.8(a), neither
the Company, nor to the knowledge of the Shareholders, any landlord of the
Company, has received notice of any violation or alleged violation of, or is
subject to liability (whether accrued, absolute, contingent, direct or
indirect) for past or continuing violation of, any Laws. To the knowledge of
the Shareholders after due inquiry, all reports and returns required to be
filed by the Company with any governmental authority have been filed, and were
accurate and complete when filed. Without limiting the generality of the
foregoing:
(i) The operation of the Company's business as
now conducted does not, nor does any condition existing at any of the
facilities in which the Company's business is conducted (collectively, the
"Facilities"), in any manner constitute a breach or violation of any lease or
other agreement governing the use of such Facilities. Neither the Company nor
the Shareholders have received any notice of or otherwise have any knowledge
about any claim or likely potential claim that the operation of the Company's
business as now conducted or any condition existing at the Facilities allegedly
constitutes a nuisance or other tortious interference with the rights of any
person or persons in such a manner as to give rise to or constitute the grounds
for a suit, action, claim or demand by any such person or persons seeking
compensation or damages or seeking to restrain, enjoin or otherwise prohibit
any aspect of the conduct of such businesses or the manner in which they are
now conducted;
(ii) the Company has made all required payments
to its unemployment compensation reserve accounts with the appropriate
governmental departments of the states where it is required to maintain such
accounts, and, to the knowledge of the Shareholders after due inquiry, each of
such accounts has a positive balance;
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<PAGE> 18
(iii) the Company, for the past three (3) years,
has not been required to file any reports under the federal Occupational Safety
and Health Act of 1970, as amended, or under all other applicable health and
safety laws and regulations, except for reports, the failure to file which
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Licenses and Permits. Except as set forth on
Schedule 2.8(b), the Company does not require any licenses, permits, approvals,
authorizations, or consents from any governmental and regulatory authorities
for the conduct of the Company's business (as presently conducted as proposed
to be conducted), or for the operation of the Facilities. The Company
(including its operations, properties, whether owned or leased, and assets) (i)
is and has been in compliance with all such permits and licenses, approvals,
authorizations and consents applicable to the conduct of the Company's business
in the States of North Carolina and Missouri, and (ii) except for such items,
the failure to obtain which would not, individually or in the aggregate, have a
Material Adverse Effect, is and has been in compliance with all such permits
and licenses, approvals, authorizations and consents applicable to the conduct
of the Company's business outside of the States of North Carolina and Missouri.
(c) Environmental Matters. The applicable Laws relating
to pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, release or threatened release of
pollutants, contaminants, asbestos, lead-based paints, chemicals or industrial,
toxic, hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without limitation, the
Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and the Comprehensive Environmental Response
Compensation Liability Act ("CERCLA"), as amended, and their state and local
counterparts are herein collectively referred to as the "Environmental Laws."
Except as set forth on Schedule 2.8(c), including, if any, the Phase I
environmental reports attached thereto, to the knowledge of the Shareholders
after due inquiry, no Waste exists on or under the Real Property (as defined in
Section 2.11(a) herein) and neither the Company, nor, to the knowledge of the
Shareholders, any of its predecessors in title, or any other person, has ever
used the Real Property for the processing, handling, manufacture, generation,
treatment, storage, or disposal of any Waste, nor has the Real Property been
used as a landfill or as a dump for garbage, refuse or Waste. Without limiting
the generality of the foregoing provisions of this Section 2.8, the Company is
in material compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulations, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. Except as specifically described
in Schedule 2.8(c), there is no civil, criminal or administrative action, suit,
demand, notice or demand letter, claim, hearing, notice of violation,
investigation or proceeding
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pending, or, the knowledge of the Shareholders after due inquiry, threatened,
against the Company, or to the knowledge of the Shareholders after due inquiry,
any landlord of the Company, relating in any way to the Environmental Laws or
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder. Except as
set forth in Schedule 2.8(c), there are no past or present (or, to the best of
the knowledge of the Company and the Shareholders) future events, conditions,
circumstances, activities, practices, incidents, actions, omissions or plans
which may interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any liability, including, without
limitation, liability under CERCLA or similar state or local Laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, remediation plan, study or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment, of any Waste.
2.9 Litigation. Except as set forth in Schedule 2.9, there is no
action, suit, arbitration proceeding, investigation or inquiry, pending before
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
or, to the knowledge of the Shareholders, threatened, against the Company or
its directors (in their capacity as officers or directors of the Company),
business or assets, nor do the Shareholders know, or have grounds to know, of
any reasonable basis for any such proceedings, investigations or inquiries.
Schedule 2.9 also identifies all such actions, suits, proceedings,
investigations and inquiries to which the Company or any of the Company's
directors (in their capacity as officers or directors of the Company) have ever
been parties, wherein either the amount in controversy exceeded $10,000 or the
relief sought or requested required remedial action other than the payment of
money. Except as set forth in Schedule 2.9, neither the Company, its business
or assets is subject to any judgment, order, writ or injunction of any court,
arbitrator or federal, state, foreign, municipal or other governmental
department, commission, board, bureau, agency or instrumentality.
2.10 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in
Schedule 2.10(a), the Company does not have any leases of real property which
are used or useful in the Company's business.
(b) Personal Property Leases. Except as set forth in
Schedule 2.10(b), the Company does not have any leases of personal property
which are used or useful in the Company's business involving consideration or
other expenditure in excess of $1,000 or involving performance over a period of
more than six (6) months.
(c) Purchase Commitments. The Company does not have any
purchase
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<PAGE> 20
commitments for inventory items or supplies for use in the Company's business
that, together with amounts on hand, constitute in excess of three months
normal usage, or which are at an excessive price.
(d) Sales Commitments. Except as set forth on Schedule
2.10(d), the Company does not have any sales contracts or commitments to
customers with respect to the Company's business which aggregate in excess of
$10,000 to any one customer (or group of affiliated customers). The Company
does not have any sales contracts or commitments with respect to the Company's
business except those made in the ordinary course of business, at arm's length.
(e) Contracts With Certain Persons. Except as set forth
on Schedule 2.10(e), the Company does not have any agreement, understanding,
contract or commitment (written or oral) with any current or former officer,
director, employee, agent, or consultant with respect to the Company's business
that is not cancelable by the Company on notice of not longer than thirty (30)
days without liability, penalty or premium of any nature or kind whatsoever.
(f) Power of Attorney. Other than to BDO Seidman,
L.L.P., for tax purposes, the Company has not given any power of attorney with
respect to the Company's business, which is currently in effect, to any person,
firm or corporation for any purpose whatsoever.
(g) Collective Bargaining Agreements. The Company is not
a party to any collective bargaining agreements with any unions, guilds, shop
committees or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule
2.10(h), the Company is not obligated under any loan agreement, promissory
note, letter of credit, or other evidence of indebtedness as a signatory,
guarantor or otherwise.
(i) Guarantees. The Company has not guaranteed the
payment or performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person.
(j) Contracts Subject to Renegotiation. Except as set
forth on Schedule 2.10(j), the Company is not a party to any contract with any
governmental body (with respect to the Company's business) which is subject to
renegotiation.
(k) Burdensome or Restrictive Agreements. The Company is
not a party to or bound by any agreement, deed, lease or other instrument with
respect to the Company's business which is so burdensome as to materially
affect or impair the operation of the Company's business. Without limiting the
generality of the foregoing, the Company is not a party to or bound by any
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<PAGE> 21
agreement requiring the Company to assign any interest in any trade secret or
proprietary information, or with respect to the Company's business, prohibiting
or restricting the Company from competing in any business or geographical area
or soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world.
(l) Other Material Contracts. Except as described in
Schedule 2.10(l) or in any other Schedule, the Company does not have any lease,
contract or commitment of any nature involving consideration or other
expenditure in excess of $10,000, or involving performance over a period of
more than six (6) months, or which is otherwise individually material to the
operations of its business.
(m) No Default. Except as set forth on Schedule 2.10(m),
the Company is not in default under any lease, contract or commitment, nor has
any event or omission occurred which through the passage of time or the giving
of notice, or both, would constitute a material default thereunder or cause the
acceleration of any obligations of the Company thereunder, result in the
creation of any Lien on any of the assets owned, used or occupied by the
Company in connection with the Company's business or give rise to an automatic
termination, or the right of discretionary termination thereof. No third party
is in default under any lease, contract or commitment to which the Company is a
party, nor has any event or omission occurred which, through the passage of
time or the giving of notice, or both, would constitute a default thereunder or
give rise to an automatic termination, or the right of discretionary
termination, thereof.
2.11 Real Estate.
(a) Real Property. Except as set forth on Schedule
2.11(a), the Company does not now own and has not at any time during the course
of its existence or during the course of the existence of any predecessor to
the Company owned any real property. Schedule 2.11(a) sets forth all real
property used or occupied by the Company in the conduct of the Company's
business (the "Real Property"), including a legal description of all land, and
all encumbrances, easements or rights of way of record (or, if not of record,
of which the Company or the Shareholders have notice or knowledge) granted on
or appurtenant to or otherwise affecting such Real Property, the zoning
classification thereof, and all plants, buildings or other structures located
thereon. Schedule 2.11(a) identifies the leases (oral or written) and all
amendments thereto and extensions thereof, under which the Company now uses any
such Real Property (the "Leases"), as well as any guarantors of tenant's
obligations under such Leases, true and correct copies of which written Leases
(or descriptions of oral Leases or arrangements) the Company has delivered to
Buyer. Except where the absence thereof would not have a Material Adverse
Effect, there are now in full force and effect duly issued certificates of
occupancy permitting the Real Property and improvements located thereon to be
legally used and occupied as the same are now constituted. Schedule 2.11(a)
further identifies any lease under which any subtenants, tenants, assignees,
licensees, concessionaires or other entities,
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<PAGE> 22
other than the Company, have a right to occupy all or any portion of the Real
Property, and true and correct copies of all such leases have been delivered by
the Company to Buyer (or, if an oral arrangement, such arrangements have been
fully described on Schedule 2.11(a)). Except where the absence thereof would
not have a Material Adverse Effect, all of the Real Property has permanent
rights of access to dedicated public highways. The Company and the Shareholders
have no notice or knowledge of any fact or condition existing on the Real
Property which would prohibit or adversely affect the ordinary rights of access
to and from the Real Property, and there is no pending or threatened
restriction or denial, governmental or otherwise, with respect to such ingress
and egress. Except where the absence thereof would not have a Material Adverse
Effect, all of the Real Property is serviced by public utilities, or utilities
that are available to the Real Property by valid, unencumbered appurtenant
easements. The Company and the Shareholders have no notice or knowledge of (i)
any claim of adverse possession or prescriptive rights involving any of the
Real Property, (ii) any structure located on any Real Property which encroaches
on or over the boundaries of neighboring or adjacent properties, or (iii) any
structure of any other party which encroaches on or over the boundaries of any
of such Real Property. Except where the same would not have a Material Adverse
Effect, none of the Real Property is located in a flood plain, flood hazard
area, wetland or lakeshore erosion area within the meaning of any Law,
regulation or ordinance. No public improvements have been commenced and, to the
knowledge of the Shareholders after due inquiry, none are planned which in
either case may result in special assessments against or otherwise materially
adversely affect any Real Property. The Company and the Shareholders have no
notice or knowledge of any (i) planned or proposed increase in assessed
valuations of any Real Property (other than routine general valuations of all
property located in the taxing district or districts in which the Real Property
is located), (ii) governmental agency or court order requiring repair,
alteration, or correction of any existing condition affecting any Real Property
or the systems or improvements thereat, (iii) condition or defect which could
give rise to an order of the sort referred to in subdivision (ii) above, (iv)
underground storage tanks affecting any Real Property, or (v) work that has
been done or labor or materials that has or have been furnished to any Real
Property during the period six (6) months immediately preceding the date of
this Agreement for which Liens could be filed against any of the Real Property.
(b) No Condemnation or Expropriation. Neither the whole
nor any portion of the property or any other assets of the Company used or
useful in the Company's business is currently subject to any governmental
decree or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority with or without payment of compensation therefor,
nor to the knowledge of the Shareholders has any such condemnation,
expropriation or taking been proposed.
(c) Leases. All of the Leases, true and complete copies
of which have been delivered or made available to Buyer, are in effect and the
Company is not in default under or with respect to any material term of the
Leases, nor has the Company received or sent any notice of any
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<PAGE> 23
default under or with respect to any of the same. No other party to any of the
Leases is in material default under or with respect to any of the same.
2.12 Accounts Receivable. All accounts receivable of the Company
reflected on the Company Statements, other than as described in Schedule
2.12(a), and those arising since the date of the Company Statements, represent
arm's length sales actually made in the ordinary course of business; are
collectible in the ordinary course of business not later than the 6-month
anniversary of the Closing Date (without regard to reserves); are subject to no
counterclaim or set off; and are not in dispute. Items contained in Schedule
2.12(a), are collectible no later than the first anniversary of the Closing
Date. Schedule 2.12(b) contains an aged schedule of accounts receivable with
respect to the Company included in the Company Statements and as of a date not
more than twenty (20) days prior to the date hereof. The Company is not owed
any receivable by any customer of the Company as a result of any retainage of
funds by such customer pursuant to any installation agreement or other
contractual agreement with the Company which has been owed to the Company for a
period of time exceeding 6 months in length (to be calculated as of the Closing
Date).
2.13 Trade Rights. Seller is incorporated in the state of Missouri
under the name "Cellular Technology International, Inc." and is qualified to do
business under this trade name in the state of North Carolina. The Company, to
the best of its knowledge, has and is using no other Trade Rights, as defined
below. To the knowledge of the Shareholders, the Company is not infringing, nor
has it infringed, any Trade Rights of another in the operation of the Company's
business, nor, to the knowledge of the Shareholders, is any other person
infringing the Trade Rights of the Company. There are no inquiries,
investigations, or claims or litigation, challenging or threatening to
challenge the right, title and interest of the Company with respect to its
continued use of, and right to preclude others from using, any Trade Rights of
the Company.
2.14 Broker's or Finder's Fees. Except for Viking Resources, Inc.
("Viking"), which shall be entitled to the finder's fee or fees determined in
accordance with Section 9.8 of this Agreement, no agent, broker, person or firm
acting on behalf of the Company or the Shareholders is, or will be, entitled to
any commission or broker's or finder's fees from any of the parties hereto, or
from any person controlling, controlled by or under common control with any of
the parties hereto, in connection with any of the transactions contemplated
herein.
2.15 Employee Benefit Plans.
(a) Disclosure. Schedule 2.15(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden
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<PAGE> 24
parachutes," collective bargaining agreements, severance agreements or plans,
vacation and sick leave plans, programs, arrangements and policies, including,
without limitation, all "employee benefit plans" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all
employee manuals and all written or binding oral statements of policies,
practices or understandings relating to employment, which are provided to, for
the benefit of, or relate to, any persons employed by the Company in the
Company's business ("Company Employees"). The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee Plan/Agreement." True
and correct copies of all the Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer. No Employee
Plan/Agreement is a "multi-employer plan" (as defined in Section 401 of ERISA),
and the Company has never contributed or been obligated to contribute to any
such multi-employer plan.
(b) Prohibited Transactions. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Internal Revenue Code of 1986 (the "Code") for which a
statutory or administrative exemption does not exist with respect to any
Employee Plan/Agreement, and no event or omission has occurred in connection
with which the Company or any of its respective assets or any Employee
Plan/Agreement, directly or indirectly, could be subject to any liability under
ERISA or the Code.
(c) Payments and Compliance. With respect to each
Employee Plan/Agreement, all payments due from the Company to date have been
made and all amounts properly accrued to date as liabilities of the Company
which have not been paid have been properly recorded on the books of the
Company and to the extent they relate to employees employed by the Company as
of the date thereof, are reflected in the Company Statements.
(d) Post-Retirement Benefits. With respect to each
Employee Plan/Agreement which provides welfare benefits of the type described
in Section 3(1) of ERISA: (i) no such Employee Plan / Agreement provides
medical or death benefits with respect to current or former employees,
directors or consultants of the Company beyond their termination of employment,
other than coverage mandated by Sections 601-608 of ERISA and 4980B(f) of the
Code; (ii) each such Employee Plan / Agreement has been administered in
compliance with Sections 601-608 of ERISA and 4980B(f) of the Code; and (iii)
no such Employee Plan / Agreement has reserves, assets, surpluses or prepaid
premiums.
(e) No Triggering of Obligations. The consummation of
the transactions contemplated by this Agreement will not (i) entitle any
current or former employee of the Company to severance pay, any payment
pursuant to any "golden parachute" or other agreement providing for payment to
any employee of the Company upon a change in control of the Company,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, (ii) accelerate
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<PAGE> 25
the time of payment or vesting, or increase the amount of compensation due to
any such employee or former employee or (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(f) Future Commitments. The Company does not have any
announced plan or legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee Plan/Agreement.
2.16 Employment Compensation. Schedule 2.16 contains a true and
correct list of all employees to whom the Company is paying compensation,
including bonuses and incentives for services rendered or otherwise, the annual
salary, average commission, or hourly wage compensation of each such employee,
and any bonus paid to each respective employee relating to services rendered
during the 1997 fiscal year. Buyer has been provided a copy of all W-2 forms
distributed to each employee of the Company in respect of compensation received
from the Company in the 1997 tax year.
2.17 Labor Matters. The Company is currently in compliance with
all applicable laws, rules and regulations relating to the employment of labor,
including those related to wages, hours and authorizations, except for such
matters of non-compliance as would not, individually or in the aggregate, have
a Material Adverse Effect. The Company has paid or caused to be paid all
compensation, including bonuses and accrued vacation pay, if any, due and
payable to its employees through the date hereof and will cause such amounts to
be paid through the Closing Date. Except as set forth in Schedule 2.17, within
the last five (5) years the Company has not experienced any labor disputes,
union organization attempts or any work stoppage due to labor disagreements.
Except to the extent set forth in Schedule 2.17, (i) there is no unfair labor
practice charge or complaint against the Company pending or threatened; (ii)
there is no labor strike, dispute, request for representation, slowdown or
stoppage actually pending or threatened against or affecting the Company nor
any secondary boycott with respect to products of the Company; (iii) no
question concerning representation has been raised or is threatened respecting
the employees of the Company; and (iv) no grievance which might have a Material
Adverse Effect.
2.18 Tax Matters.
(a) Provision For Taxes. The provision made for taxes on
the Company Statements is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and other
taxes (and any interest and penalties) and assessments, whether or not
disputed, for which the Company may be liable at the date of such Company
Statements and for all years and periods prior thereto. Since the date of such
Company Statements, the Company has not incurred any taxes other than taxes
incurred in the ordinary course of business consistent in type and amount with
past practices.
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<PAGE> 26
(b) Tax Returns Filed. Except as set forth on Schedule
2.18(b), all federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of the Company as of the date of this
Agreement have been timely filed (or if filed late all applicable penalties and
interest have been paid) and when filed were true and correct in all material
respects, and the taxes shown as due thereon were paid or adequately accrued.
True and complete copies of the tax returns filed by the Company for the three
(3) most recent fiscal years have been delivered to Buyer. The Company has duly
withheld and paid all taxes which it is required to withhold and pay relating
to salaries and other compensation heretofore paid or owing to its respective
employees, independent contractors or other third parties.
(c) Tax Audits. The federal and state income tax returns
of the Company have not been audited by the Internal Revenue Service ("IRS") or
any state taxing authorities and the Company has not received from the Internal
Revenue Service or from the tax authorities of any state, county, local or
other jurisdiction any notice of underpayment of taxes or other deficiency
which has not been paid nor any objection to any return or report filed by the
Company, except for an IRS audit for the tax year 1994 and for an amended
return for the State of Missouri to be filed as a result of the 1994 IRS audit.
There are outstanding no agreements or waivers extending the statutory period
of limitations applicable to any tax return or report.
(d) C - Corporation Status. The Company has been a
"C-corporation" within the meaning of the Code at all times since its
incorporation.
(e) Other Tax Matters. The Company is not a party to any
tax allocation or sharing agreement. The Company (i) has not been a member of
an affiliated group filing a consolidated federal income tax return (other than
a group the common parent of which was the Company) and (ii) has no liability
for the taxes of any person or entity under Reg. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract or otherwise.
2.19 Insurance.
(a) Policies in Effect. Set forth in Schedule 2.19(a) is
a complete and accurate list of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance presently
in effect with respect to the business and properties of the Company, true and
correct copies of which have heretofore been delivered to Buyer. All such
policies are valid, outstanding and enforceable policies and provide insurance
coverage for the properties, assets and operations of the Company as set forth
therein; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss
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<PAGE> 27
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events arising prior to the date hereof. The Company has not
been refused any insurance with respect to any aspect of the operation of its
business nor has its coverage been limited by any insurance carrier to which it
has applied for insurance or with which it has carried insurance during the
last three years. To the knowledge of the Shareholders, the Company has duly
and timely made all material claims it has been entitled to make under each
policy of insurance. The Shareholders have no notice or knowledge of any claim
by the Company pending under any such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies, and the
Shareholders know of no basis for denial of any claim under any such policy.
Except as set forth on Schedule 2.19(a), the Company has not received any
written notice from or on behalf of any insurance carrier issuing any such
policy that insurance rates therefor will hereafter be substantially increased
(except to the extent that insurance rates may be increased for all similarly
situated risks) or that there will hereafter be a cancellation or termination
of such policy or an increase in a deductible (or an increase in premiums in
order to maintain an existing deductible) or non-renewal of any such policy,
and the Shareholders have no knowledge of any act or omission of the Company
which could result in cancellation of any such policy prior to its scheduled
expiration date.
(b) Workers Compensation Coverage.
(i) Current Claims. Set forth separately in
Schedule 2.19(b) is (1) a list of all claims made for work-related injuries or
other work-related claims for which the Company or the Company's insurer has
continuing obligations to any current or former employee of the Company under
any state workers' compensation law or any policy of workers' compensation
insurance, including without limitation the obligation to pay temporary or
total disability benefits, medical benefits, periods of open medical treatment
which may require payments of medical benefits in the future, or any other
obligations (the "Workers' Compensation Claims"), and (2) a list of all the
current or former employees of the Company who have or had a Workers'
Compensation Claim, including current or former employees of the Company who
have given notice to the Company of an injury or work-related claim which has
not yet resulted in a Workers' Compensation Claim, including the date of the
accident or occurrence giving rise to such claim, the total payments made to or
on behalf of such current or former employee and, if known, the date on which
any obligations to each such employee terminate.
(ii) Increased Risk or Premium. The Company has
never been denied workers' compensation insurance or been placed in a high-risk
or increased-risk pool or been categorized under a similar rating system
reflecting an above-average incidence of work-related injuries for purposes of
determining the Company's workers' compensation insurance premium.
2.20 Bonds and Other Surety.
(a) Qualification for Bond. Except as set forth in
Schedule 2.20(a), there have
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been no occasions upon which the Company has been unable to qualify for any
performance bond, payment bond, fidelity bond, bid bond, bond to discharge
lien, federal Miller Act bond, or other state law bond patterned after the
federal Miller Act, or other form of surety.
(b) Other Forms of Surety. Except as set forth in
Schedule 2.20(b) the Company has not provided surety in the form of an escrow
of cash funds, bank draft, letter of credit, certified check, pledge of assets,
or in any other form as a substitute for or in addition to the surety provided
by any performance bond, payment bond, fidelity bond, bid bond, bond to
discharge lien, federal Miller Act bond, or state law bond patterned after the
federal Miller Act, or other form of surety issued listing the Company as
principal.
(c) Claims or Notices of Default. Except as set forth in
Schedule 2.20(c), no claims, notices of default or payment on any performance
bond, payment bond, fidelity bond, bid bond, federal Miller Act bond, or state
law bond patterned after the federal Miller Act, or other form of surety on
which the Company is the principal have been made or given during the last five
(5) years.
(d) No Current Default. Except as set forth in Schedule
2.20(d), the Company is not currently in default and the Shareholders have no
knowledge of the occurrence of any event which may cause the Company to default
upon any obligation of the Company arising under any construction agreement, or
that would trigger the right of any person or entity to claim payment under any
performance bond, payment bond, fidelity bond, bid bond, federal Miller Act
bond or state law bond patterned after the federal Miller Act, or other form of
surety bond listing the Company as principal.
(e) Indemnity of Sureties. Except as set forth in
Schedule 2.20(e), the Company has not entered into any indemnity agreement with
any surety company creating in favor of such surety company any security
interest, including any security interests which have not been filed or
otherwise perfected in accordance with any state law, in cash, accounts
receivable, chattel paper or other property of the Company and the Company has
not paid any claim for indemnity to any surety in respect of any lien claim
losses.
2.21 Liens. Except as set forth in Schedule 2.21, there have been
no liens filed, including liens released by payment, bond to discharge lien, or
otherwise, against the premises of any project on which the Company was the
general contractor by any subcontractor, materialman, supplier or other party
in the past five (5) years, and neither the Company nor the Shareholders have
been provided any notice or been given any other reason to believe, foresee or
otherwise anticipate the filing of any lien by any subcontractor, materialman,
supplier or other party who might file such lien.
2.22 Funds Held In Trust. Except as set forth in Schedule 2.22,
the Company is not
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holding or in possession of any funds as trustee or in any other fiduciary
capacity for the benefit of any subcontractor, materialman, supplier or other
party pursuant to any state law establishing a trust or fiduciary relationship
between the Company and any such party.
2.23 Current Projects.
(a) Identity; Completion; Profitability. Schedule
2.23(a) sets forth all installation projects currently being participated in or
overseen by the Company, (the "Current Projects"), as well as the projected
costs, expenses, revenues and profit from each respective Current Project and
all other projects completed by the Company within the twelve (12) month period
preceding the date hereof. (No warranty is hereby given by the Shareholders
concerning the accuracy of any such projected costs, expenses, revenues and
profits from Current Projects.)
(b) On Schedule. Except as set forth in Schedule
2.23(b), each project currently undertaken by the Company is proceeding without
material deviation from the schedule provided in the installation agreement or
purchase order governing each respective Current Project.
(c) On Budget. Except as set forth in Schedule 2.23(c),
none of the Current Projects is reasonably likely to run substantially over
budget.
(d) Evidence of Payment of Subcontractors. Except as set
forth in Schedule 2.23(d), there have not been any mechanics or materialman's
liens filed or asserted against the Company by any subcontractor, materialman
or lower tier subcontractor respecting work which has been performed for the
Company by any subcontractor, materialman or lower tier subcontractor on any
Current Project.
2.24 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 2.24 (or specifically required by the terms of this
Agreement), since the date of the Company Statements there has been no:
(a) Adverse Change. Material adverse change in the
financial condition, assets, liabilities or operations of the Company and, to
the knowledge of the Shareholders, in the business prospects of the Company (a
"Material Adverse Effect");
(b) Damage. Loss, damage or destruction, whether covered
by insurance or not, affecting the business or properties (owned or leased) of
the Company;
(c) Increase in Compensation. Increase in the
compensation, salaries or wages payable or to become payable to any employee or
agent of the Company (including, without limitation, any increase or change
pursuant to any bonus, pension, profit sharing, retirement or other
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plan or commitment), other than changes in the ordinary course of business
consistent with past practices, or any bonus or other employee benefit granted,
made or accrued, except those made in the ordinary course of business
consistent with past practices;
(d) Labor Disputes. Labor dispute or disturbance, other
than routine labor union or individual grievances which are not material to the
business, financial condition or results of operations of the Company or the
Company's business;
(e) Commitments. Material commitment or transaction by
the Company (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent with past
practice;
(f) Dividends. Declaration, setting aside, or payment of
any dividend or any other distribution in respect of capital stock of the
Company; any redemption, purchase or other acquisition by the Company of any of
its capital stock, or any security relating thereto, including any options or
rights to purchase or acquire capital stock of the Company;
(g) Disposition of Property. Sale, lease or other
transfer or disposition of any properties or assets of the Company used or
useful in the Company's business, except in the ordinary course of business;
(h) Indebtedness. Material indebtedness for borrowed
money incurred, assumed or guaranteed by the Company;
(i) Liens. Mortgage, pledge, Lien or Encumbrance made on
or affecting any of the assets of the Company;
(j) Amendment of Contracts. Entering into, amendment,
extension or termination by the Company of any material contract or lease, or
any waiver of material rights thereunder, other than in the ordinary course of
business;
(k) Payments, Loans and Advances. Any payment, loan or
advance (other than advances to employees in the ordinary course of business
for travel and entertainment in accordance with past practice) to any person;
(l) Credit. Any change in the policies or practices of
the Company with respect to the Company's business and the granting of credit;
(m) Payments to Affiliates. Payment to any Affiliate of
the Company. For purposes of this Agreement, the term "Affiliate" shall mean:
any organization or entity that directly,
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or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, either the Company; the Shareholders, officers
and directors of the Company; the spouse of any such person; any person who
would be the heir or descendant of any such person if he or she were not
living; and any entity in which any of the foregoing has a direct or indirect
interest, except through ownership of less than five percent (5%) of the
outstanding shares of any entity whose securities are listed on a national
securities exchange or traded in the national over-the-counter market;
(n) Status of Employees. Change in status or
continuation of employment of any employee identified in Section 2.16 of this
Agreement, other than changes occurring in the ordinary course of business.
(o) Unusual Events. Other events or conditions not in
the ordinary course of business of the Company which have had a Material
Adverse Effect or which would be prohibited by the terms of Section 4.1(b)
hereof.
2.25 Major Customers and Suppliers.
(a) Major Customers. Schedule 2.25(a) contains a list of
the ten (10) largest customers of the Company for each of the two (2) most
recent fiscal years (determined on the basis of the total dollar amount of
revenues realized by the Company) showing the total revenues realized by the
Company with respect to each such customer during each such year. Neither the
Company nor the Shareholders have received notice, and the Shareholders have no
knowledge of any facts, other than ordinary fluctuations in the business needs
of the Company's customers, reasonably indicating that any of the customers
listed on Schedule 2.25(a) will not continue to be customers of the Company
after the Closing at substantially the same level as heretofore.
(b) Major Suppliers. Schedule 2.25(b) contains a list of
the ten (10) largest suppliers to the Company for the fiscal period ending
October 31, 1998 (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such supplier
during such period. Neither the Company nor the Shareholders have received
notice, and the Shareholders have no knowledge of any facts reasonably
indicating, or have any reason to believe, other than as a result of changes or
fluctuations occurring in the ordinary course of business, that any of the
suppliers listed on Schedule 2.25(b) will not continue to be suppliers to the
Company after the Closing and will not continue to supply the Company with
substantially the same quantity and quality of goods as historically supplied
at competitive prices consistent with past pricing practices.
2.26 Product Warranty and Product Liability. Schedule 2.26
contains a true, correct and complete copy of the Company's standard warranty
or warranties (including standard extended warranties) and implied warranty or
warranties (whether arising under the Uniform Commercial
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Code or otherwise) for sales of Products (as defined below) and services and,
except as stated therein, there are no warranties, commitments or obligations
with respect to the return, repair or replacement of Products. Schedule 2.26
sets forth (a) the estimated aggregate annual cost to the Company of performing
warranty obligations for customers of the Company for each of the three (3)
preceding fiscal years and (b) a listing of extended warranty contracts under
which the Company is currently obligated. Except as set forth in Schedule 2.26,
the Company has not made any payment, or to the knowledge of the Shareholders,
incurred any liability or obligation to make any payment on any warranty issued
by the Company, and neither the Company nor the Shareholders have been
notified, whether orally or in writing, of any claim or assertion which may
reasonably result in any liability or obligation to make payment and neither
one has become aware of the reasonable potential for any liability or
obligation to make a payment pursuant to any warranty issued by the Company. As
used in this Section 2.26, the term "Products" means any and all products
currently or at any time previously manufactured, distributed or sold by the
Company, or by any predecessor of the Company under any brand name or mark
under which products are or have been manufactured, distributed or sold by the
Company.
2.27 No Subsidiaries. The Company has no subsidiaries.
2.28 Assets Necessary to Business. Except as set forth on Schedule
2.28, the Company presently has, and at the Closing will have, good, valid and
merchantable title to all property and assets, tangible and intangible, and all
leases, licenses and other agreements necessary to permit the Company to carry
on the Company's business as presently conducted.
2.29 Securities Laws Matters. The Shareholders who may receive
Public Stock or Notes pursuant to this Agreement will acquire such Public Stock
or Notes for investment for their own accounts, not on behalf of others and not
with a view to resell or otherwise distribute such Public Stock or Notes. The
Shareholders acknowledge that the Public Stock and Notes, at the time of
issuance, shall not have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any state securities laws, and may not
be sold, transferred or disposed of by them absent the registration thereof or
the availability of an exemption from registration applicable thereto, and, as
a result, the Shareholders must bear the risk of an investment in the Public
Stock or Notes for an indefinite period of time. The financial condition of the
Shareholders is currently adequate to bear the substantial risk of an
investment in the Public Stock and Notes. Each of the Shareholders, in
conjunction with a "purchaser representative", within the meaning of Regulation
D under the Securities Act, has sufficient knowledge and experience in
investment and business matters to understand the economic risk of such an
investment and the risk involved in a commercial enterprise such as that of
Clear. Each of the Shareholders (other than Scott G. Durkee) is a bonafide
resident of North Carolina, and all communications and information have been
directed to them and have been received in such place of residence. Scott G.
Durkee is a bonafide resident of Arizona, and all communications and
information have been directed to him and have been received in such place of
residence. Shareholders have had the opportunity to ask questions of, and
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receive answers from, officers of Clear concerning Clear, the Public Stock and
the Notes and to obtain any additional information which the Shareholders
reasonably requested. Each of the Shareholders shall, at or prior to the
Closing, complete and deliver to Buyer an investment letter substantially in
the form attached hereto as Exhibit B.
2.30 Power of Attorney. Other than a power of attorney, dated the
date hereof, from the Shareholders to the Representative given pursuant to the
provisions of Section 1.3 hereof of this Agreement, the Shareholders have not
given any power of attorney with respect to the Company Stock, which is
currently in effect, to any person, firm or corporation for any purpose
whatsoever.
ARTICLE III
Representations and Warranties of Buyer
Buyer represents and warrants to the Shareholders the following, as of
the date hereof and as of the Closing Date:
3.1 Due Incorporation and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has the corporate power to carry on its business as
now being conducted and to own or lease its properties and assets as now owned,
leased or operated by it. Buyer is duly qualified or otherwise authorized as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on the business of Buyer.
3.2 Authorization. Buyer has full corporate power and authority
under its articles of incorporation and bylaws, and the Board of Directors of
Buyer has taken all necessary corporate action to authorize Buyer to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby, and assuming the due authorization, execution and delivery of this
Agreement by the Company, this Agreement constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and the remedy of specific performance and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
3.3 Capitalization. The authorized capital stock of Buyer is as
set forth in Schedule 3.3. No shares of capital stock of Buyer are issued and
outstanding except as set forth in Schedule 3.3. All shares of capital stock
identified on Schedule 3.3 are validly issued, fully paid and non-assessable.
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3.4 Non-Contravention. Neither the execution and delivery of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby does or will violate, conflict with,
result in a breach of any provision of, constitute a default under, result in
the termination of or permit any third party to terminate (with or without
notice, lapse of time or pursuant to any legal or equitable principle) or
accelerate the performance required on the part of Buyer by the terms of, or
accelerate the maturity of or require the prepayment of any indebtedness of
Buyer under, any judgment, order, decree, agreement or instrument to or by
which Buyer or any of its assets is subject or bound.
3.5 Authority of Buyer. Except as set forth in Schedule 3.5, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental, administrative or regulatory body, is necessary in
connection with the transactions contemplated by this Agreement.
3.6 Litigation. Except as set forth in Schedule 3.6, there are no
material claims, actions, suits, proceedings or investigations pending or, to
the best knowledge of Buyer, threatened by or against Buyer, at law or in
equity or before or by any federal, state, municipal, foreign or other
governmental department, commission, board, agency, instrumentality or
authority.
3.7 Qualified Plan. The Buyer maintains a 401(k) plan for the
benefit of its employees under which all employees of the Company may become
eligible to participate.
3.8 Financial Statements. Attached as Schedule 3.8 are copies of
(i) the audited consolidated balance sheet of the Buyer as of December 31,
1997, and the related audited consolidated statements of operations,
stockholders' equity, and cash flows for the period from November 20, 1997
through December 31, 1997, and (ii) the unaudited consolidated balance sheet,
statement of profit/loss and statement of cash flows of the Buyer for the
period beginning January 1, 1998 and ending November 30, 1998 (collectively the
"Buyer Statements"). The Buyer Statements were prepared from the books and
records of Buyer in a manner conforming to GAAP and fairly present the
financial condition of Buyer as of the respective dates thereof.
3.9 Broker's or Finder's Fees. Except for Viking, which shall be
entitled to the finder's fee or fees determined in accordance with Section 9.8
of this Agreement, no agent, broker, person or firm acting on behalf of Buyer
is, or will be, entitled to any commission or broker's or finder's fees from
any of the parties hereto, or from any person controlling, controlled by or
under common control with any of the parties hereto, in connection with any of
the transactions contemplated herein.
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ARTICLE IV
Covenants
4.1. Conduct of Business.
(a) Between the date hereof and the Closing Date, each
party shall use its best efforts to conduct its business in the ordinary course
and in such a manner so that the representations and warranties contained in
Articles II and III hereof shall continue to be true and correct in all
material respects on and as of the Closing Date.
(b) The Shareholders shall cause the Company to refrain
from:
(i) incurring any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except in the
ordinary course of business;
(ii) permitting any of its assets to be
subjected to any mortgage, pledge, Lien, security interest, Encumbrance,
restriction or charge of any kind, except in the ordinary course of business;
(iii) selling, transferring or otherwise
disposing of any assets, except in the ordinary course of business;
(iv) making any capital expenditure or
commitment therefor, except in the ordinary course of business;
(v) increasing its indebtedness for borrowed
money, except current borrowings in the ordinary course of business, or making
any loan to any person;
(vi) writing off as uncollectible any accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate shall be
material to the Company;
(vii) granting any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees, except in the ordinary course of business and only after prior
written notice to Buyer;
(viii) canceling or waiving any claims or rights
of substantial value;
(ix) making any change in any method of
accounting or auditing practice;
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(x) otherwise conducting the Company's business
or entering into any transaction with respect thereto other than in the usual
and ordinary manner and in the ordinary course; or
(xi) agreeing, whether or not in writing, to do
any of the foregoing.
4.2 Preservation of Business. Each party shall (consistent with
its normal business practices) preserve its business, and maintain its
relationships with its present suppliers and customers.
4.3 Notice of Events. Each party shall promptly notify the other
party of (i) any event, condition or circumstance occurring from the date
hereof through the Closing Date that may reasonably be construed to constitute
a violation or breach of this Agreement, or (ii) any event, occurrence,
transaction or other item which would have been required to have been disclosed
on any Schedule or statement delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, other than items arising in the
ordinary course of business which would not render any representation or
warranty of such party materially misleading.
4.4 Examinations and Inspections.
(a) Prior to the Closing Date, Buyer shall be entitled,
through its employees and representatives, including, without limitation,
Buyer's accountants, legal counsel, bankers and advisors, to make such
inspection of the assets, properties, business and operations of the Company,
and such examination of the books, records and financial condition of the
Company as Buyer reasonably desires. Any such inspections and examinations
shall be conducted at reasonable times and under reasonable circumstances which
do not disrupt the business, properties or assets of the Company and with
respect to inspections and examinations involving the property and assets of
third parties, subject to the consent of such third parties and consistent with
their policies. For the purpose of facilitating such review, examination or
inspection, the Company and the Shareholders shall furnish the representatives
of Buyer with all such information and copies of such documents concerning the
affairs of the Company as such representatives may reasonably request and cause
their officers, employees, agents, accountants and attorneys to cooperate with
such representatives in connection with such review and examination.
(b) Buyer agrees that, with respect to any information
or documents obtained from the Company or the Shareholders concerning the
Company's assets, properties, customers, policies, finances, costs, sales,
revenues, rights, obligations, liabilities, strategies, business and operations
("Confidential Information"), unless and until the transactions contemplated by
this Agreement shall have been consummated: (a) such Confidential Information
is confidential and/or
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proprietary to the Company and is entitled to and shall receive treatment as
such by Buyer (except to the extent that any such information is readily
ascertainable from public or published information or trade sources), and (b)
Buyer will, and will cause all of its employees, representatives, agents and
advisors who have access to any Confidential Information to, hold in confidence
and not disclose or use (except in respect of the transactions contemplated by
this Agreement) any such Confidential Information. Buyer, the Company and the
Shareholders shall also each comply with the restrictions on publicity set
forth in Section 10.2 of this Agreement. If the transactions contemplated by
this Agreement are not closed, all documents and other materials obtained by
Buyer from the Company or the Shareholders shall be returned.
4.5 Third Party Consents. The Shareholders agree to obtain, prior
to the Closing Date, such consents and approvals as may be required from
parties to material contracts or other agreements with the Company in order to
prevent the Company from suffering a Material Adverse Effect as a result of the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Buyer agrees to provide to the Shareholders
such assistance and information as may be required to obtain the consents and
approvals referred to above. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement by the Company to
assign, or Buyer to assume and agree to pay, perform or otherwise discharge,
any material contracts or other agreements if an attempted assignment or
assumption thereof without the consent of a third person would constitute a
breach thereof, unless and until such consent is obtained.
4.6 Properties. The Shareholders shall cause the Company to
maintain all of its properties used in the operation of the Company's business
in customary repair, order and condition, reasonable wear and tear excepted,
and will maintain insurance upon all such properties, in such amounts and of
such kinds as are comparable to that in effect on the date hereof.
4.7 Books and Records. Until the Closing, the Shareholders shall
cause the Company to maintain its books, accounts and records in the usual
manner on a basis consistent with prior years.
4.8 Material Contracts. The Shareholders shall cause the Company
to refrain from amending, modifying or consenting to the termination of, any
material contract or other material agreements of the Company or waiving any of
the Company's material rights with respect thereto.
4.9 Vacation Pay and Bonus Accruals. Except as set forth on
Schedule 4.9, no vacation pay or bonus accruals will be payable to employees of
the Company as of the Closing Date.
4.10 Environmental Audits and Other Investigations. The
Shareholders agree that Buyer may retain, at the sole expense of Buyer, a firm
engaged in the regular business of environmental
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engineering to conduct such environmental audits of the Facilities and
operations of the Company, and the real estate occupied in connection with the
Company's business, as Buyer in its discretion shall consider necessary or
appropriate. Between the date hereof and the Closing Date, Buyer, its agents,
employees, contractors, surveyors, and engineers shall have the right to enter
and go upon the Real Property at any time and from time to time for the purpose
of inspecting the Real Property and any and all improvements located thereon.
4.11 Employment Agreement with Shareholders. At the Closing, Buyer
shall offer to enter into an employment agreement with each Shareholder in
substantially the form set forth in Exhibit C hereto (the "Employment
Agreement").
4.12 Shareholders Restrictive Covenant Agreements. At the Closing,
the Shareholders shall each enter into restrictive covenant agreements with
Buyer in substantially the form set forth in Exhibit D hereto.
4.13 Securities Law Matters. The Shareholders agree not to sell,
transfer, convey or otherwise distribute the Public Stock and the Notes, if
any, received pursuant to this Agreement over which such Shareholder has direct
or indirect control without registration under the Securities Act and
applicable federal and state securities laws, except pursuant to an exemption
from registration thereunder acceptable to and approved by legal counsel to
Buyer.
4.14 Attainment of Tax Clearance Certificates. [Intentionally
omitted.]
4.15 Employment Agreements with Key Employees. At or prior to
Closing, the Shareholders shall cause the employees of the Company identified
on Schedule 4.15 ("Selected Employees") to duly execute and deliver employment
and restrictive covenant agreements, in substantially the form attached hereto
as Exhibits E and F, respectively, and to terminate, effective as of the
Closing Date, any existing agreement to which such Selected Employees are party
respecting employment with the Company.
4.16 Tax Matters.
(a) Tax Periods Ending on or Before Closing Date. The
Shareholders shall timely prepare or cause to be prepared and file or cause to
be filed all tax returns for the Company for the periods 11/1/97 to 10/31/98
and 10/31/98 to the Closing Date, provided, however, that, for the avoidance of
doubt, it is agreed that liability for the amount of the taxes due with respect
to such periods shall remain with the Company.
(b) Cooperation on Tax Matters. Each of the Buyer, the
Company and the Shareholders shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of tax
returns pursuant to this Section 4.16 and in connection with any
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audit, litigation or other proceeding with respect to taxes. Such cooperation
shall include the retention and (upon the request of any other party) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Shareholders agree (i) to retain all books
and records with respect to tax matters pertinent to the Company relating to
any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or the
Company, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing
authority, and (ii) to give the Buyer and the Company reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the Buyer or Company so requests, the Shareholders shall allow the Buyer to
take possession of such books and records. Buyer and the Shareholders further
agree to use their reasonable best efforts to obtain, upon request, any
certificate or other document from any governmental authority or any other
person or entity as may be necessary to mitigate, reduce or eliminate any tax
that could be imposed (including, without limitation, with respect to the
transactions contemplated hereby).
4.17 Reinstatement of Company in Missouri. The Shareholders shall
promptly take all action which may be necessary in order to reinstate the
Company in the State of Missouri and to ensure that it is duly organized,
validly existing and in good standing under the laws of the State of Missouri.
ARTICLE V
Conditions Precedent to
Obligation of Buyer to Close
The obligation of Buyer to complete the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived by Buyer only in writing:
5.1 Completion of Due Diligence Investigation. In the course of
Buyer's due diligence investigation of the Company, Buyer shall not have
discovered any fact or development which relates to or involves the Company's
business, ownership or capital stock which would, in the reasonable judgment of
Buyer, have a Material Adverse Effect or challenge the validity or legality of
this Agreement or the consummation of the transactions contemplated by this
Agreement or that, in the reasonable judgment of Buyer, would be materially
adverse to the interests of Buyer.
5.2 Procurement of Financing. Buyer shall have obtained financing
reasonably satisfactory to Buyer for the Closing Payment.
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5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A.
and Fleet National Bank. Buyer shall have received the consent of each of DFW
Capital Partners, L.P., Wachovia Bank, N.A. and Fleet National Bank to enter
into this Agreement and each of the transactions contemplated by this
Agreement.
5.4 Representations and Covenants. The representations and
warranties of the Shareholders contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date. The
Shareholders shall have performed and complied with all covenants and
agreements (including, without limitation, those contained in Article IV)
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
5.5 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of Buyer, a Material Adverse
Effect.
5.6 No Material Adverse Change. Buyer shall be satisfied, in its
reasonable discretion, that since October 31, 1998 there has been no Material
Adverse Effect.
5.7 Good Standing Certificates, Etc. The Shareholders shall have
delivered all such certificates, documents or instruments with respect to the
Company's corporate existence and authority as Buyer's counsel may have
reasonably requested prior to the Closing Date.
5.8 Consents. The Shareholders shall have obtained and delivered
to Buyer such consents as Buyer may have reasonably requested that the Company
obtain in accordance with Section 4.5 hereof, except where the failure to so
obtain could not reasonably be expected to have a Material Adverse Effect.
5.9 Employment, Consulting and Restrictive Covenants Agreements.
Buyer shall have received the Employment Agreement and restrictive covenant
agreements specified in Sections 4.11 and 4.12, respectively, in a form
satisfactory to Buyer and executed by the parties to be bound thereby.
5.10 Agreements With Key Employees. Buyer shall have received an
employment contract and restrictive covenants agreement, in a form satisfactory
to Buyer and executed by the parties to be bound thereby, from the key
employees listed on Schedule 4.15 of this Agreement.
5.11 Release of Liabilities. All obligations of the Company and
its subsidiaries and
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Affiliates to the Shareholders pursuant to any contract, agreement,
understanding or otherwise shall have been extinguished without any
consideration from the Company, and the Company shall have been fully released
therefrom with respect to any future liability thereon.
5.12 Resolutions. There shall have been delivered to Buyer a copy
of the resolutions duly adopted by the board of directors of the Company and by
the Shareholders (if required), and certified as accurate by an executive
officer of the Company, as the case may be, as of the Closing Date, authorizing
and approving certain corporate and organizational matters relating to the
Company.
5.13 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
5.14 Shareholder's Certificate. There shall have been delivered to
Buyer a certificate from each of the Shareholders, dated the Closing Date,
certifying that the representations and warranties of the Shareholders
contained herein are true and correct on and as of the Closing Date.
5.15 Opinion of Counsel to the Shareholders. Buyer shall have
received an opinion of counsel to the Company and the Shareholders, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit G hereto.
5.16 Other Documents. The Shareholders and the Company shall have
delivered all other documents, instruments or writings required to be delivered
to Buyer at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as Buyer may reasonably request.
ARTICLE VI
Conditions Precedent to
Obligation of the Shareholders to Close
The obligation of the Shareholders to complete the Closing is subject
to the fulfillment, on or prior to the Closing Date, of the following
conditions, any of which may be waived by the Shareholders only in writing:
6.1 Completion of Due Diligence Investigation. In the course of
the Shareholders' due diligence investigation of Buyer, the Shareholders shall
not have discovered any fact or development which relates to or involves
Buyer's business, ownership or capital stock which would, in the reasonable
judgment of the Shareholders, have a material adverse effect on Buyer or
challenge the
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validity or legality of this Agreement or the consummation of the transactions
contemplated by this Agreement or that, in the reasonable judgment of the
Shareholders, would be materially adverse to the interests of the Shareholders.
6.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of the Company, a materially
adverse effect on the assets, properties, business, operations or financial
condition of Buyer.
6.3 No Material Adverse Change. The Shareholders shall be
satisfied, in their reasonable discretion, that since October 31, 1998 there
has been no material adverse change in the assets or liabilities, or the
business or financial condition of Buyer's business.
6.4 Consents. Buyer shall have obtained and delivered to the
Shareholders such consents as the Shareholders may have reasonably requested
that Buyer obtain, except where the failure to so obtain such consents could
not reasonably be expected to have a material adverse effect on the
transactions contemplated by this Agreement.
6.5 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date. Buyer shall have performed
and complied with all covenants and agreements (including, without limitation,
those contained in Article IV) required by this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date.
6.6 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
6.7 Resolutions. There shall have been delivered to the
Shareholders a copy of the resolutions duly adopted by the board of directors
of Buyer, and certified accurate by an executive officer of Buyer as of the
Closing Date, authorizing and approving the execution and delivery by Buyer of
this Agreement and the consummation by Buyer of the transactions contemplated
hereby.
6.8 Good Standing Certificates, Etc. Buyer shall have delivered
all such certified resolutions, certificates, documents or instruments with
respect to Buyer's corporate existence and authority as the Shareholders'
counsel may have reasonably requested prior to the Closing Date.
6.9 Officer's Certificate. There shall have been delivered to the
Shareholders a certificate
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of the chief executive officer of Buyer, dated the Closing Date, certifying
that the representations and warranties of Buyer contained herein are true and
correct on and as of the Closing Date.
6.10 Opinion of Counsel to Buyer. The Shareholders shall have
received an opinion of counsel to Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to the Shareholders, substantially to the
effect set forth in Exhibit H hereto.
6.11 Other Documents. Buyer shall have delivered all other
documents, instruments or writings required to be delivered to the Shareholders
at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as the Shareholders may reasonably request.
ARTICLE VII
Indemnification
For purposes of this Article VII, it is agreed and understood that the
Buyer shall not obtain recovery, nor shall the Shareholders be liable, more
than one time or under more than one section of this Agreement for the same
underlying claim or breach.
7.1 Survival. The representations and warranties contained in
this Agreement shall survive the Closing only until the expiration of twelve
(12) months following the Closing (the "Limitations Period"), provided,
however, that the representations and warranties of the Shareholders with
respect to tax matters set forth in Section 2.18 of this Agreement shall
survive for the period of time equal to the statute of limitations applicable
to such matter or matters.
7.2 Indemnification by the Shareholders. The Shareholders shall
indemnify, defend and hold harmless Buyer (which term shall include, for
purposes of this Article VII, Buyer's successors, assigns, directors, officers,
employees and agents) against any and all losses, damages, deficiencies, suits,
claims, demands, judgments, costs, expenses or other liabilities ("Losses")
resulting from, arising from, or relating to (i) any breach of a representation
or warranty of the Shareholders contained in Article II of this Agreement (but
only if such indemnity is sought during the Limitations Period), (ii) any
failure by the Shareholders to perform or comply with any agreement or
obligation contained in this Agreement, (iii) the conduct of the business of
the Company prior to October 31, 1998, except to the extent such Loss was
reflected in the Company Statements, and (iv) any of the matters described in
Section 2.9 hereof (Litigation).
7.3 Indemnification by Buyer. Buyer shall indemnify and hold
harmless the Shareholders against any and all Losses resulting from, arising
from, or relating to (i) any breach of a representation or warranty of Buyer
contained in Article III of this Agreement (but only if such
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<PAGE> 44
indemnity is sought during the Limitations Period), (ii) any failure by Buyer
to perform or comply with any agreement or obligation contained in this
Agreement.
7.4 Limitations of Claims. (a) No indemnification pursuant to
this Article VII shall be available to any party until the aggregate of all
Losses exceeds $50,000, provided, however, that thereafter claims may be made
against the indemnifying party for the full aggregate amount of such Losses,
without deduction of any such threshold amount.
(b) Anything to the contrary herein
notwithstanding, except for indemnification from the Shareholders pursuant to
Section 7.2(iii) and 7.2(iv) hereof, the aggregate indemnification to be
provided by any party pursuant to this Article VII shall not exceed the
Purchase Price.
(c) The amount of any Loss for which
indemnification is provided under this Article VII shall be net of (i) any
amounts recovered or recoverable by the Indemnified Party pursuant to any
indemnification by or indemnification agreement with any third party, (ii) any
insurance proceeds or other cash receipts or sources of reimbursement available
as an offset against such Loss (and no right of subrogation shall accrue to any
third party indemnitor, insurer or reimburser hereunder), and (iii) an amount
equal to any reduction of income taxes attributable to such Loss. If the amount
to be netted hereunder from any payment required under Sections 7.2 or 7.3 is
determined after payment by the Indemnifying Party of any amount required to be
paid to an Indemnified Party pursuant to this Article VII, the Indemnified
Party shall repay to the Indemnifying Party, promptly after such determination,
any amount that the Indemnifying Party would not have had to pay pursuant to
this Article VII had such determination been made at the time of such payment.
Indemnification payments hereunder shall be treated as adjustments to the
Purchase Price.
(d) Anything to the contrary herein
notwithstanding, any indemnification obligation of the Shareholders pursuant to
this Agreement may be satisfied, at the election of Buyer in its sole
discretion, by set-off of the amount thereof against the Earn-Out Payment
otherwise due to the Shareholders.
7.5 Procedures. (a) A party seeking indemnification pursuant to
Sections 7.2 or 7.3 (an "Indemnified Party") shall give prompt notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim or assessment, or the commencement of any action,
suit, audit or proceeding, by a third party in respect of which indemnity may
be sought hereunder (a "Third Party Claim") and will give the Indemnifying
Party such information with respect thereto as the Indemnifying Party may
reasonably request, but no failure to give such notice shall relieve the
Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
business days after the Indemnified Party's receipt thereof,
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<PAGE> 45
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim. The Indemnifying Party
shall have the right, exercisable by written notice (the "Notice") to the
Indemnified Party within thirty (30) days of receipt of notice from the
Indemnified Party of the commencement or assertion of any Third Party Claim, to
assume the defense of such Third Party Claim, using counsel selected by the
Indemnifying Party and reasonably acceptable to the Indemnified Party. Should
the Indemnifying Party so elect to assume the defense of a Third Party Claim,
the Indemnifying Party shall not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the Indemnifying Party shall fail to assume the defense of
the Third Party Claim within such thirty (30) day period, the Indemnified Party
shall have the right to undertake the defense of such Third Party Claim on
behalf of the Indemnifying Party. Regardless of whether the Indemnifying Party
elects to assume the defense of any such Third Party Claim, the Indemnified
Party shall not admit any liability with respect to, or settle, compromise or
discharge such Third Party Claim without the Indemnifying Party's prior written
consent.
(b) The Indemnifying Party or the Indemnified
Party, as the case may be, shall in any event have the right to participate, at
its own expense, in the defense of any Third Party Claim which the other is
defending.
(c) The Indemnifying Party, if it shall have
assumed the defense of any Third Party Claim in accordance with the terms
hereof, shall have the right, upon five (5) days prior written notice to the
Indemnified Party, to consent to the entry of judgment with respect to, or
otherwise settle such Third Party Claim provided the Indemnifying Party agrees
that as between the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be solely obligated to satisfy and discharge such
judgment or settlement unless (i) the Third Party Claim involves equitable or
other non-monetary damages or (ii) in the reasonable judgment of the
Indemnified Party such settlement would have a continuing material adverse
effect on the Indemnified Party's business (including any material impairment
of its relationships with customers and suppliers), in which case such
settlement only may be made with the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) Whether or not the Indemnifying Party
chooses to defend or prosecute any claim involving a third party, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested in connection therewith. Such cooperation shall include access during
normal business hours afforded to the Indemnifying Party of records and
information which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder, and the
Indemnifying Party shall reimburse the Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith.
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<PAGE> 46
ARTICLE VIII
Termination of Agreement
8.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at the election of the Shareholders, in the event
that Buyer shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(b) at the election of Buyer, in the event that the
Shareholders shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(c) at the election of the Shareholders or Buyer, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other person seeking to prevent the Closing or consummation of any
transaction contemplated by this Agreement, and either the Shareholders or
Buyer, as the case may be, reasonably and in good faith deems it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
(d) by the Shareholders or Buyer, in the event that the
Closing has not occurred by February 28, 1999; and
(e) at any time on or prior to the Closing Date, by
mutual written consent of the parties hereto.
8.2 Post-Termination Obligations. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no further
force and effect, except for Sections 9.2 (Announcements), 9.4 (Governing Law),
9.6 (Notice), 9.7 (Expenses), 9.9 (Entire Agreement), and 9.11 (Headings), and
none of the parties hereto shall have any liability in respect of such
termination, except that any party shall be liable for any intentional or
willful violation of the representations, warranties, covenants or agreements
of such party contained in this Agreement.
ARTICLE IX
Miscellaneous
9.1 Further Action. If, at any time following the Closing, any
further action is determined by Buyer to be necessary or desirable to carry out
the purposes of this Agreement or to vest in Buyer
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<PAGE> 47
all right, title and interest in and to the Company Stock, Shareholders shall
take such action.
9.2 Announcements. Prior to Closing, none of the parties hereto
shall issue any press release, place any advertisement or make any other public
statement relating to or in connection with this Agreement or the matters
contained herein without obtaining the prior approval of all parties hereto as
to the content and manner of presentation and publication thereof, which
approval shall not be unreasonably withheld or delayed.
9.3 Assignment; Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Buyer may assign its rights and obligations hereunder, subject to a
guaranty from Buyer of the assignee's performance thereof, to any direct or
indirect subsidiary or other entity controlled by Buyer, or to any parent
corporation of Buyer, for purposes of consummating the transactions
contemplated herein. This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the respective successors and permitted assigns of
the parties hereto. Nothing contained herein shall be deemed to confer upon any
other person or entity any right or remedy under or by reason of this
Agreement.
9.4 Law Governing Agreement. This Agreement shall be construed
and interpreted according to the internal laws of the State of Georgia,
excluding any choice of law rules that may direct the application of the laws
of another jurisdiction.
9.5 Amendment and Modification. Buyer, Clear and the Shareholders
may amend, modify and supplement this Agreement in such manner as may be agreed
upon in writing among them.
9.6 Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Buyer, to:
Clear Communications Group, Inc.
440 Interstate Parkway North
Atlanta, Georgia 30339
Attention: President
Facsimile: (770) 763-5635
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<PAGE> 48
with a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Road, N.E.
Promenade II, Suite 3300
Atlanta, Georgia 30309-3592
Attention: Terry Ferraro Schwartz, Esq.
Facsimile: (404) 685-7031
(b) If to the Shareholders, to the Representative as
follows:
Rick Hanafin
c/o Cellular Technologies International, Inc.
3410 St. Vardell Lane, Suite R
Charlotte, NC 28217
Facsimile: (704) 562-4429
with a copy to:
John J. Carpenter, Esq.
Culp, Elliot & Carpenter, P.L.L.C.
227 West Trade Street, Suite 1500
Charlotte, NC 28202
Facsimile: (704) 372-1474
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section 9.6.
9.7 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear its own
legal expenses and the expenses of its agents in connection with the
transactions contemplated hereby; provided, however, that the Shareholders
shall pay the legal expenses and the expenses of the agents of the Company
through the Closing Date.
9.8 Payment of Finder's Fee. At the Closing, Buyer shall pay to
Viking the amount of $250,000.00 in immediately available funds as a finder's
fee. At the Earn-Out Closing, the
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<PAGE> 49
Representative, on behalf of the Shareholders, shall pay to Viking, as an
additional finder's fee, an amount in immediately available funds equal to 5%
of the excess, if any, of the Earn-Out Payment over $3,000,000.00.
9.9 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto (which Exhibits and Schedules are hereby incorporated
herein by reference and made a part hereof), embodies the entire agreement
among the parties with respect to the transactions contemplated hereby, and
supersedes all prior agreements and understandings among the parties with
respect thereto.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 Headings. The table of contents and article and section
headings herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
9.12 Guaranty by Clear. Clear hereby unconditionally guarantees
the performance by the Buyer of all of the Buyer's obligations pursuant to this
Agreement.
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<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ William J. Loughman
-------------------------------------------
Name: William J Loughman
Title: Vice President of Finance
CLEAR HOLDINGS, INC.
By: /s/ William J. Loughman
------------------------------------------
Name: William J. Loughman
Title: Vice President of Finance
SHAREHOLDERS
/s/ Myron Berehulke
----------------------------------------------
Myron Berehulke
/s/ John Dunmire
----------------------------------------------
John Dunmire
/s/ Scott Durkee
----------------------------------------------
Scott Durkee
/s/ Rick Hanafin
----------------------------------------------
Rick Hanafin
/s/ Dale Stickney
----------------------------------------------
Dale Stickney
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<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
FOR THE PURCHASE AND SALE
OF
ALL ISSUED AND OUTSTANDING
CAPITAL STOCK OF
TWR TELECOM, INC. AND SPECIALTY DRILLING, INC.
DATED AS OF AUGUST 20, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
<S> <C>
ARTICLE I SALE OF STOCK AND GRANT OF OPTION...............................................................2
1.1 Sale of Stock...................................................................................2
1.2 Grant of Option.................................................................................2
1.3 Treatment of Certain Affiliate Debt, Etc........................................................2
1.4 Time and Place of Closing.......................................................................3
1.5 Closing Payment.................................................................................3
1.6 Purchase Price Adjustment; Allocation...........................................................3
1.7 Deferred Payment................................................................................5
1.8 Earn-Out Payment................................................................................5
1.9 Audit of 1999 Company Financial Statements......................................................6
1.10 Dispute Resolution..............................................................................6
1.11 Form of Deferred and Earn-Out Payments..........................................................6
1.12 Deliveries at Closing...........................................................................7
1.13 Deferred Payment and Earn-Out Payment Closings..................................................8
1.14 Restrictive Legend..............................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER...............................................9
2.1 Corporate.......................................................................................9
2.2 Authorization; Validity........................................................................10
2.3 No Violation...................................................................................10
2.4 Financial Statements...........................................................................11
2.5 Absence of Undisclosed Liabilities.............................................................11
2.6 Title to Properties; Encumbrances..............................................................12
2.7 Inventory......................................................................................12
2.8 Compliance with Laws...........................................................................13
2.9 Litigation.....................................................................................15
2.10 Contracts and Commitments......................................................................15
2.11 Real Estate....................................................................................17
2.12 Accounts Receivable............................................................................18
2.13 Trade Rights...................................................................................18
2.14 Broker's or Finder's Fees......................................................................19
2.15 Employee Benefit Plans.........................................................................20
2.16 Employment Compensation........................................................................21
2.17 Labor Matters..................................................................................21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.18 Tax Matters....................................................................................22
2.19 Insurance......................................................................................23
2.20 Bonds and Other Surety.........................................................................24
2.21 Liens..........................................................................................25
2.22 Funds Held In Trust............................................................................25
2.23 Current Projects...............................................................................25
2.24 Absence of Certain Changes.....................................................................26
2.25 Major Customers and Suppliers..................................................................27
2.26 Product Warranty and Product Liability.........................................................28
2.27 No Subsidiaries................................................................................28
2.28 Assets Necessary to Business...................................................................28
2.29 Securities Laws Matters........................................................................28
2.30 Power of Attorney..............................................................................29
2.31 Affiliates' Relationships......................................................................29
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER........................................................29
3.1 Due Incorporation and Qualification............................................................29
3.2 Authorization..................................................................................29
3.3 Capitalization.................................................................................30
3.4 Non-Contravention..............................................................................30
3.5 Authority of Buyer.............................................................................30
3.6 Litigation.....................................................................................30
3.7 Financial Statements...........................................................................30
3.8 Broker's or Finder's Fees......................................................................30
3.9 Securities Laws Matters........................................................................31
ARTICLE IV COVENANTS......................................................................................31
4.1. Conduct of Business............................................................................31
4.2 Preservation of Business.......................................................................32
4.3 Notice of Events...............................................................................32
4.4 Examinations and Inspections...................................................................32
4.5 Third Party Consents...........................................................................33
4.6 Properties.....................................................................................33
4.7 Books and Records..............................................................................33
4.8 Material Contracts.............................................................................33
4.9 Vacation Pay and Bonus Accruals................................................................34
4.10 Environmental Audits and Other Investigations..................................................34
4.11 Employment Agreement with Shareholder..........................................................34
4.12 Shareholder Restrictive Covenants Agreements...................................................34
4.13 Securities Law Matters.........................................................................34
4.14 Attainment of Tax Clearance Certificates.......................................................34
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
4.15 Employment Agreements with Key Employees.......................................................34
4.16 Tax Matters....................................................................................34
4.17 Release of Shareholder Guarantees..............................................................36
4.18 Communications with Lender and Controlling Shareholder.........................................36
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE...........................................36
5.1 Completion of Due Diligence Investigation......................................................36
5.2 Procurement of Financing.......................................................................36
5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A., Fleet National
Bank and Common Shareholders of Clear Holdings, Inc............................................36
5.4 Representations and Covenants..................................................................36
5.5 Litigation.....................................................................................37
5.6 No Material Adverse Change.....................................................................37
5.7 Good Standing Certificates, Etc................................................................37
5.8 Consents.......................................................................................37
5.9 Employment, Consulting and Restrictive Covenants Agreements....................................37
5.10 Agreements With Key Employees..................................................................37
5.11 Release of Liabilities.........................................................................37
5.12 Resolutions....................................................................................37
5.13 Governmental Permits and Approvals.............................................................37
5.14 Shareholder's Certificate......................................................................38
5.15 Opinion of U.S. Counsel to the Shareholder.....................................................38
5.16 Opinion of Counsel to the Foreign Subsidiaries.................................................38
5.17 Other Documents................................................................................38
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATION OF THE
SHAREHOLDER TO CLOSE...........................................................................38
6.1 Litigation.....................................................................................38
6.2 Representations and Warranties.................................................................38
6.3 Governmental Permits and Approvals.............................................................39
6.4 Resolutions....................................................................................39
6.5 Good Standing Certificates, Etc................................................................39
6.6 Officer's Certificate..........................................................................39
6.7 Opinion of Counsel to Buyer....................................................................39
6.8 Other Documents................................................................................39
ARTICLE VII INDEMNIFICATION.....................................................................................39
7.1 Survival.......................................................................................39
7.2 Indemnification by the Shareholder.............................................................39
7.3 Indemnification by Buyer.......................................................................40
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
7.4 Limitations of Claims..........................................................................40
7.5 Procedures.....................................................................................41
7.6 Adjustment of Liability........................................................................42
ARTICLE VIII TERMINATION OF AGREEMENT..........................................................................43
8.1 Termination....................................................................................43
8.2 Post-Termination Obligations...................................................................43
ARTICLE IX MISCELLANEOUS.......................................................................................43
9.1 Further Action.................................................................................43
9.2 Announcements..................................................................................44
9.3 Assignment; Parties in Interest................................................................44
9.4 Law Governing Agreement........................................................................44
9.5 Amendment and Modification.....................................................................44
9.6 Notice.........................................................................................44
9.7 Expenses.......................................................................................45
9.8 Entire Agreement...............................................................................46
9.9 Counterparts...................................................................................46
9.10 Headings.......................................................................................46
</TABLE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Investment Letter
Exhibit D Form of Employment Agreement with Shareholders
Exhibit E Form of Shareholders Restrictive Covenants Agreement
Exhibit F Form of Employment Agreements with Selected Employees
Exhibit G Form of Employee Restrictive Covenants Agreements
Exhibit H Opinion of Counsel to the Shareholder
Exhibit I Opinion of Counsel to Buyer
</TABLE>
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
Deal Provisions
1.3 TTI Note
1.6(e) Initial Allocation of Purchase Price
1.8 Calculation of 1999 EBITDA
1.8A Description of New Lighting Product in Development
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Seller's Representations
2.1 Companies
2.1(b) Foreign Qualifications
2.1(e) Capital Stock
2.3 Governmental Approvals for Transaction
2.4 Company Statements
2.5 Liabilities not on Company Statements
2.6(a) Title to Properties
2.6(b) Good Operating Condition
2.7 Inventory
2.7(b) Location of Inventory
2.8(a) Compliance with Laws
2.8(b) Permits for Business
2.8(c) Waste on Real Property, etc.
2.9 Litigation
2.10(a) Real Property Leases
2.10(b) Personal Property Leases
2.10(c) Purchase Commitments
2.10(d) Sales Commitments
2.10(e) Long-Term Contracts
2.10(f) Powers of Attorney
2.10(h) Loan Agreements
2.10(i) Guarantees
2.10(j) Government Contracts
2.10(l) Other Material Contracts
2.10(m) No Defaults under Contracts
2.11(a) Real Property used in Business
2.12(a) Accounts Receivable
2.12(b) AR Aged Schedule
2.13 Trade Rights
2.13(d) Protection of Trade Rights
2.15(a) Employee Benefit Plans
2.16 Employment Compensation
2.17 Labor Disputes
2.18(b) Tax Returns Filed
2.18(c) Tax Audits
2.18(d) S-Corporation
2.19(a) List of Insurance Policies
2.19(b)(i) Workers Compensation Claims
2.20(a) Qualification for Bonds
2.20(b) Other Surety
2.20(c) Defaults on Bonds
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
2.20(d) Defaults under Construction Agreements
2.20(e) Indemnity of Sureties
2.21 Liens on Projects
2.22 Funds Held in Trust
2.23(a) Current Projects
2.23(b) Projects on Schedule
2.23(c) Projects on Budget
2.23(d) Mechanics Liens
2.24 Absence of Certain Changes
2.24(c) Increase in Compensation
2.24(g) Disposition of Property
2.24(k) Payments/Loans to Third Parties
2.24(m) Payments to Affiliates
2.24(n) Change in Employment Status
2.25(a) Largest Customers
2.25(b) Largest Suppliers
2.26 Product Warranty
2.27 List of Subsidiaries
2.28 Assets Necessary to Business
2.30 Powers of Attorney
2.31(a) Agreements with Affiliates
2.31(c) Obligations to Affiliates
Buyer's Representations
3.3 Capitalization of Buyer
3.5 Governmental Consents
3.6 Litigation against Buyer
3.7 Buyer Financial Statements
Covenants
4.9 Vacation Pay/Bonus Accruals
4.15 Selected Employees
</TABLE>
vi
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 20th day of August, 1999 (the
"Agreement"), by and among Clear Holdings, Inc., a Georgia corporation (together
with its successors and assigns, "Clear"), Clear Communications Group, Inc., a
Georgia corporation ("Buyer"), Stephen F. Johnston, Sr., as majority
shareholder of Clear ("Johnston"), George A. Jackson (the "Shareholder"), being
the sole shareholder of TWR Telecom, Inc., a Texas corporation ("TTI") and of
Specialty Drilling, Inc., a Texas corporation ("SDI"), and TWR Family of
Companies, LLC, a Texas limited liability company ("TFOC").
WITNESSETH:
WHEREAS, TTI owns all of the issued and outstanding shares of the
capital stock or other equity interests in TWR Lighting, Inc., a Texas
corporation ("Lighting") and Rooker Tower Company, a Tennessee corporation
("Rooker");
WHEREAS, the Shareholder owns ninety-nine percent (99%) of the
membership interests in TFOC, and 1% of the equity interests in each of TWR
Brasil, Ltda., a Brazilian entity ("B Sub") and TWR Telecom, S.A. de C.V., a
Mexican entity ("M Sub", and, together with B Sub, the "Foreign Subsidiaries");
WHEREAS, TFOC owns the remaining 99% equity interest in each of the
Foreign Subsidiaries;
WHEREAS, TTI, SDI, Lighting, Rooker, TFOC and the Foreign Subsidiaries
are collectively referred to herein as the "Companies" or the "TWR Group";
WHEREAS, the Companies are engaged in the business of construction and
installation of telecommunication equipment and related telecommunication
support services (the "Business");
WHEREAS, the Shareholder desires to sell, and Buyer desires to
purchase, all of the issued and outstanding shares of the capital stock of TTI
and SDI (collectively, the "Stock") pursuant to this Agreement;
WHEREAS, immediately prior to Buyer's acquisition of the Stock, the
parties intend that TFOC and the Shareholder shall grant to TTI an option to
purchase all of the capital stock or other equity interests in the Foreign
Subsidiaries pursuant to an Option Agreement, in satisfaction of certain
indebtedness of TFOC to TTI (the grant of such option, together with the sale
of the Stock, the "Acquisition"); and
WHEREAS, as an inducement to the Shareholder and TFOC to enter into
this Agreement, Clear desires to guarantee the performance of Buyer's
obligations hereunder;
<PAGE> 9
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
ARTICLE I
SALE OF STOCK AND GRANT OF OPTION
1.1 Sale of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), the Shareholder shall sell,
assign, transfer and deliver the Stock to Buyer, and Buyer shall purchase the
Stock from the Shareholder.
1.2 Grant of Option. Immediately prior to the Closing (as defined
below), TFOC and the Shareholder shall, pursuant to an Option Agreement
substantially in the form of Exhibit A hereto (the "Option Agreement"), grant
to TTI an irrevocable option (the "Option"), exercisable at any time and from
time to time during the period from the Closing to April 1, 2000 and otherwise
as provided in the Option Agreement, to purchase and acquire from TFOC and the
Shareholder all right, title and interest of TFOC and the Shareholder in and to
the capital stock or other equity interests (collectively, the "Subsidiary
Stock") in the Foreign Subsidiaries. As more particularly set forth in the
Option Agreement, (i) the Option shall be granted in satisfaction, as of the
date of the Option Agreement, of $2,312,000 in amount of the indebtedness of
TFOC to TTI pursuant to the promissory note, dated May 12, 1997, from TFOC to
TTI (the "TFOC Note"), and (ii) in the event that the Option expires without
exercise by TTI, TTI shall cancel the indebtedness of M Sub to TTI in the
amount of $361,879.00 pursuant to the promissory note, dated December 31, 1998,
from M Sub to TTI (the "M Sub Note").
1.3 Treatment of Certain Affiliate Debt, Etc. (a) Immediately
prior to the Closing (as defined below), the Shareholder shall cancel the
indebtedness of each of TTI and SDI to the Shareholder in the aggregate amount
of $1,972,449 pursuant to the promissory notes to the Shareholder identified on
Schedule 1.3 hereto (collectively, the "TTI Note"), the TTI Note shall be
marked "canceled" and returned to the obligor thereunder, and the amount of the
TTI Note (the "TTI Note Amount") shall be treated as a contribution to capital
on the books of such obligor.
(b) Subject to Section 1.2 hereof, subsequent to the
Closing all obligations of TFOC and the Foreign Subsidiaries to TTI and the
other members of the TWR Group (collectively, the "Surviving Intercompany
Obligations") shall remain due and payable in accordance with their respective
terms, provided, however, that, in the event that the Option expires without
exercise by TTI, the Surviving Intercompany Obligations may, at the election of
TTI in its sole discretion, be satisfied by set-off on the Deferred Payment
Date against the amount of the Deferred Payment otherwise due to the
Shareholder pursuant to Section 1.7 hereof, such set-off to be made in the same
proportions of cash and Public Stock or Notes as shall apply to payment of the
Deferred Payment in accordance with Sections 1.7 and 1.11 hereof. For the
avoidance of doubt, the parties hereto agree
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<PAGE> 10
that, in the event that the Option is exercised, the set-off described in the
preceding sentence shall not be made with respect to any Surviving Intercompany
Obligations owed by the Foreign Subsidiaries.
(c) Immediately prior to the Closing, the Shareholder
shall contribute cash in the amount of $250,000 to the equity of SDI.
1.4 Time and Place of Closing. The parties shall use their
respective best efforts to cause the closing of the transactions contemplated by
this Agreement (the "Closing") to take place at 10:00 a.m. on September 30,
1999, or on a date to be agreed upon by the parties, such date to be not later
than the second (2nd) business day after satisfaction or waiver of all of the
conditions set forth in Articles V and VI hereof (the date on which the Closing
actually occurs, the "Closing Date"). The place of the Closing shall be at the
offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100, 1230
Peachtree Street, N.E., Atlanta, Georgia, or such other location as may be
mutually agreed by the parties.
1.5 Closing Payment. Upon the terms and subject to the conditions
of this Agreement, and in consideration of the sale, assignment, transfer,
conveyance and delivery of the Stock and the grant of the Option, at the
Closing, Buyer will deliver or cause to be delivered to the Shareholder an
amount equal to $9,505,000 in immediately available funds (the "Closing
Payment"), subject to adjustment pursuant to Section 1.6 hereof, by wire
transfer to an account designated by the Shareholder not later than three
business days prior to the Closing.
1.6 Purchase Price Adjustment; Allocation.
(a) Adjustment at Closing. Not later than ten (10)
business days prior to the Closing, the Shareholder shall deliver to Buyer a
statement (the "Debt Statement") setting forth an estimate of (x) the Total
Debt (the "Estimated Total Debt"), (y) the Non-Affiliate Debt (the "Estimated
Non-Affiliate Debt") and (z) the Affiliate Debt (the "Estimated Affiliate
Debt"), all determined in accordance with GAAP (as defined in Section 1.11)
consistent with the Company Statements (as defined in Section 1.9), accompanied
by a certificate of the Shareholder to the effect that such estimates represent
a good faith effort accurately to determine the items set forth therein in
accordance with this Agreement. At the Closing:
(i) if the Estimated Total Debt (but not
including the TTI Note Amount) exceeds an amount equal to $3,900,000.00 (the
"Debt Benchmark"), the Affiliate Debt (to the extent of the amount of such
excess) shall be forgiven, and the remainder of such excess (if any) shall be
deducted from the Closing Payment; and
(ii) if the Estimated Total Debt (but not
including the TTI Note Amount) is less than the Debt Benchmark, the Closing
Payment shall be increased by the amount of such deficit, provided, however,
that the Closing Payment shall not be increased to the extent that such
shortfall results from any payment made by any member of the TWR Group since
December 31, 1998 with respect to a loan from Sterling Bank, other than payments
required to be made pursuant to the documents evidencing such loans.
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<PAGE> 11
For purposes of this Agreement (i) "Total Debt" shall mean all
financial obligations of the TWR Group (other than TFOC and the Foreign
Subsidiaries) as of the Closing Date, other than accounts payable, (ii)
"Non-Affiliate Debt" shall mean Total Debt, other than obligations owed to a
Shareholder or any affiliate of such Shareholder that is not a member of the
TWR Group, and (iii) "Affiliate Debt" shall mean Total Debt less Non-Affiliate
Debt.
(b) Closing Balance Sheet. Not later than thirty (30)
days after the Closing, Buyer shall cause to be prepared and delivered to the
Shareholder (i) the consolidated balance sheet of the TWR Group as of the
Closing Date and the notes thereto (the "Closing Balance Sheet"), (ii) a
statement setting forth in reasonable detail any discrepancies between (A) the
Estimated Total Debt and the Total Debt, (B) the Estimated Non-Affiliate Debt
and the Non-Affiliate Debt, and (C) the Estimated Affiliate Debt and the
Affiliate Debt (each of the Total Debt, the Non-Affiliate Debt and the Affiliate
Debt as determined pursuant to the Closing Balance Sheet) and (iii) a statement
of the Closing Payment as determined pursuant to the Closing Balance Sheet and
the adjustments set forth in subsection (a) hereof.
(c) Cooperation by Buyer. The Shareholder shall have the
right to review the work papers, schedules, memoranda and other documents and
information prepared or reviewed by the Buyer and to communicate with the
persons conducting the preparation or review of the Closing Balance Sheet.
(d) Post-Closing Adjustment.
(i) If the Closing Payment as finally
determined pursuant to Sections 1.6(b) and 1.10 of this Agreement is greater
than the amount thereof actually paid at the Closing pursuant to subsection (a)
hereof, Buyer shall pay to the Shareholder the amount of such excess with
interest from the Closing Date at the prime rate offered by Citibank, N.A. in
effect on the Closing Date.
(ii) If the Closing Payment as finally
determined pursuant to Sections 1.6(b) and 1.10 of this Agreement is less than
the amount thereof actually paid at the Closing pursuant to subsection (a)
hereof, the Shareholder shall pay to Buyer the amount of such deficit with
interest from the Closing Date at the prime rate offered by Citibank, N.A. in
effect on the Closing Date.
(iii) Any sums payable pursuant to this
subsection shall be paid in cash within ten (10) business days after the final
determination of the Closing Balance Sheet pursuant to Sections 1.6(b) and 1.10
hereof.
(e) Allocation of Purchase Price. The aggregate of the
Closing Payment and the Deferred Payment (as defined below) shall initially be
allocated among the shares of TTI and SDI comprising the Stock, and the Option,
as set forth on Schedule 1.6(e) hereto (the "Initial Allocation"). In the event
that the Earn-Out Payment is greater than $0, the Initial Allocation shall
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<PAGE> 12
be adjusted proportionately. Buyer, the Companies and the Shareholder will file
all tax returns (including amended returns and claims for refund) and
information reports in a manner consistent with the Initial Allocation, as
adjusted.
1.7 Deferred Payment. Upon the terms and subject to the
conditions of this Agreement, and in further consideration of the sale,
assignment, transfer, conveyance and delivery of the Stock and the Assets,
Buyer will deliver or cause to be delivered to the Shareholder, on January 1,
2001 (the "Deferred Payment Date"), an amount equal to $2,300,000 (the
"Deferred Payment"). One-third (1/3) of the Deferred Payment shall be delivered
in the form of cash, with the balance of the Deferred Payment delivered in the
form determined pursuant to Section 1.11 hereof.
1.8 Earn-Out Payment. Upon the terms and subject to the
conditions of this Agreement, and in further consideration of the sale,
assignment, transfer, conveyance and delivery of the Stock and the grant of the
Option, Buyer will deliver or cause to be delivered to the Shareholder on May
1, 2000 (the "Earn-Out Payment Date"), an amount (the "Earn-Out Payment")
(which shall not be less than $0 nor greater than $3,300,000), to be determined
based on the excess, if any, of EBITDA of the TWR Group for the fiscal year
ending December 31, 1999 (the "1999 EBITDA"), as reflected in the Audited 1999
Statements (as defined below), over $3,500,000. For purposes of this Agreement,
"EBITDA" shall mean consolidated earnings before deduction for interest, taxes,
depreciation and amortization. For purposes of this Agreement, "1999 EBITDA"
shall be calculated as set forth in Schedule 1.8 hereto. The Earn-Out Payment
shall be delivered in the form determined pursuant to Section 1.11 hereof and
shall be calculated according to the following table:
<TABLE>
<CAPTION>
1999 EBITDA Earn-Out Payment
<S> <C>
<=$3,500,000 $ 0
$3,600,000 $ 330,000
$3,700,000 $ 660,000
$3,800,000 $ 990,000
$3,900,000 $1,320,000
$4,000,000 $1,650,000
$4,100,000 $1,980,000
$4,200,000 $2,310,000
$4,300,000 $2,640,000
$4,400,000 $2,970,000
>=$4,500,000 $3,300,000
</TABLE>
In the event that 1999 EBITDA falls between any of the figures set
forth above, the Earn-Out Payment shall be interpolated between the respective
levels to reflect the precise calculation.
(The sum of the Closing Payment, the Deferred Payment and the Earn-Out
Payment is sometimes collectively referred to herein as the "Purchase Price".)
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<PAGE> 13
1.9 Audit of 1999 Company Financial Statements. The Shareholder
has previously delivered to Buyer the audited consolidated balance sheet and
the statements of operations, stockholders' equity and cash flows of each of
TTI and SDI, for the fiscal year ending December 31, 1998, and the unaudited
balance sheet and statements of income of each of the Foreign Subsidiaries for
the fiscal year ending December 31, 1998, all as set forth in Schedule 2.4
hereof (collectively, the "Company Statements"). After December 31, 1999, Buyer
shall, at Buyer's expense, cause KPMG Peat Marwick, L.L.P. ("KPMG") to prepare
and deliver to the Buyer and to the Shareholder a consolidated audited balance
sheet and statement of income of the TWR Group for the fiscal year ending
December 31, 1999 (collectively, the "Audited 1999 Statements"), in accordance
with generally accepted accounting principles and applying the "percentage of
completion" method of accounting ("GAAP"). Buyer shall use reasonable efforts
to cause the Audited 1999 Statements to be delivered by KPMG on or prior to
March 31, 2000.
1.10 Dispute Resolution. Within 30 days after the delivery of the
Closing Balance Sheet or the Audited 1999 Statements (as applicable), the
Shareholder shall notify Buyer in writing of any objections of the Shareholder
to such Closing Balance Sheet or Audited 1999 Statements, specifying in
reasonable detail any such objections, and if the Shareholder fails to notify
the Buyer in writing of any objections within such period the Shareholder shall
be deemed to have agreed to the Closing Balance Sheet or Audited 1999
Statements. If the Shareholder does not so object or if the Shareholder and the
Buyer agree on the resolution of all such objections, the Closing Balance Sheet
or Audited 1999 Statements (with any such changes as may have been agreed)
shall be final and binding. The Shareholder and the Buyer shall negotiate in
good faith to attempt to resolve any such objections, provided that the
Shareholder and the Buyer shall each have the right, at any time, to
unilaterally terminate in writing all discussions with respect to such
objections or changes. Not later than ten business days after either the
Shareholder or the Buyer shall have terminated such discussions, all such
disputed items shall be submitted for resolution to a certified public
accounting firm of national standing designated by the Shareholder and the
Buyer (the "Auditor"), which Auditor shall be independent of and have no
ongoing business relationship with any of the Companies, the Shareholder, Buyer
or their respective affiliates. The Shareholder and the Buyer shall each (i)
cooperate fully with the Auditor and furnish to the Auditor such work papers
and other documents and information as the Auditor may request, (ii) bear 50%
of the fees and expenses of the Auditor incurred in connection with the dispute
resolution procedure pursuant to this Section 1.12, and (iii) be afforded an
opportunity to present to the Auditor any material it deems relevant and to
discuss the matters in dispute with the Auditor. The Shareholder and the Buyer
shall use reasonable efforts to cause the report of the Auditor to be rendered
within 15 days of its appointment, and the Auditor's determination as to the
appropriateness and extent of changes (if any) to the Closing Balance Sheet or
Audited 1999 Statements shall be final and binding.
1.11 Form of Deferred and Earn-Out Payments. Each of (y) the
applicable portion of Deferred Payment and (z) the Earn-Out Payment shall be
delivered to the Shareholder in the form determined pursuant to the following:
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<PAGE> 14
(a) in the event that, prior to the Deferred Payment
Date (with respect to the Deferred Payment) or the Earn-Out Payment Date (with
respect to the Earn-Out Payment), Clear shall have (i) listed any of its equity
securities on a national securities exchange or automated quotation and (ii)
become a reporting company pursuant to the Securities Exchange Act of 1934 (a
"Going Public Event"), the applicable portion of the Deferred Payment and the
Earn-Out Payment shall each take the form of such number of the publicly traded
equity securities of Clear (the "Public Stock") as shall be determined by
dividing the dollar amount of the applicable portion of the Deferred Payment
and the Earn-Out Payment, as applicable, by the average, for the 30 consecutive
trading days (or such lesser number of trading days as shall have elapsed
subsequent to the Going Public Event) ending on the fifth trading day prior to
the Deferred Payment Date (with respect to the Deferred Payment) or the
Earn-Out Payment Date (with respect to the Earn-Out Payment), of the closing
asked price for a share of Public Stock, as reported by an authoritative source
designated by Buyer (or, if such information is not available, the closing
sales price therefor), and rounding up to the nearest whole share;
(b) in the event that, prior to the Deferred Payment Date
(with respect to the Deferred Payment) or the Earn-Out Payment Date (with
respect to the Earn-Out Payment), no Going Public Event shall have occurred, the
applicable portion of the Deferred Payment and the Earn-Out Payment shall each
take the form of one or more subordinated convertible promissory notes of Clear
in the form of, and containing the terms set forth in, Exhibit B hereto (the
"Notes"), provided, however, that any Note issued with respect to the Earn-Out
Payment shall bear interest from January 1, 2000, regardless of the actual date
of its issuance.
1.12 Deliveries at Closing. (a) Deliveries by the Shareholder. At
the Closing, the Shareholder shall deliver to Buyer:
(i) stock certificates or other instruments
representing all of the Stock, endorsed in blank or accompanied by stock powers
executed in blank, or such other instruments of transfer as shall be necessary
in order to validly vest in Buyer good legal and beneficial title to the Stock;
(ii) an Investment Letter set forth in Exhibit B
hereto, executed by the Shareholder; and
(iii) such other certificates and documents as
may be required by the terms of this Agreement or as Buyer or its counsel may
reasonably request.
(b) Deliveries by Buyer. At the Closing, the Buyer shall
deliver to the Shareholder:
(i) the Closing Payment; and
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<PAGE> 15
(ii) such other certificates and documents as
may be required by the terms of this Agreement or as the Shareholder or its
counsel may reasonably request.
1.13 Deferred Payment and Earn-Out Payment Closings. On each of
the Deferred Payment Date and the Earn-Out Payment Date, Buyer and the
Shareholder shall hold a closing (each a "Deferred Closing") at the location of
the Closing, or such other place as the parties may mutually agree. At any
Deferred Closing, Buyer shall deliver to the Shareholder, to the extent
required pursuant to the terms of this Agreement, either the Deferred Payment
or the Earn-Out Payment, all in accordance with the terms of this Agreement,
and the Shareholder shall deliver to Buyer an Investment Letter substantially
in the form set forth in Exhibit B hereto, executed by the Shareholder and
dated as of the date of such Deferred Closing.
1.14 Restrictive Legend. The Public Stock and the Notes, if any,
to be issued pursuant to this Agreement shall be "restricted securities", as
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") and each certificate representing any such securities shall
bear any legend or legends required by applicable state securities laws or
otherwise, as well as a legend substantially similar to the following:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE, INCLUDING THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON CERTAIN
EXEMPTIVE PROVISIONS OF SAID ACTS. SAID SECURITIES CANNOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION; AND (2) IN A TRANSACTION WHICH IS
EXEMPT UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION
WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS."
1.15 Designation as Director of Clear. In further consideration of
the sale, assignment, transfer, conveyance and delivery of the Stock and the
grant of the Option, subsequent to and conditioned upon consummation of the
Closing, Johnston shall appoint the Shareholder as a designee of Johnston on the
Board of Directors of Clear, and the Shareholder hereby agrees to serve as a
director of Clear, subject to the conditions of the charter documents and
bylaws of Clear and any shareholder or similar agreements to which Johnston is
a party from time to time in effect that govern such designation by Johnston.
The appointment of the Shareholder as designee of Johnston shall take place at
the Clear Board of Directors meeting to be held in December 1999, and the
Shareholder shall take office at the Clear Board of Directors meeting to be
held in January 2000.
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<PAGE> 16
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Buyer shall rely thereon, the Shareholder hereby represents and warrants to
Buyer, as of the date hereof and as of the Closing Date, as set forth below.
2.1 Corporate.
(a) Organization. Each of the Companies is a corporation
or limited liability company duly organized, validly existing and (where
applicable) in good standing under the laws of its jurisdiction of
organization, each of which is identified on Schedule 2.1. Except as set forth
on Schedule 2.1, each of the Companies has elected to be taxed as an "S -
corporation" or a limited liability company. Except as set forth on Schedule
2.1, no entity has ever merged with or been consolidated into any of the
Companies.
(b) Corporate Power. Each of the Companies has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as and where such is now being
conducted. Except as set forth on Schedule 2.1(b), each of the Companies is
duly qualified or otherwise authorized as a foreign corporation to transact
business and is in good standing in each jurisdiction in which a failure to be
so qualified would have a Material Adverse Effect (as defined in Section 2.24
hereof).
(c) Subsidiaries. Except as set forth on Schedule 2.1,
none of the Companies currently owns, or has ever owned, directly or
indirectly, any capital stock or other equity securities of any corporation or
has any direct or indirect equity or other ownership interest in any entity or
business.
(d) Corporate Documents, Etc. Copies of the certificate
or articles of incorporation or organization and bylaws or regulations of each
of the Companies, including any amendments thereto, which have been delivered
by the Companies to Buyer are true, correct and complete copies of such
instruments as presently in effect. The corporate minute book and stock records
of each of the Companies which have been furnished to Buyer for inspection are
true, correct and complete in all material respects and accurately reflect all
material corporate action taken by each of the Companies, including all
transactions and actions with respect to the equity interests of each of the
Companies.
(e) Capitalization and Title to Stock. The authorized
capital stock or other equity interests of each of the Companies is as set
forth in Schedule 2.1(e). No shares of such capital stock or other equity
interests are issued and outstanding except for shares identified in Schedule
2.1(e). The shares of capital stock or other equity interests of each of the
Companies are owned of record
9
<PAGE> 17
or beneficially by the persons and in the amounts set forth in Schedule 2.1(e),
which sets forth the address of each such person. Except as set forth on
Schedule 2.1(e), all shares of capital stock identified on Schedule 2.1(e) are
validly issued, fully paid and nonassessable and each of the persons identified
on such schedule has full power and authority to convey, free and clear of all
liens, encumbrances, equities, restrictions, claims and obligations of every
kind ("Encumbrances"), all such shares of capital stock or other equity
interests, and, upon delivery of such shares of capital stock or other equity
interests, as provided in Section 1.12, Buyer will acquire good and marketable
title to the capital stock of each of the Companies, free and clear of all
Encumbrances. Except as set forth on Schedule 2.1(e), there are no (i)
securities convertible into or exchangeable for any of the capital stock or
other securities of any of the Companies, (ii) options, warrants or other
rights to purchase or subscribe to capital stock or other securities of any of
the Companies, or securities which are convertible into or exchangeable for
capital stock or other securities of any of the Companies or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance, sale or transfer of any capital stock or other equity securities
of any of the Companies, any such convertible or exchangeable securities or any
such options, warrants or other rights. Schedule 2.1(e) sets forth, with
respect to each issuance of stock of each of the Companies, the date of
issuance, the purchaser(s), and the consideration received therefor. Except as
set forth on Schedule 2.1(e), no person or entity has, or ever has had, any
ownership interest in the assets, properties or business of any of the
Companies. Except as set forth on Schedule 2.1(e), there are no options,
contracts, commitments, agreements, understandings or arrangements of any kind
to purchase any ownership interest in any of the Companies or any of their
properties, businesses or assets.
2.2 Authorization; Validity. The execution and delivery of this
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Instruments") and the performance of the obligations
set forth herein and therein, have been duly authorized by the Board of
Directors (and, in the case of TFOC, the members) of each of the Companies and
the Shareholder, and no other or further corporate act on the part of any of
the Companies or the Shareholder is necessary therefor. The Shareholder has
unanimously approved the Acquisition. This Agreement has been duly and validly
executed and delivered by the Shareholder and is, and when executed and
delivered the Ancillary Instruments to be executed and delivered by any of the
Companies or the Shareholder pursuant hereto will be, legal, valid and binding
obligations of each such person or entity, enforceable in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
2.3 No Violation. Except as set forth on Schedule 2.3, no
Governmental Approval, or any consent, authorization or approval of any other
third party, is necessary in order to enable the Shareholder or TFOC to enter
into and perform their obligations under this Agreement and to consummate the
transactions contemplated hereby, and neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will:
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<PAGE> 18
(a) be in violation of the articles of incorporation or
organization or bylaws or regulations of any of the Companies or constitute a
breach of the terms of any evidence of indebtedness or agreement relating to
any of the Companies' business to which any of the Companies is a party;
(b) cause a default under any mortgage or deed of trust
or other lien, charge or encumbrance to which any asset of any of the Companies
or the Stock is subject or under any contract relating to any of the Companies'
business to which any of the Companies is a party, or permit the termination of
any such contract by another person;
(c) result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any asset of any of the
Companies or the Stock under any agreement or commitment to which any of the
Companies is bound;
(d) accelerate, or constitute an event entitling, or
which would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of any of the Companies or a Shareholder to accelerate the
maturity of any such indebtedness;
(e) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality binding on
any of the Companies or a Shareholder; or
(f) violate any Governmental Approval, statute, law or
regulation of any jurisdiction as such Governmental Approval, statute, law or
regulation relates to the properties or business of any of the Companies.
For purposes of this Agreement, "Governmental Approvals" shall mean
any consent, approval, authorization, waiver, permit, grant, franchise,
concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any
Governmental Authority. For purposes of this Agreement, "Governmental
Authority" shall mean any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any state of the
United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction, and any self-regulatory organization.
2.4 Financial Statements. Attached as Schedule 2.4 are copies of
the Company Statements. The Company Statements were prepared from the books and
records of the Companies in a manner conforming to GAAP and fairly present the
financial condition of each of the Companies as of the date thereof.
2.5 Absence of Undisclosed Liabilities. All liabilities,
commitments or obligations of the Companies with respect to the Companies'
businesses (whether secured or unsecured and whether accrued, absolute,
contingent, direct or indirect or otherwise and whether due or to become due)
are set forth or adequately reserved against in the Company Statements, except
for liabilities incurred as a result of the transactions contemplated by this
Agreement and except for commercial
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<PAGE> 19
liabilities and obligations incurred since the date of the Company Statements
in the ordinary course of business and consistent with past practice and which
will not have a Material Adverse Effect. Except as set forth on Schedule 2.5
hereto and to the extent described in the Company Statements, the Shareholder
has no knowledge of any basis for the assertion against any of the Companies of
any liability, and there are no circumstances, conditions, happenings, events
or arrangements, contractual or otherwise, known to the Shareholder which may
likely give rise to liabilities, except commercial liabilities and obligations
incurred in the ordinary course of business and consistent with past practice.
2.6 Title to Properties; Encumbrances.
(a) Good Title. Except as set forth in Schedule 2.6 (a),
each of the Companies has good title to all of its assets, businesses and
properties used or useful in its business and necessary to permit it to carry
on its business as presently conducted, and with respect to real property
leased by each of the Companies for use in its business, good leasehold estates
or lessee's interests, including, without limitation, all such properties
(tangible and intangible) reflected in the Company Statements (except for
inventory disposed of in the ordinary course of business since the date of such
Company Statements) free and clear of all mortgages, liens (statutory or
otherwise), security interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, easements, covenants,
reservations, restrictions, rights-of-way, exceptions, limitations, mineral
rights, charges or Encumbrances of any nature whatsoever (collectively,
"Liens") except, in the case of real property identified on Schedule 2.11(a),
for Liens for taxes not yet due or which are being contested in good faith by
appropriate proceedings (and which have been sufficiently accrued or reserved
against in the Company Statements), municipal and zoning ordinances and
easements for public utilities, none of which interfere with the use of the
property as currently utilized (the "Permitted Liens"). None of the assets,
businesses or properties of any of the Companies used or useful in the
Companies' businesses are subject to any restrictions with respect to the
transferability thereof and title thereto will not be affected in any way by
the transactions contemplated hereby other than as disclosed in Schedule
2.6(a).
(b) Condition. Except as set forth on Schedule 2.6(b),
all property and assets owned or utilized by any of the Companies in the
Companies businesses are in good operating condition and repair (except such
minor defects as do not interfere with the use thereof in the conduct of normal
operations), have been maintained consistent with the standards generally
followed in the industry and were sufficient to carry on the Companies'
businesses as conducted during the preceding twelve (12) months.
2.7 Inventory. (a) All inventory of each of the Companies is
reflected on Schedule 2.7, and all such inventory consists of a quality and
quantity useable and saleable in the ordinary course of business not later than
the first anniversary of the Closing Date (except for immaterial amounts and
except as otherwise indicated on Schedule 2.7) and has a commercial value at
least equal to the value shown on Schedule 2.7, which value has been
established at cost. (b) Except as set forth on
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Schedule 2.7(b), all inventory of each of the Companies with respect to its
business is located on Real Property (as hereinafter defined) of the Companies.
2.8 Compliance with Laws.
(a) Compliance. Except as set forth on Schedule 2.8(a),
each of the Companies (including all of its operations, practices, properties,
real or personal, owned or leased, and assets) is in compliance with all
applicable federal, state, local and foreign laws, ordinances, orders, rules
and regulations (collectively, "Laws") violation of which, if uncured, would
have a Material Adverse Effect, including without limitation, Laws applicable
to the offer or sale of securities, discrimination in employment, the Americans
with Disabilities Act, occupational safety and health, trade practices,
competition and pricing, product warranties, zoning, building and sanitation,
employment, retirement and labor relations, product advertising and the
Environmental Laws (as hereinafter defined). Except as set forth in Schedule
2.8(a), none of the Companies has at any time owned any Real Property (as
hereinafter defined). Any Real Property is unconditionally zoned a
classification that allows its current use, and, to the Knowledge of the
Shareholder, such zoning is not being challenged by legal process, and no
change or modification thereof is being sought by any person or entity,
including, but not limited to, governmental or quasi-governmental authorities.
Except as set forth in Schedule 2.8(a), none of the Companies, nor to the
Knowledge of the Shareholder, any landlord of any of the Companies, has
received notice of any violation or alleged violation of, or is subject to
liability (whether accrued, absolute, contingent, direct or indirect) for past
or continuing violation of, any Laws. To the Knowledge of the Shareholder, all
reports and returns required to be filed by any of the Companies with any
governmental authority have been filed, and were accurate and complete when
filed. For purposes of this Agreement, "Knowledge" shall mean the actual
knowledge of the person indicated, after due inquiry of all of the directors,
officers, employees and agents of any corporate or other entity with which such
person is affiliated who would be reasonably likely to know the information
referred to. Without limiting the generality of the foregoing:
(i) The operation of each of the Companies'
businesses as now conducted does not, nor does any condition existing at any of
the facilities in which the Companies' businesses are conducted (collectively,
the "Facilities"), in any manner constitute a breach or violation of any lease
or other agreement governing the use of such Facilities. None of the Companies
or the Shareholder has received any notice of or otherwise has any Knowledge
about any claim or likely potential claim that the operation of the Companies'
businesses as now conducted or any condition existing at the Facilities
allegedly constitutes a nuisance or other tortious interference with the rights
of any person or persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such person or persons
seeking compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any aspect of the conduct of such businesses or the manner in which
they are now conducted;
(ii) each of the Companies has made all required
payments to its unemployment compensation reserve accounts with the appropriate
governmental departments of
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the states where it is required to maintain such accounts, and, to the
Knowledge of the Shareholder, each of such accounts has a positive balance;
(iii) none of the Companies, for the past three
(3) years, has been required to file any reports under the federal Occupational
Safety and Health Act of 1970, as amended, or under all other applicable health
and safety laws and regulations, except for reports, the failure to file which
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Licenses and Permits. Except as set forth on
Schedule 2.8(b), none of the Companies requires any licenses, permits,
approvals, authorizations, or consents from any governmental and regulatory
authorities for the conduct of their respective businesses (as presently
conducted or as proposed to be conducted), or for the operation of the
Facilities. Each of the Companies (including its operations, properties,
whether owned or leased, and assets) is and has been in compliance with all
such permits and licenses, approvals, authorizations and consents applicable to
the conduct of its business in the State of Texas and the other jurisdictions
in which it conducts business.
(c) Environmental Matters. The applicable Laws relating
to pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, release or threatened release of
pollutants, contaminants, asbestos, lead-based paints, chemicals or industrial,
toxic, hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without limitation, the
Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and the Comprehensive Environmental Response
Compensation Liability Act ("CERCLA"), as amended, and their state and local
counterparts are herein collectively referred to as the "Environmental Laws."
Except as set forth on Schedule 2.8(c), including, if any, the Phase I
environmental reports attached thereto, to the Knowledge of the Shareholder, no
Waste exists on or under the Real Property (as defined in Section 2.11(a)
herein) and none of the Companies, nor, to the Knowledge of the Shareholder,
any of their predecessors in title, or any other person, has ever used the Real
Property for the processing, handling, manufacture, generation, treatment,
storage, or disposal of any Waste, nor has the Real Property been used as a
landfill or as a dump for garbage, refuse or Waste. Without limiting the
generality of the foregoing provisions of this Section 2.8, each of the
Companies is in material compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. Except as specifically
described in Schedule 2.8(c), there is no civil, criminal or administrative
action, suit, demand, notice or demand letter, claim, hearing, notice of
violation, investigation or proceeding pending, or, the Knowledge of the
Shareholder, threatened, against any of the Companies, or to the Knowledge of
the Shareholder, any landlord of any of the Companies, relating in any way to
the Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter
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issued, entered, promulgated or approved thereunder. Except as set forth in
Schedule 2.8(c), there are no past or present (or, to the best of the Knowledge
of the Companies and the Shareholder) future events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which may
interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any liability, including, without
limitation, liability under CERCLA or similar state or local Laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, remediation plan, study or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment, of any Waste.
2.9 Litigation. Except as set forth in Schedule 2.9, there is no
action, suit, arbitration proceeding, investigation or inquiry, pending before
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
or, to the Knowledge of the Shareholder, threatened, against any of the
Companies or their respective officers or directors (in their capacity as
officers or directors of the Company), business or assets, nor does the
Shareholder know, or have grounds to know, of any reasonable basis for any such
proceedings, investigations or inquiries. Schedule 2.9 also identifies all such
actions, suits, proceedings, investigations and inquiries to which any of the
Companies or their officers or directors (in their capacity as officers or
directors of the Company) have ever been parties, wherein either the amount in
controversy exceeded $10,000 or the relief sought or requested required
remedial action other than the payment of money. Except as set forth in
Schedule 2.9, none of the Companies, their businesses or assets is subject to
any judgment, order, writ or injunction of any court, arbitrator or federal,
state, foreign, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
2.10 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in
Schedule 2.10(a), none of the Companies has any leases of real property which
are used or useful in their respective businesses.
(b) Personal Property Leases. Except as set forth in
Schedule 2.10(b), none of the Companies has any leases of personal property
which are used or useful in their respective businesses involving consideration
or other expenditure in excess of $1,000 or involving performance over a period
of more than six (6) months.
(c) Purchase Commitments. Except as set forth on
Schedule 2.10(c), none of the Companies has any purchase commitments for
inventory items or supplies for use in their respective businesses that,
together with amounts on hand, constitute in excess of three months normal
usage, or which are at an excessive price.
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(d) Sales Commitments. Except as set forth on Schedule
2.10(d), none of the Companies has (i) any sales contracts or commitments to
customers with respect to their respective businesses which aggregate in excess
of $10,000 to any one customer (or group of affiliated customers), or (ii) any
sales contracts or commitments with respect to their respective businesses
except those made in the ordinary course of business, at arm's length.
(e) Contracts With Certain Persons. Except as set forth
on Schedule 2.10(e), none of the Companies has any agreement, understanding,
contract or commitment (written or oral) with any current or former officer,
director, employee, agent, or consultant with respect to their respective
businesses that is not cancelable by the applicable Company on notice of not
longer than thirty (30) days without liability, penalty or premium of any
nature or kind whatsoever.
(f) Power of Attorney. Except as set forth on Schedule
2.10(f), none of the Companies has given any power of attorney with respect to
their respective businesses, which is currently in effect, to any person, firm
or corporation for any purpose whatsoever.
(g) Collective Bargaining Agreements. None of the
Companies is a party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule
2.10(h), none of the Companies is obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as a
signatory, guarantor or otherwise.
(i) Guarantees. Except as set forth on Schedule 2.10(i),
none of the Companies has guaranteed the payment or performance of any person,
firm or corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the obligations
of any person.
(j) Contracts Subject to Renegotiation. Except as set
forth on Schedule 2.10(j), none of the Companies is a party to any contract
with any governmental body (with respect to its business) which is subject to
renegotiation.
(k) Burdensome or Restrictive Agreements. None of the
Companies is a party to or bound by any agreement, deed, lease or other
instrument with respect to its business which is so burdensome as to materially
affect or impair the operation of the business. Without limiting the generality
of the foregoing, none of the Companies is a party to or bound by any agreement
requiring it to assign any interest in any trade secret or proprietary
information, or with respect to its business, prohibiting or restricting it
from competing in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on its business anywhere in the world.
(l) Other Material Contracts. Except as described in
Schedule 2.10(l) or in any other Schedule, none of the Companies has any lease,
contract or commitment of any nature
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involving consideration or other expenditure in excess of $10,000, or involving
performance over a period of more than six (6) months, or which is otherwise
individually material to the operations of its business.
(m) No Default. Except as set forth on Schedule 2.10(m),
none of the Companies is in default under any lease, contract or commitment,
nor has any event or omission occurred which through the passage of time or the
giving of notice, or both, would constitute a material default thereunder or
cause the acceleration of any obligations of the Company thereunder, result in
the creation of any Lien on any of the assets owned, used or occupied by the
Company in connection with its business or give rise to an automatic
termination, or the right of discretionary termination thereof. No third party
is in default under any lease, contract or commitment to which any of the
Companies is a party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
2.11 Real Estate.
(a) Real Property. Schedule 2.11(a) sets forth all real
property owned, used or occupied by any of the Companies or their predecessors
in the conduct of their respective businesses (the "Real Property"). Schedule
2.11(a) identifies the leases (oral or written) and all amendments thereto and
extensions thereof, under which any of the Companies now uses any such Real
Property (the "Leases"), as well as any guarantors of tenant's obligations
under such Leases, true and correct copies of which written Leases (or
descriptions of oral Leases or arrangements) have been delivered to Buyer.
Except where the absence thereof would not have a Material Adverse Effect,
there are now in full force and effect duly issued certificates of occupancy
permitting the Real Property and improvements located thereon to be legally
used and occupied as the same are now constituted. Schedule 2.11(a) further
identifies any lease under which any subtenants, tenants, assignees, licensees,
concessionaires or other entities, other than one or more of the Companies,
have a right to occupy all or any portion of the Real Property, and true and
correct copies of all such leases have been delivered to Buyer (or, if an oral
arrangement, such arrangements have been fully described on Schedule 2.11(a)).
Except where the absence thereof would not have a Material Adverse Effect, all
of the Real Property has permanent rights of access to dedicated public
highways. None of the Companies or the Shareholder has notice or Knowledge of
any fact or condition existing on the Real Property which would prohibit or
adversely affect the ordinary rights of access to and from the Real Property,
and there is no pending or threatened restriction or denial, governmental or
otherwise, with respect to such ingress and egress. None of the Companies or
the Shareholder has notice or Knowledge of (i) any claim of adverse possession
or prescriptive rights involving any of the Real Property, (ii) any structure
located on any Real Property which encroaches on or over the boundaries of
neighboring or adjacent properties, or (iii) any structure of any other party
which encroaches on or over the boundaries of any of such Real Property. No
public improvements have been commenced and, to the Knowledge of the
Shareholder, none are planned which in either case may result in special
assessments against or otherwise materially adversely affect any Real Property.
None of the Companies or the Shareholder has notice or Knowledge of any (i)
planned or proposed
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increase in assessed valuations of any Real Property (other than routine
general valuations of all property located in the taxing district or districts
in which the Real Property is located), (ii) governmental agency or court order
requiring repair, alteration, or correction of any existing condition affecting
any Real Property or the systems or improvements thereat, (iii) condition or
defect which could give rise to an order of the sort referred to in subdivision
(ii) above, (iv) underground storage tanks affecting any Real Property, or (v)
work that has been done or labor or materials that has or have been furnished
to any Real Property during the period six (6) months immediately preceding the
date of this Agreement for which Liens could be filed against any of the Real
Property.
(b) No Condemnation or Expropriation. Neither the whole
nor any portion of the property or any other assets of the Companies used or
useful in the Companies' businesses is currently subject to any governmental
decree or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority with or without payment of compensation therefor,
nor to the Knowledge of the Shareholder has any such condemnation,
expropriation or taking been proposed.
(c) Leases. All of the Leases, true and complete copies
of which have been delivered or made available to Buyer, are in effect and none
of the Companies is in default under or with respect to any material term of
the Leases, or has received or sent any notice of any default under or with
respect to any of the same. No other party to any of the Leases is in material
default under or with respect to any of the same.
2.12 Accounts Receivable. All accounts receivable of each of the
Companies reflected on the Company Statements, other than as described in
Schedule 2.12(a), and those arising since the date of the Company Statements,
represent arm's length sales actually made in the ordinary course of business;
are collectible in the ordinary course of business not later than the six-month
anniversary of the Closing Date (without regard to reserves); are subject to no
counterclaim or set off; and are not in dispute. Items contained in Schedule
2.12(a) are collectible no later than the first anniversary of the Closing
Date. Schedule 2.12(b) contains an aged schedule of accounts receivable with
respect to each of the Companies included in the Company Statements and as of a
date not more than thirty (30) days prior to the date hereof. None of the
Companies is owed any receivable by any customer as a result of any retainage
of funds by such customer pursuant to any installation agreement or other
contractual agreement with one of the Companies which has been owed for a
period of time exceeding six months in length (to be calculated as of the
Closing Date).
2.13 Trade Rights.
(a) Schedule 2.13 lists all Trade Rights (as defined
below) of the type described in clauses (i), (ii), (iii) and (iv) and, to the
extent practicable, clause (v) of Section 2.13(e) in which any of the Companies
(with respect to its business) now has any interest, specifying whether such
Trade Rights are owned, controlled, used or held (under license or otherwise)
by it, and also indicating which of such Trade Rights are registered.
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(b) All Trade Rights shown as registered in Schedule
2.13 have been properly registered, all pending registrations and applications
have been properly made and filed and all annuity, maintenance, renewal and
other fees relating to registrations or applications are current.
(c) To conduct each of the Companies' businesses as such
is currently being conducted, none of the Companies requires any Trade Rights
that it does not already have. To the Knowledge of the Shareholder, none of the
Companies is infringing or has infringed any Trade Rights of another in the
operation of its business, nor to the Knowledge of the Shareholder is any other
person infringing the Trade Rights of any of the Companies. Except as set forth
on Schedule 2.13, none of the Companies has granted any license or made any
assignment of any Trade Rights listed on Schedule 2.13, nor does any of the
Companies pay any royalties or other consideration for the right to use any
Trade Rights of others. There are no inquiries, investigations, or claims or
litigation, challenging or threatening to challenge the right, title and
interest of any of the Companies with respect to its continued use and right to
preclude others from using any of its Trade Rights. All Trade Rights of the
Companies are enforceable and in good standing, and there are no equitable or
statutory defenses to enforcement based on any act or omission of the
Companies. The consummation of the transactions contemplated hereby will not
alter or impair any Trade Rights owned or used by any of the Companies.
(d) Except as set forth on Schedule 2.13(d), the
Companies have used commercially prudent efforts to protect the Trade Rights
owned or used by them.
(e) As used herein, the term "Trade Rights" shall mean
and include: (i) all United States, state and foreign trademark rights,
business identifiers, trade dress, service marks, trade names and brand names,
including all claims for infringement, and all registrations thereof and
applications therefor and all goodwill associated with the foregoing accruing
from the dates of first use thereof; (ii) all United States and foreign
copyrights, copyright registrations and copyright applications, including all
claims for infringement, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all United States and foreign patents
and patent applications, including all claims for infringement and all
international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; and (v) all inventions, mask
works and mask work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee and third party
covenants and agreements respecting confidentiality, intellectual property and
non-competition (including without limitation agreements executed by potential
purchasers of the Companies' businesses, or any part thereof) and all other
types of intellectual property.
2.14 Broker's or Finder's Fees. Except for William D. Hout and
Henron Group, Inc. d/b/a "ABA American Business Acquisitions", all of the fees
and expenses of which shall be paid by the Shareholder, no agent, broker,
person or firm acting on behalf of the Companies or the Shareholder is, or will
be, entitled to any commission or broker's or finder's fees from any of the
parties hereto, or from any person controlling, controlled by or under common
control with any of the parties hereto, in connection with any of the
transactions contemplated herein.
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2.15 Employee Benefit Plans.
(a) Disclosure. Schedule 2.15(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective bargaining
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals and
all written or binding oral statements of policies, practices or understandings
relating to employment, which are provided to, for the benefit of, or relate
to, any persons employed by any of the Companies ("Company Employees"). The
items described in the foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements," and each individually as an
"Employee Plan/Agreement." True and correct copies of all the Employee
Plans/Agreements, including all amendments thereto, have heretofore been
provided to Buyer. No Employee Plan/Agreement is a "multi-employer plan" (as
defined in Section 401 of ERISA), and none of the Companies has ever
contributed or been obligated to contribute to any such multi-employer plan.
(b) Prohibited Transactions. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
there have been no "prohibited transactions" within the meaning of Section 406
or 407 of ERISA or Section 4975 of the Internal Revenue Code of 1986 (the
"Code") for which a statutory or administrative exemption does not exist with
respect to any Employee Plan/Agreement, and no event or omission has occurred
in connection with which any of the Companies or any of their respective assets
or any Employee Plan/Agreement, directly or indirectly, could be subject to any
liability under ERISA or the Code.
(c) Payments and Compliance. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
with respect to each Employee Plan/Agreement, all payments due from any of the
Companies to date have been made and all amounts properly accrued to date as
liabilities of any of the Companies which have not been paid have been properly
recorded on its books and to the extent they relate to employees employed as of
the date thereof, are reflected in the Company Statements.
(d) Post-Retirement Benefits. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
with respect to each Employee Plan/Agreement which provides welfare benefits of
the type described in Section 3(1) of ERISA: (i) no such Employee
Plan/Agreement provides medical or death benefits with respect to current or
former employees, directors or consultants of any of the Companies beyond their
termination of employment, other than coverage mandated by Sections 601-608 of
ERISA and 4980B(f) of the Code; (ii) each such Employee Plan/Agreement has been
administered in compliance with Sections
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601-608 of ERISA and 4980B(f) of the Code; and (iii) no such Employee Plan /
Agreement has reserves, assets, surpluses or prepaid premiums.
(e) No Triggering of Obligations. The consummation of
the transactions contemplated by this Agreement will not (i) entitle any
current or former employee of any of the Companies to severance pay, any
payment pursuant to any "golden parachute" or other agreement providing for
payment to any employee upon a change in control of any of the Companies,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(f) Future Commitments. There are no announced plans or
legally binding commitments to create any additional Employee Plans/Agreements
or to amend or modify any existing Employee Plan/Agreement.
2.16 Employment Compensation. Schedule 2.16 contains a true and
correct list of all employees to whom each of the Companies is paying
compensation, including bonuses and incentives for services rendered or
otherwise, the annual salary, average commission, or hourly wage compensation
of each such employee, and any bonus paid to each respective employee relating
to services rendered during the 1998 fiscal year. Buyer has been provided a
copy of all W-2 forms distributed to each employee of the Company in respect of
compensation received in the 1998 tax year.
2.17 Labor Matters. Each of the Companies is currently in
compliance with all applicable laws, rules and regulations relating to the
employment of labor, including those related to wages, hours and
authorizations, except for such matters of non-compliance as would not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Companies has paid or caused to be paid all compensation, including bonuses and
accrued vacation pay, if any, due and payable to its employees through the date
hereof and will cause such amounts to be paid through the Closing Date. Except
as set forth in Schedule 2.17, within the last five (5) years none of the
Companies has experienced any labor disputes, union organization attempts or
any work stoppage due to labor disagreements. Except to the extent set forth in
Schedule 2.17, (i) there is no unfair labor practice charge or complaint
against any of the Companies pending or threatened; (ii) there is no labor
strike, dispute, request for representation, slowdown or stoppage actually
pending or threatened against or affecting any of the Companies nor any
secondary boycott with respect to products of any of the Companies; (iii) no
question concerning representation has been raised or is threatened respecting
the employees of any of the Companies; and (iv) there is no grievance which
might have a Material Adverse Effect.
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2.18 Tax Matters.
(a) Provision For Taxes. The provision made for taxes on
the Company Statements is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and other
taxes (and any interest and penalties) and assessments, whether or not
disputed, for which each of the Companies may be liable at the date of such
Company Statements and for all years and periods prior thereto. Since the date
of such Company Statements, none of the Companies has incurred any taxes other
than taxes incurred in the ordinary course of business consistent in type and
amount with past practices and taxes incurred as a result of the transactions
contemplated by this Agreement.
(b) Tax Returns Filed. Except as set forth on Schedule
2.18(b), all federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of each of the Companies as of the date of
this Agreement have been timely filed (or if filed late all applicable
penalties and interest have been paid) and when filed were true and correct in
all material respects, and the taxes shown as due thereon were paid or
adequately accrued. True and complete copies of the tax returns filed by the
Companies for the three (3) most recent fiscal years have been delivered to
Buyer. Each of the Companies has duly withheld and paid all taxes which it is
required to withhold and pay relating to salaries and other compensation
heretofore paid or owing to its respective employees, independent contractors
or other third parties.
(c) Tax Audits. Except as set forth on Schedule 2.18(c),
the federal and state income tax returns of the Companies have not been audited
by the Internal Revenue Service ("IRS") or any state taxing authorities and
none of the Companies has received from the Internal Revenue Service or from
the tax authorities of any state, county, local or other jurisdiction any
notice of underpayment of taxes or other deficiency which has not been paid nor
any objection to any return or report filed. There are outstanding no
agreements or waivers extending the statutory period of limitations applicable
to any tax return or report.
(d) S Corporation Status. Except as set forth on
Schedule 2.18(d), each of the Companies, other than TWR Family of Companies,
LLC and the Foreign Subsidiaries, has been an electing S corporation within the
meaning of the Code at all times since its incorporation, and will remain an S
corporation through the Closing Date.
(e) Other Tax Matters. None of the Companies has filed a
consent under Section 341(f) of the Internal Revenue Code, as amended (the
"Code") concerning collapsible corporations. None of the Companies has made any
payments, is obligated to make any payments, or is a party to any agreement
that could obligate it to make any payments that will not be deductible under
Section 280G of the Code. None of the Companies has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of the Companies is a party to any tax allocation or sharing
agreement. None of the Companies (i) has been a member of an affiliated group
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filing a consolidated federal income tax return (other than a group the common
parent of which was the Company) or (ii) has liability for the taxes of any
person or entity under Reg. 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract or otherwise.
2.19 Insurance.
(a) Policies in Effect. Set forth in Schedule 2.19(a) is
a complete and accurate list of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance presently
in effect with respect to the business and properties of each of the Companies,
true and correct copies of which have been delivered to Buyer. All such
policies are valid, outstanding and enforceable policies and provide insurance
coverage for the properties, assets and operations of each of the Companies as
set forth therein; and no such policy (nor any previous policy) provides for or
is subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. None of the
Companies has been refused any insurance with respect to any aspect of the
operation of its business nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last three years. To the Knowledge of the Shareholder,
each of the Companies has duly and timely made all material claims it has been
entitled to make under each policy of insurance. Except as set forth on
Schedule 2.19(a), the Shareholder has no notice or Knowledge of any claim by
any of the Companies pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies, and
the Shareholder knows of no basis for denial of any claim under any such
policy. Except as set forth on Schedule 2.19(a), none of the Companies has
received any written notice from or on behalf of any insurance carrier issuing
any such policy that insurance rates therefor will hereafter be substantially
increased (except to the extent that insurance rates may be increased for all
similarly situated risks) or that there will hereafter be a cancellation or
termination of such policy or an increase in a deductible (or an increase in
premiums in order to maintain an existing deductible) or non-renewal of any
such policy, and the Shareholder has no Knowledge of any act or omission which
could result in cancellation of any such policy prior to its scheduled
expiration date.
(b) Workers Compensation Coverage.
(i) Current Claims. Set forth separately in
Schedule 2.19(b)(i) is (1) a list of all claims made for work-related injuries
or other work-related claims for which any of the Companies or its insurer has
continuing obligations to any current or former employee under any state
workers' compensation law or any policy of workers' compensation insurance,
including without limitation the obligation to pay temporary or total
disability benefits, medical benefits, periods of open medical treatment which
may require payments of medical benefits in the future, or any other
obligations (the "Workers' Compensation Claims"), and (2) a list of all the
current or former employees of each of the Companies who have or had a Workers'
Compensation Claim, including current or former employees of each of the
Companies who have given notice of an injury or work-related claim which has
not yet resulted in a Workers' Compensation Claim, including the
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date of the accident or occurrence giving rise to such claim, the total
payments made to or on behalf of such current or former employee and, if known,
the date on which any obligations to each such employee terminate.
(ii) Increased Risk or Premium. Since January 1,
1989, none of the Companies has ever been denied workers' compensation
insurance or been placed in a high-risk or increased-risk pool or been
categorized under a similar rating system reflecting an above-average incidence
of work-related injuries for purposes of determining the workers' compensation
insurance premium.
2.20 Bonds and Other Surety.
(a) Qualification for Bond. Except as set forth in
Schedule 2.20(a), there have been no occasions upon which any of the Companies
has been unable to qualify for any performance bond, payment bond, fidelity
bond, bid bond, bond to discharge lien, federal Miller Act bond, or other state
law bond patterned after the federal Miller Act, or other form of surety.
(b) Other Forms of Surety. Except as set forth in
Schedule 2.20(b), none of the Companies has provided surety in the form of an
escrow of cash funds, bank draft, letter of credit, certified check, pledge of
assets, or in any other form as a substitute for or in addition to the surety
provided by any performance bond, payment bond, fidelity bond, bid bond, bond
to discharge lien, federal Miller Act bond, or state law bond patterned after
the federal Miller Act, or other form of surety issued listing any of the
Companies as principal.
(c) Claims or Notices of Default. Except as set forth in
Schedule 2.20(c), no claims, notices of default or payment on any performance
bond, payment bond, fidelity bond, bid bond, federal Miller Act bond, or state
law bond patterned after the federal Miller Act, or other form of surety on
which any of the Companies is the principal have been made or given during the
last five (5) years.
(d) No Current Default. Except as set forth in Schedule
2.20(d), none of the Companies is currently in default and the Shareholder has
no knowledge of the occurrence of any event which may cause any of the
Companies to default upon any obligation arising under any construction
agreement, or that would trigger the right of any person or entity to claim
payment under any performance bond, payment bond, fidelity bond, bid bond,
federal Miller Act bond or state law bond patterned after the federal Miller
Act, or other form of surety bond listing any of the Companies as principal.
(e) Indemnity of Sureties. Except as set forth in
Schedule 2.20(e), none of the Companies has entered into any indemnity
agreement with any surety company creating in favor of such surety company any
security interest, including any security interests which have not been filed
or otherwise perfected in accordance with any state law, in cash, accounts
receivable, chattel paper or other property of the Companies and none of the
Companies has paid any claim for indemnity to any surety in respect of any lien
claim losses.
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2.21 Liens. Except as set forth in Schedule 2.21, there have been
no liens filed, including liens released by payment, bond to discharge lien, or
otherwise, against the premises of any project on which any of the Companies
was the general contractor by any subcontractor, materialman, supplier or other
party in the past five (5) years, and none of the Companies or the Shareholder
has been provided any notice or been given any other reason to believe, foresee
or otherwise anticipate the filing of any lien by any subcontractor,
materialman, supplier or other party who might file such lien.
2.22 Funds Held In Trust. Except as set forth in Schedule 2.22,
none of the Companies is holding or in possession of any funds as trustee or in
any other fiduciary capacity for the benefit of any subcontractor, materialman,
supplier or other party pursuant to any state law establishing a trust or
fiduciary relationship between it and any such party.
2.23 Current Projects.
(a) Identity; Completion; Profitability. Schedule
2.23(a) sets forth all installation projects currently being participated in or
overseen by each of the Companies (the "Current Projects"), as well as the
projected revenues from each respective Current Project, and, with respect to
all of the Companies other than Lighting, the percentage completed and amount
remaining to be invoiced for each respective Current Project, and all other
projects completed by each of the Companies within the twelve (12) month period
preceding the date hereof.
(b) On Schedule. Except as set forth in Schedule
2.23(b), each Current Project is proceeding without material deviation from the
schedule provided in the installation agreement or purchase order governing
each respective Current Project.
(c) On Budget. Except as set forth in Schedule 2.23(c),
the draws, progress payments, or other payments received by each of the
Companies pursuant to an arrangement whereby a percentage of the total contract
price is payable upon completion of specified portions or percentages of the
job or similar criteria, taken by each of the Companies on each Current
Project, are in material proportion to the amount of work completed and the
amount of work remaining on each project (e.g., draws taken on a project which
is 40% complete do not exceed 40% of the total budgeted cost of the project)
and none of the Current Projects is reasonably likely to run substantially over
budget.
(d) Evidence of Payment of Subcontractors. Except as set
forth in Schedule 2.23(d), there have not been any mechanics or materialman's
liens filed or asserted against any of the Companies by any subcontractor,
materialman or lower tier subcontractor respecting work which has been
performed for any of the Companies by any subcontractor, materialman or lower
tier subcontractor on any Current Project.
(e) Authority of Subcontractors. To the Knowledge of the
Shareholder, all subcontractors are duly authorized to do business in the state
where the Current Project of each
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respective subcontractor is located and are properly licensed by all necessary
public and quasi-public authorities in such state.
2.24 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 2.24 (or specifically required by the terms of this
Agreement), since the date of the Company Statements there has been no:
(a) Adverse Change. Material adverse change in the
financial condition, assets, liabilities or operations of any of the Companies
and, to the Knowledge of the Shareholder, in the business prospects of any of
the Companies (a "Material Adverse Effect");
(b) Damage. Loss, damage or destruction, whether covered
by insurance or not, affecting the business or properties (owned or leased) of
any of the Companies;
(c) Increase in Compensation. Except as set forth on
Schedule 2.24(c), increase in the compensation, salaries or wages payable or to
become payable to any employee or agent of any of the Companies (including,
without limitation, any increase or change pursuant to any bonus, pension,
profit sharing, retirement or other plan or commitment), other than changes in
the ordinary course of business consistent with past practices, or any bonus or
other employee benefit granted, made or accrued, except those made in the
ordinary course of business consistent with past practices;
(d) Labor Disputes. Labor dispute or disturbance, other
than routine labor union or individual grievances which are not material to the
business, financial condition or results of operations of any of the Companies;
(e) Commitments. Material commitment or transaction by
any of the Companies (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent with past
practice;
(f) Dividends. Declaration, setting aside, or payment of
any dividend or any other distribution in respect of capital stock of any of
the Companies; any redemption, purchase or other acquisition by any of the
Companies of any of its capital stock, or any security relating thereto,
including any options or rights to purchase or acquire capital stock of any of
the Companies;
(g) Disposition of Property. Except as set forth in
Schedule 2.24(g), sale, lease or other transfer or disposition of any
properties or assets of any of the Companies used or useful in their
businesses, except in the ordinary course of business;
(h) Indebtedness. Material indebtedness for borrowed
money incurred, assumed or guaranteed by any of the Companies;
(i) Liens. Mortgage, pledge, Lien or Encumbrance made on
or affecting any of the assets of any of the Companies;
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(j) Amendment of Contracts. Entering into, amendment,
extension or termination by the any of the Companies of any material contract
or lease, or any waiver of material rights thereunder, other than in the
ordinary course of business;
(k) Payments, Loans and Advances. Except as set forth on
Schedule 2.24(k), any payment, loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person;
(l) Credit. Any change in the policies or practices of
any of the Companies with respect to their respective businesses and the
granting of credit;
(m) Payments to Affiliates. Except as set forth on
Schedule 2.24(m), payment to any Affiliate of any of the Companies. For
purposes of this Agreement, the term "Affiliate" shall mean: any organization
or entity that directly, or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, any of the
Companies; the Shareholder, officers and directors of any of the Companies; the
spouse of any such person; any person who would be the heir or descendant of
any such person if he or she were not living; and any entity in which any of
the foregoing has a direct or indirect interest, except through ownership of
less than five percent (5%) of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market;
(n) Status of Employees. Except as set forth on Schedule
2.24(n), change in status or continuation of employment of any employee
identified in Section 2.16 of this Agreement, other than changes occurring in
the ordinary course of business; or
(o) Unusual Events. Other events or conditions not in
the ordinary course of business which have had a Material Adverse Effect or
which would be prohibited by the terms of Section 4.1(b) hereof.
2.25 Major Customers and Suppliers.
(a) Major Customers. Schedule 2.25(a) contains a list of
the ten (10) largest customers of each of the Companies for each of the two (2)
most recent fiscal years (determined on the basis of the total dollar amount of
revenues realized by each of the Companies) showing the total revenues realized
by each of the Companies with respect to each such customer during each such
year. None of the Companies or the Shareholder has received notice, and the
Shareholder has no knowledge of any facts, other than ordinary fluctuations in
the business needs of the Companies' customers, reasonably indicating that any
of the customers listed on Schedule 2.25(a) will not continue to be customers
after the Closing at substantially the same level as heretofore.
(b) Major Suppliers. Schedule 2.25(b) contains a list of
the ten (10) largest suppliers to each of the Companies for the fiscal period
ending December 31, 1998 (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such supplier
during such period. None of the Companies or the Shareholder has received
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notice, and the Shareholder has no Knowledge of any facts reasonably
indicating, or have any reason to believe, other than as a result of changes or
fluctuations occurring in the ordinary course of business, that any of the
suppliers listed on Schedule 2.25(b) will not continue to be suppliers to each
of the Companies after the Closing and will not continue to supply
substantially the same quantity and quality of goods as historically supplied
at competitive prices consistent with past pricing practices.
2.26 Product Warranty and Product Liability. Schedule 2.26
contains a true, correct and complete copy of each of the Companies' standard
warranty or warranties (including standard extended warranties) and implied
warranty or warranties (whether arising under the Uniform Commercial Code or
otherwise) for sales of Products (as defined below) and services and, except as
stated therein, there are no warranties, commitments or obligations with
respect to the return, repair or replacement of Products. Schedule 2.26 sets
forth (a) the estimated aggregate annual cost of performing warranty
obligations for customers for each of the three (3) preceding fiscal years and
(b) a listing of warranty contracts under which any of the Companies is
currently obligated. Except as set forth in Schedule 2.26, none of the
Companies has made any payment, or to the knowledge of the Shareholder,
incurred any liability or obligation to make any payment on any warranty, and
none of the Companies or the Shareholder has been notified, whether orally or
in writing, of any claim or assertion which may reasonably result in any
liability or obligation to make payment and none has become aware of the
reasonable potential for any liability or obligation to make a payment pursuant
to any warranty issued. As used in this Section 2.26, the term "Products" means
any and all products currently or at any time previously manufactured,
distributed or sold by any of the Companies, or by any predecessor under any
brand name or mark under which products are or have been manufactured,
distributed or sold by any of the Companies.
2.27 No Subsidiaries. Except as set forth on Schedule 2.27, none
of the Companies has any subsidiaries.
2.28 Assets Necessary to Business. Except as set forth on
Schedule 2.28, each of the Companies presently has, and at the Closing will
have, good and valid title to all property and assets, tangible and intangible,
and all leases, licenses and other agreements necessary to permit it to carry
on its business as presently conducted, regardless of whether such items are
reflected on the Company Statements.
2.29 Securities Laws Matters. The Shareholder who receives common
stock or notes ("Securities") pursuant to this Agreement will acquire such
Securities for investment for his own account, not on behalf of others and not
with a view to resell or otherwise distribute such Securities. The Shareholder
acknowledges that the Securities, at the time of issuance, shall not have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, and may not be sold, transferred or
disposed of by them absent the registration thereof or the availability of an
exemption from registration applicable thereto, and, as a result, the
Shareholder must bear the risk of an investment in the Securities for an
indefinite period of time. The financial condition of the Shareholder is
currently adequate to bear the substantial risk of an investment in the
Securities. The Shareholder, in conjunction with a "purchaser representative,
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within the meaning of Regulation D under the Securities Act, has sufficient
knowledge and experience in investment and business matters to understand the
economic risk of such an investment and the risk involved in a commercial
enterprise such as that of Clear. The Shareholder is a bonafide resident of
Texas, and all communications and information have been directed to him and
have been received in such place of residence. The Shareholder has had the
opportunity to ask questions of, and receive answers from, officers of Clear
concerning Clear and the Securities and to obtain any additional information
which the Shareholder reasonably requested. The Shareholder shall, at or prior
to the Closing, complete and deliver to Buyer an Investment Letter
substantially in the form attached hereto as Exhibit B.
2.30 Power of Attorney. Except as set forth on Schedule 2.30, the
Shareholder has not given any power of attorney with respect to the Stock,
which is currently in effect, to any person, firm or corporation for any
purpose whatsoever.
2.31 Affiliates' Relationships.
(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between any of the Companies and any Affiliate
are summarized on Schedule 2.31(a).
(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with any of the
Companies or is competitive with any of the Companies' businesses, or (ii) any
property, asset or right which is used by any of the Companies in the conduct
of its business.
(c) Obligations. All obligations of any Affiliate to any
of the Companies, and all obligations of any of the Companies to any Affiliate,
are listed on Schedule 2.31(c).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholder the following, as of
the date hereof and as of the Closing Date:
3.1 Due Incorporation and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has the corporate power to carry on its business as
now being conducted and to own or lease its properties and assets as now owned,
leased or operated by it. Buyer is duly qualified or otherwise authorized as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on the business of Buyer.
3.2 Authorization. Buyer has full corporate power and authority
under its articles of incorporation and bylaws, and the Board of Directors of
Buyer has taken all necessary corporate
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action to authorize Buyer to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and assuming the due
authorization, execution and delivery of this Agreement by the Company, this
Agreement constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the remedy of
specific performance and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.3 Capitalization. The authorized capital stock of Buyer is as
set forth in Schedule 3.3. No shares of capital stock of Buyer are issued and
outstanding except as set forth in Schedule 3.3. All shares of capital stock
identified on Schedule 3.3 are validly issued, fully paid and non-assessable.
3.4 Non-Contravention. Neither the execution and delivery of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby does or will violate, result in a breach
of any provision of, constitute a default under, result in the termination of
or permit any third party to terminate (with or without notice, lapse of time
or pursuant to any legal or equitable principle) or accelerate the performance
required on the part of Buyer by the terms of, or accelerate the maturity of or
require the prepayment of any indebtedness of Buyer under, any judgment, order,
decree, material agreement or instrument to or by which Buyer or any of its
assets is subject or bound.
3.5 Authority of Buyer. Except as set forth in Schedule 3.5, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental, administrative or regulatory body, is necessary in
connection with the transactions contemplated by this Agreement.
3.6 Litigation. Except as set forth in Schedule 3.6, there are no
material claims, actions, suits, proceedings or investigations pending or, to
the best knowledge of Buyer, threatened by or against Buyer, at law or in
equity or before or by any federal, state, municipal, foreign or other
governmental department, commission, board, agency, instrumentality or
authority.
3.7 Financial Statements. Attached as Schedule 3.7 are copies of
(i) the audited consolidated balance sheet of the Buyer as of December 31,
1997, and the related audited consolidated statements of operations,
stockholders' equity, and cash flows for the period from November 20, 1997
through December 31, 1997, and (ii) the unaudited consolidated balance sheet,
statement of profit/loss and statement of cash flows of the Buyer for the
period beginning January 1, 1998 and ending November 30, 1998 (collectively the
"Buyer Statements"). The Buyer Statements were prepared from the books and
records of Buyer in a manner conforming to GAAP and fairly present the
financial condition of Buyer as of the respective dates thereof.
3.8 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Buyer is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto,
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or from any person controlling, controlled by or under common control with any
of the parties hereto, in connection with any of the transactions contemplated
herein.
3.9 Securities Laws Matters. The Buyer will acquire the Stock for
investment for its own account, not on behalf of others and not with a view to
resell or otherwise distribute such Stock. The Buyer acknowledges that the
Stock, at the time of the Closing, shall not have been registered under the
Securities Act, or under any state securities laws, and may not be sold,
transferred or disposed of by it absent the registration thereof or the
availability of an exemption from registration applicable thereto.
ARTICLE IV
COVENANTS
4.1. Conduct of Business.
(a) Between the date hereof and the Closing Date, each
party shall use its best efforts to conduct its business in the ordinary course
and in such a manner so that the representations and warranties contained in
Articles II and III hereof shall continue to be true and correct in all
material respects on and as of the Closing Date.
(b) Between the date hereof and the Closing Date, except
(with respect to all items enumerated in this Section 4.1(b) other than item
(ii) below) for such actions as (x) would be undertaken in the ordinary course
of business of the applicable Company, or (y) as to which Buyer shall have
received prior written notice, the Shareholder shall cause each of the
Companies to refrain from:
(i) incurring any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise);
(ii) paying, repaying, repurchasing, discharging
or satisfying any of its debts, claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), except for such
items (A) as are required by the terms of the agreements relating thereto or
(B) as to which Buyer shall have given its prior written consent;
(iii) permitting any of its assets to be
subjected to any mortgage, pledge, Lien, security interest, Encumbrance,
restriction or charge of any kind;
(iv) selling, transferring or otherwise
disposing of any assets;
(v) making any capital expenditure or
commitment therefor;
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(vi) increasing its indebtedness for borrowed
money, or making any loan to any person;
(vii) writing off as uncollectible any accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate shall be
material to any one of the Companies;
(viii) granting any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees;
(ix) canceling or waiving any claims or rights
of substantial value;
(x) making any change in any method of
accounting or auditing practice;
(xi) settling or otherwise disposing of any of
the matters covered by Section 2.9 of this Agreement; and
(xii) agreeing, whether or not in writing, to do
any of the foregoing.
(d) Between the date hereof and the Closing Date, each
of the parties hereto shall have a continuing obligation to notify the other,
in writing, with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or described in the Schedules or which would render any
representation or warranty inaccurate, but no such disclosure shall cure any
breach of any representation or warranty previously made. For purposes of the
making by the Shareholder of the representations and warranties set forth in
Article II hereof on and as of the Closing Date, Schedules 2.5, 2.7, 2.10(h),
2.23(a) and 2.24(m) shall be deemed to have been updated, on and as of the
Closing Date, in the manner and to the extent set forth in the attached
Schedule J. The delivery of any information pursuant to this Section 4.1(c)
shall not constitute a waiver by Buyer of any of the provisions of Article V,
and any and all adverse changes contained in any such notices shall be
considered in the determination of whether the conditions set forth in Article
V are met.
4.2 Preservation of Business. Each party shall (consistent with
its normal business practices) preserve its business, and maintain its
relationships with its present suppliers and customers.
4.3 Notice of Events. Each party shall promptly notify the other
party of (i) any event, condition or circumstance occurring from the date
hereof through the Closing Date that may reasonably be construed to constitute
a violation or breach of this Agreement, or (ii) any event, occurrence,
transaction or other item which would have been required to have been disclosed
on any Schedule or statement delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, other than items arising in the
ordinary course of business which would not render any representation or
warranty of such party materially misleading.
4.4 Examinations and Inspections.
(a) Prior to the Closing Date, Buyer shall be entitled,
through its employees and representatives, including, without limitation,
Buyer's accountants, legal counsel, bankers and advisors, to make such
inspection of the assets, properties, business and operations of the Companies,
and such examination of the books, records and financial condition of the
Companies as Buyer reasonably desires, upon prior notice. During any inspection
of the assets, properties or operations of any of the Companies, Buyer's
representatives shall at all times be accompanied by any of the Shareholder,
Ken Meador or Jerry Broussard. Any such inspections and examinations shall be
conducted during normal business hours and under reasonable circumstances which
do not disrupt the business, properties or assets of the Companies and with
respect to inspections and examinations involving the property and assets of
third parties, subject to the consent of such third parties and consistent with
their policies. For the purpose of facilitating such review, examination
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or inspection, the Companies and the Shareholder shall furnish the
representatives of Buyer with all such information and copies of such documents
concerning the affairs of the Companies as such representatives may reasonably
request and cause their officers, employees, agents, accountants and attorneys
to cooperate with such representatives in connection with such review and
examination.
(b) Buyer agrees that, with respect to any information
or documents obtained from any of the Companies or the Shareholder concerning
the Companies' assets, properties, customers, policies, finances, costs, sales,
revenues, rights, obligations, liabilities, strategies, business and operations
("Confidential Information"), unless and until the transactions contemplated by
this Agreement shall have been consummated: (a) such Confidential Information
is confidential and/or proprietary to the Companies and is entitled to and
shall receive treatment as such by Buyer (except to the extent that any such
information is readily ascertainable from public or published information or
trade sources), and (b) Buyer will, and will cause all of its employees,
representatives, agents and advisors who have access to any Confidential
Information to, hold in confidence and not disclose or use (except in respect
of the transactions contemplated by this Agreement) any such Confidential
Information. Buyer, the Companies and the Shareholder shall also each comply
with the restrictions on publicity set forth in Section 9.2 of this Agreement.
If the transactions contemplated by this Agreement are not closed, all
documents and other materials obtained by Buyer from the Companies or the
Shareholder shall be returned.
4.5 Third Party Consents. The Shareholder agrees to obtain, prior
to the Closing Date, such consents and approvals as may be required from
parties to material contracts or other agreements with the Companies in order
to prevent the Companies from suffering a Material Adverse Effect as a result
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Buyer agrees to provide to the Shareholder
such assistance and information as may be required to obtain the consents and
approvals referred to above. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement by any of the
Companies to assign, or Buyer to assume and agree to pay, perform or otherwise
discharge, any material contracts or other agreements if an attempted
assignment or assumption thereof without the consent of a third person would
constitute a breach thereof, unless and until such consent is obtained.
4.6 Properties. The Shareholder shall cause each of the Companies
to maintain all of its properties used in the operation of its business in
customary repair, order and condition, reasonable wear and tear excepted, and
will maintain insurance upon all such properties, in such amounts and of such
kinds as are comparable to that in effect on the date hereof.
4.7 Books and Records. Until the Closing, the Shareholder shall
cause each of the Companies to maintain its books, accounts and records in the
usual manner on a basis consistent with prior years.
4.8 Material Contracts. Except upon prior written notice to
Buyer, the Shareholder shall cause each of the Companies to refrain from
amending, modifying or consenting to the termination
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of, any material contract or other material agreement or waiving any of its
material rights with respect thereto.
4.9 Vacation Pay and Bonus Accruals. Except as set forth on
Schedule 4.9, no vacation pay or bonus accruals will be payable to employees of
any of the Companies as of the Closing Date.
4.10 Environmental Audits and Other Investigations. The
Shareholder agrees that Buyer may retain, at the sole expense of Buyer, a firm
engaged in the regular business of environmental engineering to conduct such
environmental audits of the Facilities and operations of the Companies, and the
real estate occupied in connection with the Companies' businesses, as Buyer in
its discretion shall consider necessary or appropriate. Between the date hereof
and the Closing Date, Buyer, its agents, employees, contractors, surveyors, and
engineers shall have the right, upon prior notice and during normal business
hours, to enter and go upon the Real Property at any time and from time to time
for the purpose of inspecting the Real Property and any and all improvements
located thereon.
4.11 Employment Agreement with Shareholder. At the Closing, Buyer
shall enter into an employment agreement with George A. Jackson in
substantially the form set forth in Exhibit D hereto (the "Employment
Agreement").
4.12 Shareholder Restrictive Covenants Agreements. At the Closing,
the Shareholder shall enter into a restrictive covenants agreement with Buyer
in substantially the form set forth in Exhibit E hereto.
4.13 Securities Law Matters. The Shareholder agrees not to sell,
transfer, convey or otherwise distribute the Securities received pursuant to
this Agreement over which such Shareholder has direct or indirect control
without registration under the Securities Act and applicable federal and state
securities laws, except pursuant to an exemption from registration thereunder
acceptable to and approved by legal counsel to Buyer.
4.14 Attainment of Tax Clearance Certificates. The Shareholder
shall obtain tax clearance certificates for each of the Companies as requested
by Buyer.
4.15 Employment Agreements with Key Employees. At or prior to
Closing, the Shareholder shall use its best efforts to cause the employees of
the Companies identified on Schedule 4.15 ("Selected Employees") to duly
execute and deliver employment and restrictive covenants agreements, in
substantially the form attached hereto as Exhibits F and G, respectively, and
to cause the Companies to terminate, effective as of the Closing Date, any
existing agreement to which such Selected Employees are party respecting
employment with the Companies, provided, however, that such termination shall
not cause the applicable Company to be in breach of such agreement.
4.16 Tax Matters.
(a) S Corporation Status. The Companies and the
Shareholder will not revoke the Companies' elections to be taxed as S
corporations within the meaning of Sections 1361 and
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1362 of the Code. The Companies and the Shareholder will not take or allow any
action that would result in the termination of any of the Companies' status as
a validly electing S corporation within the meaning of Sections 1361 and 1362
of the Code.
(b) Cooperation on Tax Matters. Each of the Buyer, the
Companies and the Shareholder shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of tax
returns pursuant to this Section 4.16 and in connection with any audit,
litigation or other proceeding with respect to taxes. Such cooperation shall
include the retention and (upon the request of any other party) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Shareholder agrees (i) to retain all books and
records with respect to tax matters pertinent to the Companies relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or the Companies,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the Buyer and the Companies reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
Buyer or one of the Companies so requests, the Shareholder shall allow the
Buyer to take possession of such books and records. Buyer and the Shareholder
further agree to use their reasonable best efforts to obtain, upon request, any
certificate or other document from any governmental authority or any other
person or entity as may be necessary to mitigate, reduce or eliminate any tax
that could be imposed (including, without limitation, with respect to the
transactions contemplated hereby). Neither Clear nor Buyer will make any
election under Section 338(h) of the Code with respect to the Acquisition.
(c) Certain Reimbursement Obligations of Clear. In the
event (and subject to the condition) that the Option is exercised pursuant to
the Option Agreement, Clear shall pay to the Shareholder an amount equal to the
amount of United States income tax actually paid by the Shareholder (the
"Pass-Through Amount") with respect to the income of the Foreign Subsidiaries
allocable to the period from the date hereof to the date of exercise of the
Option, as follows:
(A) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is $0, the payment to be made to the
Shareholder hereunder shall equal the Pass-Through Amount;
(B) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is equal to the maximum Earn-Out Payment
of $3.3 million, the payment to be made to the Shareholder hereunder shall
equal one-half (1/2) of the Pass-Through Amount; and
(C) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is between $0 and $3.3 million, the
payment to be made to the Shareholder hereunder shall equal (i) one-half (1/2)
of the Pass-Through Amount, plus (ii) an additional amount determined by
multiplying one-half (1/2) of the Pass-Through Amount by the percentage equal
to (x) one hundred
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percent (100%) minus (y) the percentage which the actual Earn-Out Payment
represents of $3.3 million.
4.17 Release of Shareholder Guarantees. Buyer shall use its best
efforts to (i) cause itself or Clear to be substituted in all respects for the
Shareholder, effective as of the Closing, in respect of all obligations of the
Shareholder under any guaranty (the "Guaranties") given by the Shareholder for
the benefit of any of the Companies (other than TFOC and the Foreign
Subsidiaries) with respect to any Non-Affiliate Debt that is not repaid by the
Buyer immediately after the Closing, and (ii) obtain the release of all
associated collateral owned by the Shareholder. From and after the Closing,
with respect to any of the Guaranties for which no such substitution is
effected, Buyer and Clear shall indemnify the Shareholder against any liability
under any of such Guaranties.
4.18 Communications with Lender and Controlling Shareholder.
Between the date hereof and the Closing Date, Buyer shall permit the
Shareholder, after prior notice to, and upon the introduction of, Buyer, to
hold discussions with the principal bank lender to Clear and the controlling
shareholder of Clear.
ARTICLE V
CONDITIONS PRECEDENT TO
OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to complete the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived by Buyer only in writing:
5.1 Completion of Due Diligence Investigation. In the course of
Buyer's due diligence investigation of the Companies, Buyer shall not have
discovered any fact or development which relates to or involves the Companies'
businesses, ownership or capital stock which would, in the reasonable judgment
of Buyer, have a Material Adverse Effect or challenge the validity or legality
of this Agreement or the consummation of the transactions contemplated by this
Agreement or that, in the reasonable judgment of Buyer, would be materially
adverse to the interests of Buyer.
5.2 Procurement of Financing. Buyer shall have obtained financing
reasonably satisfactory to Buyer for the Closing Payment.
5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A.,
Fleet National Bank and Common Shareholders of Clear Holdings, Inc. Buyer shall
have received the consent of each of DFW Capital Partners, L.P., Wachovia Bank,
N.A., Fleet National Bank and the holders of a majority in interest of the
Common Stock of Clear Holdings, Inc. to enter into this Agreement and each of
the transactions contemplated by this Agreement.
5.4 Representations and Covenants. The representations and
warranties of the Shareholder contained in this Agreement shall be true and
correct in all material respects on and as
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of the Closing Date (except for any representation or warranty which expressly
speaks only as of a stated date). The Shareholder and TFOC shall have performed
and complied with all covenants and agreements (including, without limitation,
those contained in Article IV) required by this Agreement to be performed or
complied with by them on or prior to the Closing Date.
5.5 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of Buyer, a Material Adverse
Effect.
5.6 No Material Adverse Change. Buyer shall be satisfied, in its
reasonable discretion, that since December 31, 1998 there has been no Material
Adverse Effect.
5.7 Good Standing Certificates, Etc. The Shareholder shall have
delivered all such certificates, documents or instruments with respect to the
Companies' corporate existence and authority as Buyer's counsel may have
reasonably requested prior to the Closing Date.
5.8 Consents. The Shareholder shall have obtained and delivered
to Buyer such consents as Buyer may have requested that the Companies obtain in
accordance with Section 4.5 hereof.
5.9 Employment, Consulting and Restrictive Covenants Agreements.
Buyer shall have received the employment and restrictive covenants agreements
specified in Sections 4.11 and 4.12, respectively, in a form satisfactory to
Buyer and executed by the parties to be bound thereby.
5.10 Agreements With Key Employees. Buyer shall have received an
employment agreement and restrictive covenants agreement, in a form
satisfactory to Buyer and executed by the parties to be bound thereby, from the
key employees listed on Schedule 4.15 of this Agreement.
5.11 Release of Liabilities. Except as expressly provided in this
Agreement, all obligations of the Companies and Affiliates to the Shareholder
pursuant to any contract, agreement, understanding or otherwise shall have been
extinguished without any consideration from the Companies, and the Companies
shall have been fully released therefrom with respect to any future liability
thereon.
5.12 Resolutions. There shall have been delivered to Buyer a copy
of the resolutions duly adopted by the board of directors of each of the
Companies and by the Shareholder (if required), and certified as accurate by an
executive officer of each of the Companies, as the case may be, as of the
Closing Date, authorizing and approving certain corporate and organizational
matters relating to each of the Companies.
5.13 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
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5.14 Shareholder's Certificate. There shall have been delivered to
Buyer a certificate from the Shareholder, dated the Closing Date, certifying
that the representations and warranties of the Shareholder contained herein are
true and correct on and as of the Closing Date.
5.15 Opinion of U.S. Counsel to the Shareholder. Buyer shall have
received an opinion of counsel to the Company and the Shareholder, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit H hereto.
5.16 Opinion of Counsel to the Foreign Subsidiaries. Buyer shall
have received an opinion of counsel to each of the Foreign Subsidiaries, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer, with
regard to the matters set forth in Exhibit H hereto as such opinions relate to
the respective Foreign Subsidiary domiciled in the jurisdiction where such
foreign counsel is admitted or otherwise authorized to practice.
5.17 Other Documents. The Shareholder and the Companies shall have
delivered all other documents, instruments or writings required to be delivered
to Buyer at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as Buyer may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO
OBLIGATION OF THE SHAREHOLDER TO CLOSE
The obligation of the Shareholder to complete the Closing is subject
to the fulfillment, on or prior to the Closing Date, of the following
conditions, any of which may be waived by the Shareholder only in writing:
6.1 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of the Shareholder, a
materially adverse effect on the assets, properties, business, operations or
financial condition of Buyer.
6.2 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date (except for any
representation or warranty which expressly speaks only as of a stated date).
Buyer shall have performed and complied with all covenants and agreements
(including, without limitation, those contained in Article IV) required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date.
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6.3 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
6.4 Resolutions. There shall have been delivered to the
Shareholder a copy of the resolutions duly adopted by the board of directors of
each of Clear and Buyer, and certified accurate by an executive officer of
Clear and Buyer, respectively, as of the Closing Date, authorizing and
approving the execution and delivery by Clear and Buyer, respectively, of this
Agreement and the consummation by Clear and Buyer of the transactions
contemplated hereby.
6.5 Good Standing Certificates, Etc. Buyer shall have delivered
all such certified resolutions, certificates, documents or instruments with
respect to Buyer's corporate existence and authority as the Shareholder's
counsel may have reasonably requested prior to the Closing Date.
6.6 Officer's Certificate. There shall have been delivered to the
Shareholder a certificate of an executive officer of Buyer, dated the Closing
Date, certifying that the representations and warranties of Buyer contained
herein are true and correct on and as of the Closing Date.
6.7 Opinion of Counsel to Buyer. The Shareholder shall have
received an opinion of counsel to Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to the Shareholder, substantially to the
effect set forth in Exhibit I hereto.
6.8 Other Documents. Buyer shall have delivered all other
documents, instruments or writings required to be delivered to the Shareholder
at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as the Shareholder may reasonably request.
ARTICLE VII
INDEMNIFICATION
For purposes of this Article VII, it is agreed and understood that the
Buyer shall not obtain recovery, nor shall the Shareholder be liable, more than
one time or under more than one section of this Agreement for the same
underlying claim or breach.
7.1 Survival. The representations and warranties contained in
this Agreement shall survive the Closing until the expiration of twenty-four
(24) months following the Closing (the "Limitations Period"), provided,
however, that the representations and warranties of the Shareholder with
respect to tax matters set forth in Section 2.18 of this Agreement shall
survive for the period of time equal to the statute of limitations applicable
to such matter or matters.
7.2 Indemnification by the Shareholder. The Shareholder shall
indemnify, defend and hold harmless Buyer (which term shall include, for
purposes of this Article VII, Buyer's successors,
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assigns, directors, officers, employees and agents) against any and all losses,
damages, deficiencies, suits, claims, demands, judgments, costs, expenses or
other liabilities ("Losses") resulting from, arising from, or relating to (i)
any breach of a representation or warranty of the Shareholder contained in
Article II of this Agreement (but only if such indemnity is sought during the
Limitations Period), (ii) any failure by the Shareholder to perform or comply
with any agreement or obligation contained in this Agreement, (iii) the conduct
of the business of the Companies prior to Closing, except to the extent such
Loss was reflected in the Company Statements or disclosed pursuant to this
Agreement, (iv) any of the matters described in Schedules 2.1(b), 2.10(i) and
2.18(b) hereto, and in Section 2.9 hereof (Litigation), and (v) the assertion
by any person or entity that such person has or had any rights with respect to
the Stock purchased pursuant to this Agreement. With respect to clause (iii) of
the immediately preceding sentence, the Shareholder shall have no obligation to
indemnify Buyer as a result of Environmental Laws which were not in effect
prior to the Closing to the extent such damages could not have resulted under
Environmental Laws in effect prior the Closing.
7.3 Indemnification by Buyer. Buyer shall indemnify and hold
harmless the Shareholder against any and all Losses resulting from, arising
from, or relating to (i) any breach of a representation or warranty of Buyer
contained in Article III of this Agreement (but only if such indemnity is
sought during the Limitations Period) and (ii) any failure by Buyer to perform
or comply with any agreement or obligation contained in this Agreement.
7.4 Limitations of Claims. (a) No indemnification pursuant to
this Article VII shall be available to any party until the aggregate of all
Losses exceeds $25,000, provided, however, that thereafter claims may be made
against the indemnifying party for the full aggregate amount of such Losses,
without deduction of any such threshold amount.
(b) The amount of any Loss for which indemnification is
provided under this Article VII shall be net of (i) any amounts recovered or
recoverable by the Indemnified Party pursuant to any indemnification by or
indemnification agreement with any third party, (ii) any insurance proceeds or
other cash receipts or sources of reimbursement available as an offset against
such Loss (and no right of subrogation shall accrue to any third party
indemnitor, insurer or reimburser hereunder), and (iii) an amount equal to any
reduction of income taxes attributable to such Loss. If the amount to be netted
hereunder from any payment required under Sections 7.2 or 7.3 is determined
after payment by the Indemnifying Party of any amount required to be paid to an
Indemnified Party pursuant to this Article VII, the Indemnified Party shall
repay to the Indemnifying Party, promptly after such determination, any amount
that the Indemnifying Party would not have had to pay pursuant to this Article
VII had such determination been made at the time of such payment.
Indemnification payments hereunder shall be treated as adjustments to the
Purchase Price.
(c) Anything to the contrary herein notwithstanding, (i)
any indemnification obligation of the Shareholder pursuant to this Agreement
may be satisfied, at the election of Buyer in its sole discretion, by set-off
of the amount thereof against any future consideration or amount to be paid to
the Shareholder by Buyer, including but not limited to, the Deferred Payment
and the Earn-Out Payment otherwise due to the Shareholder, (ii) the
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indemnification obligation of the Shareholder pursuant to Section 7.2(iv) of
this Agreement with respect to the first Item on Schedule 2.9 (Katherine Henson
v. Rooker Tower Company, Inc. and TWR Telecom, Inc., the "Henson Litigation")
shall not exceed the amount of $1 million, and no indemnification with respect
thereto shall be due from Shareholder in the event such item is settled for a
sum not greater than $125,000, and (iii) the aggregate indemnification
obligation of any party to this Agreement (including all costs, expenses and
attorneys fees paid or incurred in connection therewith or with respect to the
curing of any misrepresentations or breaches under this Agreement) shall not
exceed the amount of the Purchase Price actually received by the Shareholder.
(d) Anything to the contrary herein notwithstanding, any
rights of the parties hereto to indemnification or other remedy based on the
representations, warranties, covenants and agreements set forth in this
Agreement shall not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of, or compliance with, any
such representation, warranty, covenant or agreement. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification or other remedy based on such representations,
warranties, covenants and agreements.
7.5 Procedures. (a) A party seeking indemnification pursuant to
Sections 7.2 or 7.3 (an "Indemnified Party") shall give prompt notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim or assessment, or the commencement of any action,
suit, audit or proceeding, by a third party in respect of which indemnity may
be sought hereunder (a "Third Party Claim") and will give the Indemnifying
Party such information with respect thereto as the Indemnifying Party may
reasonably request, but no failure to give such notice shall relieve the
Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
business days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified
Party relating to the Third Party Claim. The Indemnifying Party shall have the
right, exercisable by written notice (the "Notice") to the Indemnified Party
within thirty (30) days of receipt of notice from the Indemnified Party of the
commencement or assertion of any Third Party Claim, to assume the defense of
such Third Party Claim, using counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Party. Should the Indemnifying Party
so elect to assume the defense of a Third Party Claim, the Indemnifying Party
shall not be liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof. If
the Indemnifying Party shall fail to assume the defense of the Third Party
Claim within such thirty (30) day period, the Indemnified Party shall have the
right to undertake the defense of such Third Party Claim on behalf of the
Indemnifying Party. Regardless of whether the Indemnifying Party elects to
assume the defense of any such Third Party Claim, the Indemnified Party shall
not admit any liability with respect to, or settle, compromise or discharge
such Third Party Claim without the Indemnifying Party's prior written consent.
(b) The Indemnifying Party or the Indemnified Party, as
the case may be, shall in any event have the right to participate, at its own
expense, in the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim in accordance with the terms hereof, shall
have the right, upon five (5) days prior written notice to the Indemnified
Party, to consent to the entry of judgment with respect to, or otherwise settle
such Third Party Claim provided the Indemnifying Party agrees that as between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge such judgment or settlement unless
(i) the Third Party Claim involves equitable or other non-monetary damages or
(ii) in the reasonable judgment of the Indemnified Party such
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settlement would have a continuing material adverse effect on the Indemnified
Party's business (including any material impairment of its relationships with
customers and suppliers), in which case such settlement only may be made with
the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(d) Whether or not the Indemnifying Party chooses to
defend or prosecute any claim involving a third party, all the parties hereto
shall cooperate in the defense or prosecution thereof and shall furnish
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party
shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
7.6 Adjustment of Liability. In the event an Indemnifying Party
is required to make any payment under this Article VIII in respect of any
damages, liability, obligation, loss, claim, or other amount indemnified
hereunder, such Indemnifying Party shall pay the Indemnified Party an amount
(the "Adjusted Amount") which is equal to the sum of (i) the amount of such
damages, liability, obligation, loss, claim or other amount, minus (ii) the
amount of any insurance proceeds the Indemnified Party actually receives with
respect thereto, minus (iii) any third party payments actually received by the
Indemnified Party with respect to such damages, liability, obligation, loss,
claim or other amount after demand or notice to such third party from the
Indemnifying Party (with the consent of the Indemnified Party which will not be
unreasonably withheld), plus (iv) the amount of the Net Tax Liability. "Net Tax
Liability" shall be equal to the amount, if any, by which, the sum of all
federal, state, and local taxes, if any, required to be paid by such
Indemnified Party in respect of the receipt or accrual of the Adjusted Amount
exceeds the sum of (a) the value of any reduction in taxes of such Indemnified
Party by reason of deductions, credits or allowances in respect of the payment
or accrual of the damages, liability, obligation, loss, claim or other amount
included in clause (i) above recognized by such Indemnified Party in the same
year in which the taxes in respect of the receipt or accrual by such
Indemnified Party of the Adjusted Amount would be payable and (b) the net
present value of any reduction in taxes of such Indemnified Party by reason of
deductions, credits or allowances in respect of the payment or accrual of the
damages, liability, obligation, loss, claim or other amount included in clause
(i) above recognized by such Indemnified Party in years thereafter. The net
present value of any such reduction in taxes shall be determined by discounting
the amount of such reduction in taxes semi-annually from the date such tax
saving is recognized or reasonably expected to be recognized (which shall be
deemed to be the date the applicable tax return on which such tax saving would
be properly reflected is due, without extensions) to the date of payment of the
applicable indemnity by such Indemnifying Party, applying a discount factor
equal to the interest rate on federal income tax deficiencies in effect at the
time of such adjustment. For purposes of determining the amount of any taxes
required to be paid and any tax savings recognized or reasonably expected to be
recognized by such Indemnified Party hereunder, it shall be assumed that such
Indemnified Party is subject to tax in each applicable taxing jurisdiction at
the highest applicable marginal rate then in effect in such jurisdiction.
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ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at the election of the Shareholder, in the event
that Buyer shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(b) at the election of Buyer, in the event that the
Shareholder shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(c) at the election of the Shareholder or Buyer, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other person seeking to prevent the Closing or consummation of any
transaction contemplated by this Agreement, and either the Shareholder or
Buyer, as the case may be, reasonably and in good faith deems it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
(d) at the election of the Shareholder, in the event
that the Closing has not occurred by November 1, 1999, and, as of such date,
all of the conditions to the obligation of Buyer to complete the Closing other
than the conditions set forth in Sections 5.1, 5.2 and 5.3 shall have been
fulfilled;
(e) at the election of the Shareholder or Buyer, in the
event that the Closing has not occurred by November 15, 1999; and
(f) at any time on or prior to the Closing Date, by
mutual written consent of the parties hereto.
8.2 Post-Termination Obligations. Subject to Section 8.2 (b)
hereof, if this Agreement is terminated pursuant to Section 8.1, this Agreement
shall become void and of no further force and effect, except for this Section
8.2 and Sections 4.4(b) (Examinations and Inspections), 9.2 (Announcements),
9.4 (Governing Law), 9.6 (Notice), 9.7 (Expenses), 9.8 (Entire Agreement), and
9.10 (Headings), and none of the parties hereto shall have any liability in
respect of such termination, except that any party shall be liable for any
intentional or willful violation of the representations, warranties, covenants
or agreements of such party contained in this Agreement.
(b) If this Agreement is terminated pursuant to Section
8.1(d), Buyer shall promptly pay to the Shareholder the Break-Up Fee in
immediately available funds, by wire transfer to an account designated by the
Shareholder. For purposes of this Agreement, "Break-Up Fee" shall mean an
amount equal to $500,000, without interest.
ARTICLE IX
MISCELLANEOUS
9.1 Further Action. If, at any time following the Closing, any
further action is determined by Buyer to be necessary or desirable to carry out
the purposes of this Agreement or to vest in Buyer all right, title and
interest in and to the Stock, Shareholder shall take such action.
43
<PAGE> 51
9.2 Announcements. Prior to Closing, none of the parties hereto
shall issue any press release, place any advertisement or make any other public
statement relating to or in connection with this Agreement or the matters
contained herein without obtaining the prior approval of all parties hereto as
to the content and manner of presentation and publication thereof, which
approval shall not be unreasonably withheld or delayed.
9.3 Assignment; Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Buyer may assign its rights and obligations hereunder, subject to a
guaranty from Buyer of the assignee's performance thereof, to any direct or
indirect subsidiary or other entity controlled by Buyer, or to any parent
corporation of Buyer, for purposes of consummating the transactions
contemplated herein. This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the respective successors and permitted assigns of
the parties hereto. Nothing contained herein shall be deemed to confer upon any
other person or entity any right or remedy under or by reason of this
Agreement.
9.4 Law Governing Agreement. This Agreement shall be construed
and interpreted according to the internal laws of the State of Georgia,
excluding any choice of law rules that may direct the application of the laws
of another jurisdiction.
9.5 Amendment and Modification. Buyer, Clear and the Shareholder
may amend, modify and supplement this Agreement in such manner as may be agreed
upon in writing among them.
9.6 Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Buyer, to:
Clear Communications Group, Inc.
440 Interstate Parkway North
Atlanta, Georgia 30339
Attention: President
Facsimile: (770) 763-5635
44
<PAGE> 52
with a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Road, N.E.
Promenade II, Suite 3300
Atlanta, Georgia 30309-3592
Attention: Terry Ferraro Schwartz, Esq.
Facsimile: (404) 685-7031
(b) If to the Shareholder:
George A. Jackson
9930 Shadow Wood
Houston, Texas 77080
Facsimile: (713) 467-1321
with a copy to:
Campbell & Riggs, P.C.
1980 Post Oak Boulevard, Suite 2300
Houston, Texas 77056
Attention: C. R. Riggs
Facsimile: (713) 621-5453
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section 9.6.
9.7 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear its own
legal expenses and the expenses of its agents in connection with the
transactions contemplated hereby; provided, however, that the Shareholder shall
pay the legal expenses and the expenses of the agents of the Companies through
the Closing Date, and the Companies shall pay (i) the fees and expenses of Jain
& Jain, P.C., (ii) an amount, not to exceed $25,000, for services rendered to
the Companies (as specifically set forth in one or more invoices to the
Companies) by Arthur Andersen, LLP, and (iii) the fees and expenses of Mann
Frankfort Stein & Lipp (but only for amounts incurred subsequent to the
execution of this Agreement), in each case incurred in connection with services
rendered to TTI, SDI, Rooker and Lighting.
45
<PAGE> 53
9.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto (which Exhibits and Schedules are hereby incorporated
herein by reference and made a part hereof), together with the Confidentiality
Agreement dated November 4, 1998, as amended as of January 15, 1999, embodies
the entire agreement among the parties with respect to the transactions
contemplated hereby, and supersedes all prior agreements and understandings
among the parties with respect thereto.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Headings. The table of contents and article and section
headings herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
46
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
CLEAR HOLDINGS, INC.
By: /s/ Stephen F. Johnston, Sr.
------------------------------------------
Name: Stephen F. Johnston, Sr.
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ Stephen F. Johnston, Sr.
------------------------------------------
Name: Stephen F. Johnston, Sr.
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
JOHNSTON
(as to Section 1.15 of the Agreement only)
/s/ Stephen F. Johnston, Sr.
---------------------------------------------
Stephen F. Johnston, Sr.
SHAREHOLDER
/s/ George A. Jackson
---------------------------------------------
George A. Jackson
TWR FAMILY OF COMPANIES, LLC
By: /s/ George A Jackson
------------------------------------------
Name: George A. Jackson
--------------------------------------
Title: Sole Manager
--------------------------------------
47
<PAGE> 55
Schedule 1.3
1. Promissory Note dated April 1, 1998 from SDI to the Shareholder in the
original principal amount of $140,626.00.
2. Promissory Note dated December 31, 1998 from SDI to the Shareholder in
the original principal amount of $191,930.00.
3. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $972,450.00.
4. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $167,443.99.
5. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $500,000.00.
48
<PAGE> 56
Schedule 1.8
The calculation of 1999 EBITDA shall be made without regard to:
(i) the effect on the Companies of any (A) acquisition
of assets or (B) assumption of liabilities, in either case, as part of the
acquisition of any business or any entity as a going concern after the Closing;
(ii) the expenses incurred by Buyer or its affiliates
with respect to, or in connection with, the negotiation, authorization,
preparation, execution and performance of this Agreement, including, without
limitation, all fees and expenses of agents, representatives, brokers, counsel
and accountants;
(iii) management fees, allocation of administrative
overhead, legal or accounting services or other similar charges incurred,
charged or allocated by Buyer or any of its affiliates to the Companies;
(iv) any expenses equal to or less than $125,000,
associated with the final settlement of the Henson Litigation;
(v) any expenses of Lighting equal to or less than
$400,000, associated with research and development for a high-intensity (L-856)
flashing white lighting system, as more completely described in Schedule 1.8A;
and
(vi) gain or income, if any, recognized in connection
with (A) the grant, exercise or lapse without exercise, of the Option, or (B)
the cancellation of the M Sub Note.
The calculation of 1999 EBITDA shall include:
(i) charges for services rendered or goods delivered by
the Companies to Buyer or any affiliate of Buyer; provided, however, that the
rates deemed to be charged by the Companies for purposes of calculating EBITDA
shall not be less than those that would be charged by the Companies in a
transaction with a non-affiliated third party; and
(ii) charges for services rendered or goods delivered by
Buyer or any affiliate Buyer to the Companies shall be taken into account;
provided, however, that the rates deemed to be charged by the Buyer or any
affiliate of Buyer shall not be more than those that would be charged by Buyer
or affiliates of Buyer in a transaction with a non-affiliated third party.
49
<PAGE> 1
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
AMONG
CLEAR HOLDINGS, INC.,
CLEAR COMMUNICATIONS GROUP, INC.,
MCKENZIE TELECOMMUNICATIONS GROUP, INC.,
AND RHONDA MCKENZIE
FOR THE PURCHASE AND SALE OF
SUBSTANTIALLY ALL OF THE ASSETS OF
MCKENZIE TELECOMMUNICATIONS GROUP, INC.
DATED AS OF NOVEMBER 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - Sale and Purchase of Assets; Assumption of Liabilities.............................................. 1
1.1 Assets........................................................................................ 1
1.2 Assumption of Liabilities..................................................................... 3
1.3 Excluded Liabilities.......................................................................... 3
1.4 Consent of Third Parties...................................................................... 4
1.5 Purchase Price................................................................................ 4
1.6 Audited 2000 Financial Statements. ........................................................... 5
1.7 Form of Earn-Out.............................................................................. 5
1.8 Time and Place of Closing..................................................................... 6
1.9 Deliveries by the Company..................................................................... 6
1.10 Earn-Out Closing.............................................................................. 7
1.11 Restrictive Legend............................................................................ 8
ARTICLE II - Representations and Warranties of the Company and McKenzie......................................... 8
2.1 Corporate..................................................................................... 8
2.2 Authorization; Validity....................................................................... 8
2.3 No Violation.................................................................................. 9
2.4 Financial Statements.......................................................................... 9
2.5 Absence of Undisclosed Liabilities............................................................ 9
2.6 Title to Assets; Encumbrances................................................................. 10
2.7 Compliance with Laws.......................................................................... 10
2.8 Litigation.................................................................................... 11
2.9 Material Contracts and Commitments............................................................ 11
2.10 Real Estate................................................................................... 11
2.11 Broker's or Finder's Fees..................................................................... 11
2.12 Employee Benefit Plans........................................................................ 12
2.13 Employment Compensation....................................................................... 12
2.14 Labor Matters................................................................................. 12
2.15 Tax Matters................................................................................... 13
2.16 Absence of Certain Changes.................................................................... 14
2.17 Securities Laws Matters....................................................................... 16
ARTICLE III - Representations and Warranties of Clear and Buyer................................................. 16
3.1 Due Incorporation and Qualification........................................................... 16
3.2 Authorization................................................................................. 16
3.3 Non-Contravention............................................................................. 16
3.4 Authority of Clear and Buyer.................................................................. 16
3.5 Broker's or Finder's Fees..................................................................... 16
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - Covenants.......................................................................................... 17
4.1 Conduct of Business........................................................................... 17
4.2 Preservation of Business...................................................................... 18
4.3 Notice of Events.............................................................................. 18
4.4 Examinations and Inspections.................................................................. 18
4.5 Third Party Consents.......................................................................... 19
4.6 Properties.................................................................................... 19
4.7 Books and Records............................................................................. 19
4.8 Material Contracts............................................................................ 19
4.9 Pay in Lieu of Vacation and Bonus Accruals.................................................... 19
4.10 Environmental Audits and Other Investigations................................................. 19
4.11 Shareholders Employment and/or Restrictive Covenant Agreements................................ 20
4.12 Employment Agreements with Key Employees...................................................... 20
4.13 License of Tradenames, Etc.................................................................... 20
ARTICLE V - Conditions Precedent to Obligations of Clear and Buyer to Close..................................... 20
5.1 Completion of Due Diligence Investigation..................................................... 20
5.3 Certain Consents.............................................................................. 21
5.4 Representations and Covenants................................................................. 21
5.5 Litigation.................................................................................... 21
5.6 No Material Adverse Change.................................................................... 21
5.7 Good Standing Certificates, Etc............................................................... 21
5.8 Consent....................................................................................... 21
5.9 Restrictive Covenant Agreements............................................................... 21
5.10 Agreements With Key Employees................................................................. 21
5.11 Release of Liabilities........................................................................ 22
5.12 Governmental Permits and Approvals............................................................ 22
5.13 Certificates.................................................................................. 22
5.14 Opinion of Counsel to the Company............................................................. 22
5.15 Other Documents............................................................................... 22
ARTICLE VI - Indemnification.................................................................................... 22
6.1 Survival...................................................................................... 22
6.2 Indemnification by the Company and McKenzie................................................... 22
6.3 Indemnification by Clear and Buyer............................................................ 23
6.4 Limitations of Claims......................................................................... 23
6.5 Procedures.................................................................................... 24
ARTICLE VII - Termination of Agreement.......................................................................... 25
7.1 Termination................................................................................... 25
7.2 Post-Termination Obligations.................................................................. 26
ARTICLE VIII - Miscellaneous.................................................................................... 26
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
8.1 Further Action................................................................................ 26
8.2 Announcements................................................................................. 26
8.3 Assignment; Parties in Interest............................................................... 26
8.4 Law Governing Agreement....................................................................... 26
8.5 Amendment and Modification.................................................................... 26
8.6 Notice........................................................................................ 27
8.7 Expenses...................................................................................... 28
8.8 Entire Agreement.............................................................................. 28
8.9 Counterparts.................................................................................. 28
8.10 Headings...................................................................................... 28
</TABLE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Bill of Sale A
Investment Letter B
Officer's Certificate of Buyer C
McKenzie Employment Agreement D
Shareholder's Restrictive Covenants Agreement E
Key Employee Employment Agreement F
Employee Restrictive Covenants Agreement G
Certificate of McKenzie re Warranties H
Officer's Certificate of MTG I
Opinion of Counsel to MTG J
</TABLE>
Schedules
(iii)
<PAGE> 5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of the 1st day of November, 1999
(the "Agreement"), by and among CLEAR HOLDINGS, INC., a Georgia corporation
("Clear"), CLEAR COMMUNICATIONS GROUP, INC., a Georgia corporation and a
wholly-owned subsidiary of Clear ("Buyer"), MCKENZIE TELECOMMUNICATIONS GROUP,
INC., an Arizona corporation (the "Company"), and Rhonda McKenzie, as majority
shareholder of the Company ("McKenzie").
WITNESSETH:
WHEREAS, the Company is engaged in the business of wireless
telecommunications services (the "Business"); and
WHEREAS, the Company desires to sell, and Buyer desires to purchase,
substantially all of the assets of the Company relating to the Business,
together with the assumption by Buyer of certain obligations and liabilities
associated with the Business pursuant to this Agreement (such purchase and
assumption, the "Acquisition");
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
ARTICLE I
Sale and Purchase of Assets; Assumption of Liabilities
1.1 Assets. Subject to and upon the terms and conditions set
forth in this Agreement, at the Closing, the Company will sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer will purchase or acquire
from the Company, all right, title and interest of the Company in and to the
properties, assets and rights of every nature, kind and description, tangible
and intangible (including goodwill), whether real, personal or mixed, whether
accrued, contingent or otherwise and whether now existing or hereinafter
acquired, relating to or used or held for use in connection with the Business
as the same may exist on the Closing Date (collectively, the "Assets"),
including without limitation all those items in the following categories that
conform to the definition of the term "Assets":
(a) all machinery, equipment, furniture, furnishings,
automobiles, trucks, vehicles, tools, dies, molds and parts and similar
property (including, but not limited to, any of the foregoing purchased subject
to any conditional sales or title retention agreement in favor of any other
person);
1
<PAGE> 6
(b) all inventories of raw materials, work in process,
finished products, goods, spare parts, replacement and component parts, and
office and other supplies (collectively, the "Inventories"), including
Inventories held at any location controlled by the Company and Inventories
previously purchased and in transit to the Company at such locations;
(c) all computer hardware and software, including
programs and databases, whether owned, licensed, leased or internally developed
(including without limitation user manuals and, in the case of software owned
by the Company, both object code and source code versions), printers, modems
and other related equipment;
(d) all rights in and to products sold or leased
(including, but not limited to, products hereafter returned or repossessed and
unpaid sellers' rights of rescission, replevin, reclamation and rights to
stoppage in transit);
(e) all of the rights of the Company under all contracts,
arrangements, licenses, leases and other agreements, including, without
limitation, any right to receive payment for products sold or services
rendered, and to receive goods and services, pursuant to such agreements and to
assert claims and take other rightful actions in respect of breaches, defaults
and other violations of such contracts, arrangements, licenses, leases and
other agreements and otherwise;
(f) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and prepaid items;
(g) all notes and accounts receivable held by the
Company and all notes, bonds and other evidences of indebtedness of and rights
to receive payments from any person held by the Company;
(h) all patents, trademarks, trade names, service marks,
trade secrets and other proprietary property and all rights thereunder or in
respect thereof primarily relating to or used or held for use in connection
with the Business, including, but not limited to, rights to sue for and
remedies against past, present and future infringements thereof, and rights of
priority and protection of interests therein under the laws of any jurisdiction
worldwide and all tangible emodiments thereof (collectively, the "Intellectual
Property);
(i) all books, records, manuals and other materials (in
any form or medium), including, without limitation, all records and materials
maintained at the headquarters of the Company, advertising matter, catalogues,
price lists, correspondence, mailing lists, lists of customers, distribution
lists, photographs, production data, sales and promotional materials and
records, purchasing materials and records, personnel records, manufacturing and
quality control records and procedures, blueprints, research and development
files, records, data and laboratory
2
<PAGE> 7
books, Intellectual Property disclosures, media materials and plates,
accounting records, sales order files and litigation files;
(j) to the extent their transfer is permitted by law,
the Governmental Approvals, including all applications therefor;
(k) all rights to causes of action, lawsuits, judgments,
claims and demands of any nature available to or being pursued by the Company
with respect to the Business or the ownership, use, function or value of any
Asset, whether arising by way of counterclaim or otherwise;
(l) all guarantees, warranties, indemnities and similar
rights in favor of the Company with respect to any Asset; and
(m) all cash and cash equivalents.
Anything to the contrary herein notwithstanding, the Assets
shall not include the items set forth on Schedule 1.1 to this Agreement (the
"Excluded Assets").
Subject to the terms and conditions hereof, at the Closing,
the Assets shall be transferred or otherwise conveyed to the Buyer free and
clear of all liabilities, obligations, liens and encumbrances excepting only
Assumed Liabilities and Liens listed on Schedule 2.6(a).
1.2 Assumption of Liabilities. (a) Subject to the terms and
conditions hereof, at the Closing the Buyer shall assume and agree to pay,
honor and discharge when due any and all liabilities, obligations and
commitments relating exclusively to the Business or the Assets that are (x)
reflected on the April 30 Balance Sheet (as hereinafter defined), including
without limitation the items set forth on Schedule 1.2 to this Agreement, (y)
incurred after the date of the April 30 Balance Sheet in the ordinary course of
business consistent with prior practice and in accordance with the terms of
this Agreement (applied as if the provisions of Section 4.1 hereof had been in
effect from the close of business on the date of the April 30 Balance Sheet
through the Closing Date), or (z) reflected on Schedule 1.2 to this Agreement
(collectively, the "Assumed Liabilities").
(b) At the Closing, the Buyer shall assume the Assumed
Liabilities by executing and delivering to the Company an assumption agreement
in form reasonably satisfactory to the Company (the "Assumption Agreement").
1.3 Excluded Liabilities. Notwithstanding any other provision
hereof or any schedule or exhibit hereto, and regardless of any disclosure to
the Buyer, the Buyer shall not assume (i) any liabilities, obligations or
commitments of the Company relating to or arising out of the operation of the
Business or the ownership of the Assets prior to the Closing other than the
Assumed Liabilities,
3
<PAGE> 8
(ii) any liabilities of the Company relating to Excluded Assets, and (iii) the
liabilities listed on Schedule 1.3 to this Agreement (the aggregate of (i),
(ii) and (iii), the "Excluded Liabilities").
1.4 Consent of Third Parties. Notwithstanding anything to the
contrary in this Agreement, this Agreement shall not constitute an agreement to
assign or transfer any Governmental Approval, instrument, contract, lease,
permit or other agreement or arrangement or any claim, right or benefit arising
thereunder or resulting therefrom if an assignment or transfer or an attempt to
make such an assignment or transfer without the consent of a third party would
constitute a breach or violation thereof or affect adversely the rights of the
Buyer thereunder; and any transfer or assignment to the Buyer by the Company of
any interest under any such instrument, contract, lease, permit or other
agreement or arrangement that requires the consent of a third party shall be
made subject to such consent or approval being obtained. In the event any such
consent or approval is not obtained on or prior to the Closing Date, the
Company shall continue to use all reasonable efforts to obtain any such
approval or consent after the Closing Date until such time as such consent or
approval has been obtained, and the Company will cooperate with the Buyer in
any lawful and economically feasible arrangement to provide that the Buyer
shall receive the interest of the Company, as the case may be, in the benefits
under any such instrument, contract, lease or permit or other agreement or
arrangement, including performance by the Company, as the case may be, as
agent, if economically feasible, provided that the Buyer shall undertake to pay
or satisfy the corresponding liabilities for the enjoyment of such benefit to
the extent the Buyer would have been responsible therefore hereunder if such
consent or approval had been obtained. The Company shall pay and discharge, and
shall indemnify and hold the Buyer harmless from and against, any and all
out-of-pocket costs of seeking to obtain or obtaining any such consent or
approval whether before or after the Closing Date. Nothing in this Section
shall be deemed a waiver by the Buyer of its right to have received on or
before the Closing an effective assignment of all of the Assets nor shall this
Section be deemed to constitute an agreement to exclude from the Assets any
assets described under Section 1.1.
1.5 Purchase Price. Upon the terms and subject to the conditions
of this Agreement, and in consideration of the sale, assignment, transfer,
conveyance and delivery of the Assets, Buyer shall (i) assume the Assumed
Liabilities and (ii) pay to the Company the following amounts, not to exceed
$4.5 million in aggregate:
(a) at the Closing, $200,000.00 in cash (the "Closing
Payment"); and
(b) on the Earn-Out Date (as defined below) an amount
(the "Earn-Out"), in the form specified herein, equal to the EBITDA (as defined
below) of the business conducted by Buyer with the Assets after the Closing for
the period ending on the first anniversary of the Closing, as derived from the
Audited 2000 Statements (as defined below), less the sum of: (x) the Closing
Payment, and (y) an amount equal to the Assumed Liabilities less the Johnston
Note Amount. "Earn-Out Date"
4
<PAGE> 9
shall mean the thirtieth calendar day following final determination of the
Audited 2000 Statements pursuant to Section 1.6 of this Agreement. "EBITDA"
shall mean earnings before deduction for interest, taxes, depreciation and
amortization, and without deduction for any items of "overhead" allocated by
Buyer or Clear to the business conducted with the Assets. (The aggregate of the
Closing Payment and the Earn-Out is collectively referred to as the "Purchase
Price".) "Johnston Note Amount" shall mean the amount outstanding, as of the
Closing Date, under that certain Promissory Note, dated October 20, 1999, of
McKenzie Telecommunications Group, Inc. in favor of Stephen F. Johnston.
1.6 Audited 2000 Financial Statements. After the first
anniversary of the Closing, Buyer shall, at Buyer's expense, cause KPMG Peat
Marwick, L.L.P. to prepare and deliver to the Buyer and to the Company an
audited balance sheet and statement of income of the business conducted by
Buyer with the Assets after the Closing for the period ending on the first
anniversary of the Closing (collectively, the "Audited 2000 Statements"), in
accordance with generally accepted accounting principles and applying the
"percentage of completion" method of accounting. Within 30 days after the
delivery of the Audited 2000 Statements, the Company shall notify Buyer in
writing of any objections of the Company to such Audited 2000 Statements,
specifying in reasonable detail any such objections, and if the Company fails
to notify the Buyer in writing of any objections within such period the Company
shall be deemed to have agreed to the Audited 2000 Statements. If the Company
does not so object or if the Company and the Buyer agree on the resolution of
all such objections, the Audited 2000 Statements (with any such changes as may
have been agreed) shall be final and binding. The Company and the Buyer shall
negotiate in good faith to attempt to resolve any such objections, provided
that the Company and the Buyer shall each have the right, at any time, to
unilaterally terminate in writing all discussions with respect to such
objections or changes. Not later than ten business days after either the
Company or the Buyer shall have terminated such discussions, all such disputed
items shall be submitted for resolution to a certified public accounting firm
of national standing designated by the Company and the Buyer (the "Auditor"),
which Auditor shall be independent of and have no ongoing business relationship
with any of the Company, Buyer or their respective affiliates. The Company and
the Buyer shall each (i) cooperate fully with the Auditor and furnish to the
Auditor such work papers and other documents and information as the Auditor may
request, (ii) bear 50% of the fees and expenses of the Auditor incurred in
connection with the dispute resolution procedure pursuant to this Section, and
(iii) be afforded an opportunity to present to the Auditor any material it
deems relevant and to discuss the matters in dispute with the Auditor. The
Company and the Buyer shall use reasonable efforts to cause the report of the
Auditor to be rendered within 15 days of its appointment, and the Auditor's
determination as to the appropriateness and extent of changes (if any) to the
Audited 2000 Statements shall be final and binding.
1.7 Form of Earn-Out. (a) The Earn-Out shall be delivered to
the Company in the form determined pursuant to the following:
5
<PAGE> 10
(i) in the event that, prior to the Earn-Out Date,
Clear shall have (x) listed any of its equity securities on a national
securities exchange or NASDAQ and (y) become a reporting company pursuant to
the Securities Exchange Act of 1934 (collectively, a "Going Public Event"), the
Earn-Out shall take the form of such number of the publicly traded equity
securities of Clear (the "Public Stock") as shall be determined by dividing the
dollar amount of the Earn-Out by the average, for the 10 consecutive trading
days ending on the fifth trading day prior to the Earn-Out Date, of the closing
asked price for a share of Public Stock, and rounding up to the nearest whole
share;
(ii) in the event that, prior to the Earn-Out Date,
no Going Public Event shall have occurred, the Earn-Out shall, at the election
of the Company in its sole discretion, take the form of either (x) such number
of the shares of common stock of Clear (the "Common Stock") as shall be
determined by dividing the dollar amount of the Earn-Out by the fair market
value of a single share of Common Stock, as determined by the Board of
Directors of Clear, or (y) an unsecured subordinated promissory note of Clear
in the amount of the Earn-Out, payable in 36 equal monthly installments, with
interest on the principal amount thereof at the Prime Rate (the "Note"). The
"Prime Rate" shall mean a simple interest rate equal to the rate most recently
announced in The Wall Street Journal as the PRIME RATE, which rate shall be
adjusted on July 31 and December 31 of each year the Note remains outstanding.
Anything to the contrary herein notwithstanding, the first $250,000 in amount
of any Earn-Out otherwise payable in Common Stock or Notes pursuant to this
Section 1.7(a)(ii) shall be paid in cash.
(b) For purposes of all Tax Returns (as defined in
Section 2.15(g) of this Agreement), to be filed after the Closing Date by each
of Clear, the Company, McKenzie and Buyer, the Earn-Out shall be deemed to
include interest at the rate of 6.00% per annum.
1.8 Time and Place of Closing. The parties shall use their
reasonable efforts to cause the closing of the transactions contemplated by
this Agreement (the "Closing") to take place at 10:00 a.m. on November 1, 1999,
or at such other time as the parties may mutually agree (the date on which the
Closing actually occurs, the "Closing Date"). The place of the Closing shall be
at the offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100,
1230 Peachtree Street, N.E., Atlanta, Georgia, or such other location as may be
mutually agreed by the Parties.
1.9 Deliveries by the Company.
(a) Deliveries by the Company. At the Closing, the
Company shall deliver to Buyer:
(i) a general instrument of sale, conveyance,
assignment, transfer and delivery, conveying good and marketable title to all
the Assets, in the form of Exhibit A;
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(ii) such specific instruments of sale, conveyance,
assignment, transfer and delivery conveying good and marketable title to such
of the Assets included within such general instrument of sale, conveyance,
assignment, transfer and delivery as Buyer shall request;
(iii) all the Company's contracts, books, records
and other data relating to the Assets and the Company's operations (except the
Company's minute and stock books and all other records which the Company is
required by law to keep in its possession, as to which the Company will furnish
to Buyer, at Buyer's cost, at any time or from time to time after the Closing
Date, copies or transcripts);
(iv) the Investment Letter set forth in Exhibit B
hereto; and
(v) such other certificates and documents as may
be required by the terms of this Agreement or as Buyer or its counsel may
reasonably request.
(b) Deliveries by Buyer. At the Closing, Buyer will
deliver to the Company:
(i) the Closing Payment, by wire transfer of
immediately available funds to an account designated by the Company not later
than three business days prior to the Closing;
(ii) the Assumption Agreement;
(iii) a certificate of an authorized officer of
Buyer in the form of Exhibit C, certifying as to the accuracy of Buyer's
representations and warranties at and as of the Closing and that Buyer has
performed and complied with all of the terms, provisions and conditions to be
performed and complied with by Buyer at or before the Closing; and
(iv) such other certificates and documents as may
be required by the terms of this Agreement or as the Company or its counsel may
reasonably request.
1.10 Earn-Out Closing. On the Earn-Out Date, Buyer and the Company
shall hold a closing (the "Earn-Out Closing") at the location of the Closing,
or such other place as the parties may mutually agree. At the Earn-Out Closing,
Buyer shall deliver to the Company the Earn-Out, and, in the event the Earn-Out
consists of Public Stock, Common Stock or Notes, the Company shall deliver to
Buyer (i) an Investment Letter substantially in the form set forth in Exhibit B
hereto, executed by the Company as of the Earn-Out Date, and (ii) such
shareholders' and other agreements as may then be in force among all of the
existing holders of Common Stock of Clear.
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1.11 Restrictive Legend. The Public Stock, Common Stock and the
Notes, if any, to be issued pursuant to this Agreement shall be "restricted
securities", as defined in Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act") and each certificate representing any such
securities shall bear any legend or legends required by applicable state
securities laws or otherwise, as well as a legend substantially similar to the
following:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE, INCLUDING THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON CERTAIN
EXEMPTIVE PROVISIONS OF SAID ACTS. SAID SECURITIES CANNOT BE SOLD OR
TRANSFERRED UNLESS, IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
THE ISSUER, ANY SUCH SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION; AND (2) IN A TRANSACTION WHICH IS
EXEMPT UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION
WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS."
ARTICLE II
Representations and Warranties of the Company and McKenzie
As an inducement to Clear and Buyer to enter into this Agreement and
to consummate the transactions contemplated hereby, and with the knowledge that
Clear and Buyer shall rely thereon, the Company and McKenzie hereby jointly and
severally represent and warrant to Clear and to Buyer, as of the date hereof,
as set forth below.
2.1 Corporate.
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona. The Company elected to be taxed as an "S - corporation" effective July
20, 1993. No entity has ever merged with or been consolidated into the Company.
(b) Corporate Power. The Company has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as and where such is now being conducted. The Company is
duly qualified or otherwise authorized as a foreign
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corporation to transact business and is in good standing in each jurisdiction
in which a failure to be so qualified would have a material adverse effect on
the financial condition, assets, liabilities, operations or business prospects
of the Company (a "Material Adverse Effect").
(c) Subsidiaries. The Company does not have any
subsidiaries. Except as set forth on Schedule 2.1(c), the Company does not
currently own, and has never owned, directly or indirectly, any capital stock
or other equity securities of or interest in any corporation or other entity or
business.
(d) Corporate Documents, Etc. Copies of the Articles of
Incorporation, bylaws or other charter and organizational documents of the
Company, including any amendments thereto, which have been delivered by the
Company to Buyer are true, correct and complete copies of such instruments as
presently in effect.
2.2 Authorization; Validity. The execution and delivery of this
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Instruments") and the performance of the obligations
set forth herein and therein, have been duly authorized by the Board of
Directors of the Company and by the holders of all of the common stock or other
equity interests in the Company (collectively, the "Shareholders"), and no
other or further corporate act on the part of the Company or the Shareholders
is necessary therefor. This Agreement has been duly and validly executed and
delivered by the Company and the Shareholders and is, and when executed and
delivered, and the Ancillary Instruments to be executed and delivered by the
Company or the Shareholders pursuant hereto will be, legal, valid and binding
obligations of each such person or entity, enforceable in accordance with their
respective terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and the remedy of specific
performance and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
2.3 No Violation. Except as set forth on Schedule 2.3, no consent,
authorization or approval of, or declaration, filing or registration with, any
governmental, administrative or regulatory body, or any consent, authorization
or approval of any other third party, is necessary in order to enable the
Company or McKenzie to enter into and perform their obligations under this
Agreement and to consummate the transactions contemplated hereby, and neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) be in violation of the Articles of
Incorporation or bylaws of the Company; (b) except as set forth on Schedule
2.3(c), cause a default under any mortgage, deed of trust or other lien, charge
or encumbrance to which any of the Assets is subject or constitute a breach of
the terms of any evidence of indebtedness, agreement or contract relating to
the Business to which the Company is a party, or
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permit the termination of any such contract by another person; (c) result in
the creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets under any agreement or commitment to which
the Company is bound; (d) accelerate, or constitute an event entitling, or
which would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of the Company to accelerate the maturity of any such
indebtedness; (e) conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality binding on the Company;
or (f) violate any statute, law or regulation of any jurisdiction as such
statute, law or regulation relates to the properties or business of the
Company.
2.4 Financial Statements. Attached as Schedule 2.4 are copies of
the unaudited balance sheet, income statement, statement of stockholders'
equity and statement of cash flows of the Company for the twelve-month period
ended December 31, 1998 and the unaudited balance sheet and income statement of
the Company as of September 30, 1999 (together, the "Company Statements"). The
Company Statements (i) were prepared from the books and records of the Company,
(ii) except as set forth in Schedule 2.4, were prepared in a manner
substantially conforming to GAAP, using the accrual method of accounting, and
(iii) fairly present the financial condition of the Company as of the dates
thereof.
2.5 Absence of Undisclosed Liabilities. All liabilities,
commitments or obligations of the Company (whether secured or unsecured and
whether direct or indirect) are set forth or adequately reserved against in the
Company Statements, except for commercial liabilities and obligations incurred
since the date of the Company Statements in the ordinary course of business and
consistent with past practice and which would not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 2.5 hereto and
to the extent described in the Company Statements, the Shareholders have no
knowledge of any basis for the assertion against the Company of any liability,
and there are no circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, known to the Shareholders which would reasonably be
expected to give rise to liabilities, except commercial liabilities and
obligations incurred in the ordinary course of business and consistent with
past practice.
2.6 Title to Assets; Encumbrances.
(a) Merchantable Title. Except as set forth in Schedule
2.6 (a), the Company has good and merchantable title to all of the Assets,
including, without limitation, all Assets reflected in the Company Statements
(except for inventory disposed of in the ordinary course of business since the
date of such Company Statements) free and clear of all mortgages, liens
(statutory or otherwise), security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions, limitations,
mineral rights, charges or Encumbrances of any nature whatsoever (collectively,
"Liens") except for (a) materialmen's, mechanics', worker's, repairmen's,
employees' or other like
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Liens arising against the Company in the ordinary course of business, in each
case which are either not delinquent or are being contested in good faith and
by appropriate actions or proceedings conducted with due diligence and for the
payment of which adequate reserves in accordance with GAAP have been
established with respect thereto, and (b) Liens for property taxes not yet due
("Permitted Liens"). Except as set forth in Schedule 2.6(a), none of the Assets
is subject to any restrictions with respect to the transferability thereof and
title thereto will not be affected in any way by the transactions contemplated
hereby other than as disclosed in Schedule 2.6(a).
(b) Condition. Except as set forth on Schedule 2.6(b),
all of the Assets are in good operating condition and repair (except such minor
defects as do not interfere with the use thereof in the conduct of normal
operations), have been maintained consistent with the standards generally
followed in the industry and were sufficient to carry on the Company's business
as conducted during the preceding twelve (12) months.
2.7 Compliance with Laws.
(a) Compliance. Except as set forth on Schedule 2.7(a),
the Company (including all of its operations, practices, properties, real or
personal, owned or leased, and assets) is in compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations (collectively, "Laws") the violation of which, if uncured, would
have a Material Adverse Effect.
(b) Licenses and Permits. Except as set forth on Schedule
2.7(b), the Company does not require any licenses, permits, approvals,
authorizations or consents from any governmental and regulatory authorities for
the conduct of its business (as presently conducted), or for the operation of
its facilities. The Company, except for such items, the failure to obtain which
would not, individually or in the aggregate, have a Material Adverse Effect, is
in compliance with all such permits and licenses, approvals, authorizations and
consents applicable to the conduct of the Business.
(c) Environmental Matters. The applicable Laws relating
to pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, release or threatened release of
pollutants, contaminants, asbestos, lead-based paints, chemicals or industrial,
toxic, hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste are herein collectively referred to as
the "Environmental Laws." Except as set forth on Schedule 2.7(c), the Company
is in material compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any
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regulations, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
2.8 Litigation. Except as set forth in Schedule 2.8, there is no
action, suit, arbitration proceeding, investigation or inquiry, pending before
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
or, to the knowledge of McKenzie, threatened, against the Company.
2.9 Material Contracts and Commitments. Except as described in
Schedule 2.9 (i) the Company is not party to any lease, contract or commitment
of any nature involving consideration or other expenditure in excess of
$10,000, or involving performance over a period of more than one (1) year, or
which is otherwise individually material to the operations of the Business
(each, a "Material Contract"), and (ii) the Company is not in default under any
Material Contract.
2.10 Real Estate. The Company does not own any real property.
Schedule 2.10 sets forth all real property used or occupied by the Company in
the conduct of the Business (the "Real Property").
2.11 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Company or McKenzie is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
2.12 Employee Benefit Plans. Schedule 2.12 sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective bargaining
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals and
all written or binding oral statements of policies, practices or understandings
relating to employment, which are provided to, for the benefit of, or relate
to, any persons employed by the Company.
2.13 Employment Compensation. Schedule 2.13 contains a true and
correct list of all employees to whom the Company is paying compensation,
including bonuses and incentives for services rendered or otherwise, the annual
salary, average commission, or hourly wage compensation of each such employee,
and any bonus paid to each respective employee relating to services rendered
during the 1998 fiscal year. Buyer has been provided a copy of all W-2 or
similar foreign forms
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distributed to each employee of the Company in respect of compensation received
from the Company in the 1998 tax year.
2.14 Labor Matters. The Company is currently in compliance with
all applicable laws, rules and regulations relating to the employment of labor,
including those related to wages, hours and authorizations, except for such
matters of non-compliance as would not, individually or in the aggregate, have
a Material Adverse Effect. Except as set forth on Schedule 2.14(a), the Company
has paid or caused to be paid all compensation, including bonuses if any, due
and payable to its employees through the date hereof and will cause such
amounts to be paid through the Closing Date. Schedule 2.14(b) sets forth the
accrued vacation for each employee of the Company. Since its formation, the
Company has not experienced any labor disputes, union organization attempts or
any work stoppage due to labor disagreements. There is no unfair labor practice
charge or complaint against the Company or any Subsidiary pending or, to the
knowledge of the Company, threatened; there is no labor strike, dispute,
request for representation, slowdown or stoppage actually pending or, to the
knowledge of the Company, threatened against or affecting the Company nor any
secondary boycott with respect to products of the Company; no question
concerning representation has been raised or, to the knowledge of the Company,
is threatened respecting the employees of the Company; and no grievance has
been raised or, to the knowledge of the Company, is threatened respecting the
employees of the Company which might have a Material Adverse Effect.
2.15 Tax Matters. (a) The Company has filed all Tax Returns that
it was required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Returns. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Liens on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Except as set forth on Schedule 2.15(b), the Company
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party (other than immaterial amounts).
(c) No Shareholder, director or officer (or employee
responsible for Tax matters) of the Company has any basis to expect any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax liability of
the Company either (A) claimed or raised by any authority in writing or (B) as
to which any of the Shareholders and the directors and officers (and employees
responsible for Tax matters) of the Company has knowledge based upon personal
contact with any agent of such authority. Schedule 2.15 lists all federal,
state, local, and foreign income Tax Returns filed with respect to the Company
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for taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company since
December 31, 1995.
(d) The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The unpaid Taxes of the Company (A) did not, as of
September 30, 1999, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the September 30, 1999 balance
sheet (rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company in filing its Tax Returns.
(f) None of the Assumed Liabilities is an obligation to
make a payment that will not be deductible under Code ss.280G. The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within
the meaning of Code ss.6662. The Company is not a party to any Tax allocation
or sharing agreement. The Company (A) has not been a member of an affiliated
group filing a consolidated federal income Tax Return and (B) has no liability
for the Taxes of any person (other than the Company ) under Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(g) For purposes of this Agreement (A) "Tax" or "Taxes"
shall mean all taxes, charges, fees, duties, levies, penalties or other
assessments imposed by any federal, state, local or foreign governmental
authority, including, but not limited to, income, gross receipts, excise,
property, sales, gain, use, license, custom duty, unemployment, capital stock,
transfer, franchise, payroll, withholding, social security, minimum estimated,
and other taxes, and shall include interest, penalties or additions
attributable thereto; (B) "Tax Returns" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof; and (C) "Code" shall mean the Internal Revenue Code of 1986, as
amended .
2.16 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 2.16, since the date of the Company Statements there has been
no:
(a) Material Adverse Effect. Material Adverse Effect;
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(b) Damage. Loss, damage or destruction, whether covered
by insurance or not, affecting the Business;
(c) Increase in Compensation. Increase in the
compensation, salaries or wages payable or to become payable to any employee or
agent of the Company (including, without limitation, any increase or change
pursuant to any bonus, pension, profit sharing, retirement or other plan or
commitment), or any bonus or other employee benefit granted, made or accrued;
(d) Labor Disputes. Labor dispute or disturbance, other
than routine labor union or individual grievances which are not material to the
business, financial condition or results of operations of the Company, or the
Business;
(e) Commitments. Material commitment or transaction
(including, without limitation, any borrowing or capital expenditure) other
than in the ordinary course of business consistent with past practice;
(f) Dividends. Declaration, setting aside, or payment of
any dividend or any other distribution in respect of capital stock of the
Company; any redemption, purchase or other acquisition by the Company of any of
its capital stock, or any security relating thereto, including any options or
rights to purchase or acquire capital stock of the Company;
(g) Disposition of Property. Sale, lease or other
transfer or disposition of any properties or assets used or useful in the
Business, except in the ordinary course of business;
(h) Indebtedness. Material indebtedness for borrowed
money incurred, assumed or guaranteed;
(i) Liens. Mortgage, pledge, or Lien made on or
affecting any of the Assets except for Permitted Liens;
(j) Amendment of Contracts. Entry into, amendment,
extension or termination of any Material Contract, or any waiver of rights
thereunder, other than in the ordinary course of business;
(k) Payments, Loans and Advances. Payment, loan or
advance (other than payments pursuant to legal obligations of the Company and
other than advances to employees in the ordinary course of business for travel
and entertainment in accordance with past practice) to any person;
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(l) Credit. Any change in policies or practices with
respect to the Business and the granting of credit; or
(m) Unusual Events. Other events or conditions not in
the ordinary course of business which have had or could reasonably be expected
to have a Material Adverse Effect or which would be prohibited by the terms of
Section 4.1 hereof.
For purposes of subsections (d), (e) and (h) of this Section
2.16 only, the term "material" shall include items that, individually or in the
aggregate, exceed the sum of $1,500.00.
2.17 Securities Laws Matters. The Company which may receive Public
Stock, Common Stock or Notes pursuant to this Agreement will acquire such
Public Stock, Common Stock or Notes for investment for its own account, not on
behalf of others and not with a view to resell or otherwise distribute such
Public Stock, Common Stock or Notes. The Company acknowledges that the Public
Stock, Common Stock and Notes, at the time of issuance, shall not have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, and may not be sold, transferred or
disposed of by it absent the registration thereof or the availability of an
exemption from registration applicable thereto, and, as a result, the Company
must bear the risk of an investment in the Public Stock, Common Stock or Notes
for an indefinite period of time. The financial condition of the Company is
currently adequate to bear the substantial risk of an investment in the Public
Stock, Common Stock and Notes. The Company has sufficient knowledge and
experience in investment and business matters to understand the economic risk
of such an investment and the risk involved in a commercial enterprise such as
that of Clear. The Company is a bonafide resident of Arizona, and all
communications and information have been directed to it and have been received
in such place of residence. Representatives of the Company have had the
opportunity to ask questions of, and receive answers from, officers of Clear
concerning Clear, the Public Stock, Common Stock and the Notes and to obtain
any additional information which the Company reasonably requested. The Company
shall, at or prior to the Closing, complete and deliver to Buyer an investment
letter substantially in the form attached hereto as Exhibit B.
ARTICLE III
Representations and Warranties of Clear and Buyer
As an inducement to the Company and McKenzie to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that the Company and McKenzie shall rely thereon, the Clear and Buyer
hereby jointly and severally represent and warrant to the Company and McKenzie,
as of the date hereof, as set forth below:
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3.1 Due Incorporation and Qualification. Each of Clear and Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Georgia, and has the corporate power to carry on its
business as now being conducted and to own or lease its properties and assets
as now owned, leased or operated by it. Each of Clear and Buyer is duly
qualified or otherwise authorized as a foreign corporation to transact business
and is in good standing in each jurisdiction in which a failure to be so
qualified would have a material adverse effect on the business of Clear or
Buyer.
3.2 Authorization. Each of Clear and Buyer has full corporate
power and authority under its articles of incorporation and bylaws, and the
Board of Directors of each of Clear and Buyer has taken all necessary corporate
action to authorize Clear and Buyer, respectively, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and assuming
the due authorization, execution and delivery of this Agreement by the Company
and the Shareholders, this Agreement constitutes the valid and binding
obligation of each of Clear and Buyer, enforceable in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and the remedy of specific performance
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
3.3 Non-Contravention. Neither the execution and delivery of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby does or will violate, conflict with,
result in a breach of any provision of, constitute a default under (with or
without notice, lapse of time or pursuant to any legal or equitable principle)
or accelerate the maturity of or require the prepayment of any indebtedness of
either Clear or Buyer under, any judgment, order, decree or material agreement
or instrument to or by which any of Clear or Buyer is subject or bound.
3.4 Authority of Clear and Buyer. No consent, authorization or
approval of, or declaration, filing or registration with, any governmental,
administrative or regulatory body, is necessary in connection with the
transactions contemplated by this Agreement.
3.5 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Clear or Buyer is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
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ARTICLE IV
Covenants
4.1 Conduct of Business.
(a) Between the date hereof and the Closing Date, each
of the parties shall use its best efforts to conduct its business in the
ordinary course and in such a manner so that the representations and warranties
contained in Articles II and III hereof shall continue to be true and correct
in all material respects on and as of the Closing Date.
(b) Between the date hereof and the Closing Date, absent
the prior written consent of the Buyer, the Company shall refrain from:
(i) incurring any material liability or obligation
of any nature (whether accrued, absolute, contingent or
otherwise);
(ii) permitting any of its assets to be subjected
to any mortgage, pledge, Lien, security interest,
encumbrance, restriction or charge of any kind, except in the
ordinary course of business and except for Permitted Liens;
(iii) selling, transferring or otherwise disposing
of any assets, except in the ordinary course of business;
(iv) making any capital expenditure or commitment
therefor;
(v) increasing its indebtedness for borrowed
money, or making any loan to any person;
(vi) writing off as uncollectible any accounts
receivable, except write-offs in the ordinary course of
business charged to applicable reserves, none of which
individually or in the aggregate shall be material to the
Business;
(vii) granting any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive
employee or other employees, except pursuant to a legal
obligation with respect to such increase in existence prior
to January 1, 1999;
(viii) canceling or waiving any claims or rights of
substantial value;
(ix) making any change in any method of accounting
or auditing practice;
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(x) otherwise conducting the Business or entering
into any transaction with respect thereto other than in the
usual and ordinary manner and in the ordinary course; or
(xi) agreeing, whether or not in writing, to do
any of the foregoing.
For purposes of this Section 4.1.(b) only, the term "material" shall
include items that, individually or in the aggregate, exceed the sum of
$1,500.00.
4.2 Preservation of Business. Between the date hereof and the
Closing Date, each party shall (consistent with its normal business practices)
preserve its business, and use its best efforts to maintain its relationships
with its present suppliers and customers.
4.3 Notice of Events. Each of the parties shall promptly notify
the other parties of (i) any event, condition or circumstance occurring from
the date hereof through the Closing Date that may reasonably be construed to
constitute a violation or breach of this Agreement, or (ii) any event,
occurrence, transaction or other item which would have been required to have
been disclosed on any Schedule or statement delivered hereunder, had such
event, occurrence, transaction or item existed on the date hereof.
4.4 Examinations and Inspections.
(a) Between the date hereof and the Closing Date, Buyer
shall be entitled, through its employees and representatives, including,
without limitation, Buyer's accountants, legal counsel, bankers and advisors,
to make such inspection of the assets, properties, business and operations of
the Company, and such examination of the books, records and financial condition
of the Company, as Buyer reasonably desires. Any such inspections and
examinations shall be conducted at reasonable times and under reasonable
circumstances which do not disrupt the business, properties or assets of the
Company and with respect to inspections and examinations involving the property
and assets of third parties, subject to the consent of such third parties and
consistent with their policies. For the purpose of facilitating such review,
examination or inspection, the Company shall furnish the representatives of
Buyer with all such information and copies of such documents concerning the
affairs of the Company as such representatives may reasonably request and cause
their officers, employees, agents, accountants and attorneys to cooperate with
such representatives in connection with such review and examination.
(b) Buyer agrees that, with respect to any information
or documents obtained from the Company concerning its assets, properties,
customers, policies, finances, costs, sales, revenues, rights, obligations,
liabilities, strategies, business and operations ("Confidential Information"),
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<PAGE> 24
unless and until the transactions contemplated by this Agreement shall have
been consummated: (a) such Confidential Information is confidential and/or
proprietary to the Company and is entitled to and shall receive treatment as
such by Buyer (except to the extent that any such information is readily
ascertainable from public or published information or trade sources), and (b)
Buyer will, and will cause all of its employees, representatives, agents and
advisors who have access to any Confidential Information to, hold in confidence
and not disclose or use (except in respect of the transactions contemplated by
this Agreement) any such Confidential Information. Clear, Buyer, the Company
and the Shareholders shall also each comply with the restrictions on publicity
set forth in Section 8.2 of this Agreement. If the transactions contemplated by
this Agreement are not closed, all documents and other materials obtained by
Clear and Buyer from the Company shall be returned.
4.5 Third Party Consents. The Company agrees to use its best
effort to obtain, prior to the Closing Date, such consents and approvals as may
be required from parties to Material Contracts or other agreements with the
Company in order to prevent the Company from suffering a Material Adverse
Effect as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Each of Clear and Buyer
agrees to provide to the Company such assistance and information as may be
required to obtain the consents and approvals referred to above.
4.6 Properties. Between the date hereof and the Closing Date, the
Company shall maintain the Assets in customary repair, order and condition,
reasonable wear and tear excepted, and will maintain insurance upon all such
properties, in such amounts and of such kinds as are comparable to that in
effect on the date hereof.
4.7 Books and Records. Until the Closing, the Company shall
maintain its books, accounts and records in the usual manner on a basis
consistent with prior years.
4.8 Material Contracts. The Company shall refrain from amending,
modifying, or consenting to the termination of, any Material Contract or other
material agreements or waiving any of its material rights with respect thereto.
4.9 Pay in Lieu of Vacation and Bonus Accruals. Except as set
forth on Schedule 4.9, no pay in lieu of vacation or bonus accruals will be
payable to employees of the Company as of the Closing Date.
4.10 Environmental Audits and Other Investigations. The Company
agrees that Buyer may retain, at the sole expense of Buyer, a firm engaged in
the regular business of environmental engineering to conduct such environmental
audits of the facilities and operations of the Company, and the real estate
occupied in connection with the Business, as Buyer in its discretion shall
consider necessary or appropriate. Between the date hereof and the Closing
Date, Buyer, its agents,
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<PAGE> 25
employees, contractors, surveyors, and engineers shall have the right to enter
and go upon the Real Property at any time and from time to time for the purpose
of inspecting the Real Property and any and all improvements located thereon.
4.11 Shareholders Employment and/or Restrictive Covenant
Agreements. At the Closing, McKenzie shall each enter into employment and/or
restrictive covenant agreements with Buyer in substantially the forms set forth
in Exhibits D and E hereto, as applicable to each of them.
4.12 Employment Agreements with Key Employees. At or prior to
Closing, the Company shall use its best efforts to cause the employees of the
Company identified on Schedule 4.12 ("Selected Employees") to duly execute and
deliver employment and restrictive covenant agreements, in substantially the
form attached hereto as Exhibits F and G, respectively, and to terminate,
effective as of the Closing Date, any existing agreement to which such Selected
Employees are party respecting employment with the Company.
4.13 License of Tradenames, Etc. Effective on the Closing Date,
and contingent upon the consummation of the Closing in accordance with the
terms of this Agreement, the Company hereby grants to Buyer an unlimited,
world-wide, fully paid-up exclusive license to use the Intellectual Property
identified as Excluded Assets in Item 9 on Schedule 1.1 to this Agreement (the
"License"). The License shall be in effect for a period of one (1) year after
the Closing Date.
4.13 Securities Law Matters. The Company agrees not to sell,
transfer, convey or otherwise distribute the Public Stock, Common Stock and the
Notes, if any, received pursuant to this Agreement over which the Company has
direct or indirect control without registration under the Securities Act and
applicable federal and state securities laws, except pursuant to an exemption
from registration thereunder acceptable to and approved by legal counsel to
Buyer.
ARTICLE V
Conditions Precedent to
Obligations of Clear and Buyer to Close
The respective obligations of Clear and Buyer to complete the Closing
are subject to the fulfillment on or prior to the Closing Date of the following
conditions, any of which may be waived by Clear and Buyer only in writing:
5.1 Completion of Due Diligence Investigation. In the course of
Buyer's due diligence investigation of the Business, Buyer shall not have
discovered any fact or development which relates to or involves the Company,
Assets or Assumed Liabilities which would, in the reasonable judgment
21
<PAGE> 26
of Buyer, have a Material Adverse Effect or that, in the reasonable judgment of
Buyer, would be materially adverse to the interests of Buyer or challenge the
validity or legality of this Agreement or the consummation of the transactions
contemplated by this Agreement.
5.2 No Impairment of Contracts. Buyer shall have reasonably
determined that the contracts and agreements between the Company and its
material customers will, following the conveyance of the Assets, remain in full
force and effect, and that such arrangements are not subject to revocation,
withdrawal, cancellation or termination as a result of the Acquisition.
5.3 Certain Consents. Buyer shall have received the consent of
each of DFW Capital Partners, L.P., Wachovia Bank, N.A., Fleet National Bank
and the holders of a majority in interest of the capital stock of Clear to
enter into this Agreement and each of the transactions contemplated by this
Agreement.
5.4 Representations and Covenants. The representations and
warranties of the Company and McKenzie contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date. The
Company and McKenzie shall have performed and complied with all covenants and
agreements (including, without limitation, those contained in Article IV)
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
5.5 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of Buyer, a Material Adverse
Effect.
5.6 No Material Adverse Change. Buyer shall be satisfied, in its
reasonable discretion, that since April 30, 1999 there has been no event or
events constituting a Material Adverse Effect.
5.7 Good Standing Certificates, Etc. The Company shall have
delivered all such certificates, documents or instruments with respect to the
Company's corporate existence and authority as Buyer's counsel may have
reasonably requested prior to the Closing Date.
5.8 Consent. The Shareholders shall have unanimously approved and
adopted this Agreement and the consummation by the Company of the transactions
contemplated hereby.
5.9 Restrictive Covenant Agreements. Buyer shall have received the
employment and/or restrictive covenant agreements specified in Section 4.11, in
a form satisfactory to Buyer and executed by the parties to be bound thereby,
from the Company.
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<PAGE> 27
5.10 Agreements With Key Employees. Buyer shall have received the
employment agreements and restrictive covenant agreements specified in Section
4.13, in a form satisfactory to Buyer and executed by the parties to be bound
thereby, from the Selected Employees.
5.11 Release of Liabilities. All obligations of any of the
Shareholders to the Company for the payment of money pursuant to any contract,
agreement, understanding or otherwise shall have been paid in full.
5.12 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
5.13 Certificates. There shall have been delivered to Buyer: (i) a
certificate of McKenzie in the form of Exhibit H certifying as to the accuracy
of the representations and warranties of the Company and McKenzie at and as of
the Closing and that the Company has performed and complied with all of the
terms, provisions and conditions to be performed and complied with by the
Company at or before the Closing, and (ii) a certificate of the chief executive
officer of the Company in the form of Exhibit I, certifying as to certain
corporate matters, together with all of the attachments referred to therein.
5.14 Opinion of Counsel to the Company. Buyer shall have received
an opinion of counsel to the Company, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer, substantially to the effect set
forth in Exhibit J hereto.
5.15 Other Documents. The Company shall have delivered all other
documents, instruments or writings required to be delivered to Buyer at or
prior to the Closing pursuant to this Agreement and such other certificates of
authority (including good standing certificates), documents, instruments or
writings as Buyer may reasonably request.
ARTICLE VI
Indemnification
6.1 Survival. The representations and warranties contained in this
Agreement shall survive the Closing only until the expiration of fifteen (15)
months after such Closing, provided, however, that the representations and
warranties of the Shareholders with respect to tax matters set forth in Section
2.15 of this Agreement shall survive for the period of time equal to the
statute of limitations applicable to such matter or matters (the "Limitations
Period").
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<PAGE> 28
6.2 Indemnification by the Company and McKenzie. The Company and
McKenzie shall, jointly and severally, indemnify, defend and hold harmless
Clear and Buyer (which terms shall include, for purposes of this Article VI,
Clear and Buyer's respective successors, assigns, directors, officers,
employees and agents) against any and all losses, damages, deficiencies, suits,
claims, demands, judgments, costs, expenses or other liabilities ("Losses")
resulting from, arising from, or relating to (i) any breach of the Company's or
McKenzie's covenants and agreements contained in this Agreement, (ii) any
breach of a representation or warranty of the Company or McKenzie contained in
Article II of this Agreement, and (iii) the conduct of the Business prior to
the Closing Date.
6.3 Indemnification by Clear and Buyer. Clear and Buyer shall,
jointly and severally, indemnify and hold harmless the Company and McKenzie
against any and all Losses resulting from, arising from, or relating to (i) any
breach of Clear's or Buyer's covenants and agreements contained in this
Agreement, (ii) any breach of a representation or warranty of Buyer contained
in Article III of this Agreement, and (iii) the conduct of its business with
the Assets subsequent to the Closing Date.
6.4 Limitations of Claims. Anything to the contrary herein
notwithstanding:
(a) no claim for indemnification shall be brought after
expiration of the Limitations Period;
(b) no claim for indemnification shall be made until the
aggregate of all claims against the indemnifying party under the terms of this
Agreement shall exceed the sum of $10,000 (whereupon indemnification shall be
due for the entire amount of such claims, without deduction of the above
threshold amount);
(c) the aggregate amount of indemnification to be
provided by any indemnifying party shall in no event exceed the Purchase Price;
(d) the amount of any indemnification owed by McKenzie
and the Company under the terms of this Agreement shall be first satisfied, to
the extent of any positive amount of Earn-Out, by set-off against the Earn-Out,
such set-off to be made (i) first against the portion of the Earn-Out
consisting of Public Stock, Common Stock or Notes (to the extent of any such
amount), (ii) second against the balance of the Earn-Out, and (iii) third
against the Closing Payment. For purposes of this Section, McKenzie and the
Company, on the one hand, and Clear and Buyer, on the other hand, shall be
collectively deemed an "indemnifying party"; and
(e) the indemnification claims of any party shall be in
addition to, and not in lieu of, any other remedy available to such party under
applicable law or otherwise, provided, however, that
24
<PAGE> 29
with respect to claims arising under Section 6.2 (ii) and (iii) and Section 6.3
(ii) and (iii) of this Article, such indemnification claims shall (in the
absence of intentional breaches of representations or warranties, fraud or bad
faith) be the sole and exclusive remedy.
6.5 Procedures.
(a) A party seeking indemnification pursuant to Sections
6.2 or 6.3 (an "Indemnified Party") shall give prompt notice to the party from
whom such indemnification is sought (the "Indemnifying Party") of the assertion
of any claim or assessment, or the commencement of any action, suit, audit or
proceeding, by a third party in respect of which indemnity may be sought
hereunder (a "Third Party Claim") and will give the Indemnifying Party such
information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying
Party of any liability hereunder (except to the extent the Indemnifying Party
has suffered actual prejudice thereby). Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five (5) business days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third Party Claim. The Indemnifying Party shall have the right, exercisable by
written notice (the "Notice") to the Indemnified Party within thirty (30) days
of receipt of notice from the Indemnified Party of the commencement or
assertion of any Third Party Claim, to assume the defense of such Third Party
Claim, using counsel selected by the Indemnifying Party and reasonably
acceptable to the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. If the Indemnifying
Party shall fail to assume the defense of the Third Party Claim within such
thirty (30) day period, the Indemnified Party shall have the right to undertake
the defense of such Third Party Claim on behalf of the Indemnifying Party.
Regardless of whether the Indemnifying Party elects to assume the defense of
any such Third Party Claim, the Indemnified Party shall not admit any liability
with respect to, or settle, compromise or discharge such Third Party Claim
without the Indemnifying Party's prior written consent.
(b) The Indemnifying Party or the Indemnified Party, as
the case may be, shall in any event have the right to participate, at its own
expense, in the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim in accordance with the terms hereof, shall
have the right, upon five (5) days prior written notice to the Indemnified
Party, to consent to the entry of judgment with respect to, or otherwise settle
such Third Party Claim provided the Indemnifying Party agrees that as between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge such judgment or settlement unless
(i) the Third Party Claim involves equitable
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<PAGE> 30
or other non-monetary damages or (ii) in the reasonable judgment of the
Indemnified Party such settlement would have a continuing material adverse
effect on the Indemnified Party's business (including any material impairment
of its relationships with customers and suppliers), in which case such
settlement only may be made with the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) Whether or not the Indemnifying Party chooses to
defend or prosecute any claim involving a third party, all the parties hereto
shall cooperate in the defense or prosecution thereof and shall furnish
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party
shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
ARTICLE VII
Termination of Agreement
7.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at the election of the Company, in the event that
Buyer or Clear shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(b) at the election of Buyer, in the event that the
Company or McKenzie shall have materially breached any representation,
warranty, covenant or agreement contained in this Agreement or in any document
or other paper delivered pursuant to this Agreement;
(c) at the election of the Company or Buyer, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other person seeking to prevent the Closing or consummation of any
transaction contemplated by this Agreement, and either the Company or Buyer, as
the case may be, reasonably and in good faith deems it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
(d) at the election of the Company or Buyer, in the
event that the Closing has not occurred by December 31, 1999; and
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<PAGE> 31
(e) at any time on or prior to the Closing Date, by
mutual written consent of the Company and Buyer.
7.2 Post-Termination Obligations. If this Agreement is terminated
pursuant to Section 7.1, this Agreement shall become void and of no further
force and effect, except for this Section 7.2 and Sections 4.4(b) (Confidential
Information), 8.2 (Announcements), 8.4 (Governing Law), 8.6 (Notice), 8.7
(Expenses), 8.9 (Entire Agreement), and 8.11 (Headings), and none of the
parties hereto shall have any liability in respect of such termination, except
that any party shall be liable for any intentional or willful violation of the
representations, warranties, covenants or agreements of such party contained in
this Agreement.
ARTICLE VIII
Miscellaneous
8.1 Further Action. If, at any time following the Closing, any
further action is determined by Buyer to be necessary or desirable to carry out
the purposes of this Agreement or to vest in Buyer all right, title and
interest in and to the Assets, the Company shall take such action.
8.2 Announcements. Prior to Closing, none of the parties hereto
shall issue any press release, place any advertisement or make any other public
statement relating to or in connection with this Agreement or the matters
contained herein without obtaining the prior approval of all parties hereto as
to the content and manner of presentation and publication thereof, which
approval shall not be unreasonably withheld or delayed.
8.3 Assignment; Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Buyer may assign its rights and obligations hereunder, subject to a
guaranty from Buyer of the assignee's performance thereof, to an affiliate of
Buyer, for purposes of consummating the transactions contemplated herein. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the respective successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person or entity any
right or remedy under or by reason of this Agreement.
8.4 Law Governing Agreement. This Agreement shall be construed
and interpreted according to the internal laws of the State of Georgia,
excluding any choice of law rules that may direct the application of the laws
of another jurisdiction.
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<PAGE> 32
8.5 Amendment and Modification. The parties may amend, modify and
supplement this Agreement in such manner as may be agreed upon in writing among
them.
8.6 Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Clear or Buyer, to:
Clear Communications Group, Inc.
440 Interstate Parkway North
Atlanta, Georgia 30339
Attention: President
Facsimile: (770) 763-5635
with a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Road, N.E.
Promenade II, Suite 3300
Atlanta, Georgia 30309-3592
Attention: Terry Ferraro Schwartz, Esq.
Facsimile: (404) 685-7031
(b) If to the Company or McKenzie, to:
McKenzie Telecommunications Group, Inc.
7550 East Redfield Road
Scottsdale, Arizona 85260
Attention: Rhonda McKenzie
Facsimile:
with a copy to:
Jennings, Strauss & Salmon, P.L.C.
Two North Central Avenue
Suite 1600
28
<PAGE> 33
Phoenix, Arizona 85004
Attention: Scott Berg, Esq.
Facsimile: (602) 253-3255
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section 8.6.
8.7 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear its own
legal expenses and the expenses of its agents in connection with the
transactions contemplated hereby.
8.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto (which Exhibits and Schedules are hereby incorporated
herein by reference and made a part hereof), embodies the entire agreement
among the parties with respect to the transactions contemplated hereby, and
supersedes all prior agreements and understandings among the parties with
respect thereto, provided, however, that in the event this Agreement is
terminated pursuant to Article VII hereof, the obligations of the parties under
Section 12 of that certain Letter of Intent, dated July 19, 1999, shall revive
and be reinstated, such revival to be effective only upon the termination of
this Agreement, as if this Agreement had not been executed.
8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 Headings. The table of contents and article and section
headings herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
29
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
CLEAR HOLDINGS, INC.
By:/s/ Stephen F. Johnston, Sr.
--------------------------------------------------
Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer
CLEAR COMMUNICATIONS GROUP, INC.
By:/s/ Stephen F. Johnston, Sr.
--------------------------------------------------
Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer
MCKENZIE TELECOMMUNICATIONS GROUP, INC.
By:/s/ Rhonda McKenzie
--------------------------------------------------
Name: Rhonda McKenzie
Title: President and Chief Executive Officer
MCKENZIE:
/s/ Rhonda McKenzie
----------------------------------------------------
Typed Name: Rhonda McKenzie
30
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
O2WIRELESS SOLUTIONS, INC.
o2wireless Solutions, Inc., a Georgia corporation (the "Corporation"),
acting pursuant to Section 14-2-1007 of the Georgia Business Corporation Code,
as amended, does hereby adopt the following Amended and Restated Articles of
Incorporation superseding as of the date of filing hereof its previously filed
original Articles of Incorporation and amendments thereto:
FIRST: The name of the Corporation is: "o2wireless Solutions,
Inc."
SECOND: The Corporation shall have perpetual existence.
THIRD: The Corporation is organized pursuant to the provisions of
the Georgia Business Corporation Code. The object of the Corporation is
pecuniary gain and profit and the purpose for which the Corporation is formed is
to engage in such lawful business or activity as the Board of Directors may from
time to time specify by resolution.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 20,100,000 shares, consisting
of 100,000 shares of Class A Convertible Preferred Stock, $.01 par value ("Class
A Preferred Stock"), 5,000,000 shares of Serial Preferred Stock, no par value
per share ("Serial Preferred Stock"), and 15,000,000 shares of Common Stock,
$.0001 par value ("Common Stock").
All cross-references in each subdivision of this Article Fourth
refer to other paragraphs in such subdivision unless otherwise indicated.
The following is a statement of the designations, and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:
I.
CLASS A PREFERRED STOCK
Except as otherwise expressly provided herein, all shares of
Class A Preferred Stock shall be identical and shall entitle the holders thereof
to the same rights and privileges.
1. Dividends. (a) The holders of shares of Class A Preferred
Stock shall be entitled to receive dividends at the rate of $6.00 per share per
annum, payable either in cash or, at the election of the Board of Directors of
the Corporation, in shares of Class A Preferred Stock
<PAGE> 2
valued at $100 per share, such dividends to be paid quarterly on January 2, 1998
and on the first business day of each calendar quarter thereafter (each, a
"Dividend Payment Date"); provided, however, that with respect to dividends for
periods ending prior to November 19, 1999, the Board of Directors shall have the
right to elect to accrue such dividends, in which event such accrued and unpaid
dividends shall bear interest at the rate of 6% per annum from the Dividend
Payment Date on which they would have been payable absent such election to
accrue, such interest to be compounded on November 19, 1998 and on each November
19 thereafter. Such dividends shall be cumulative and shall accrue on a daily
basis from and after the date of issue whether or not declared and whether or
not there are any funds of the Corporation legally available for the payment of
dividends. The Corporation may at its option pay any dividend in either cash or
in shares of Class A Preferred Stock; provided, however, any dividend which is
not paid in cash on any Dividend Payment Date occurring after November 19, 1999
shall be declared and paid in shares of Class A Preferred Stock on such Dividend
Payment Date; provided, further, that dividends on the Class A Preferred Stock
may not be paid in cash unless all conditions to payment thereof imposed by the
terms of the Series D Senior Redeemable Preferred Stock have been satisfied. The
Board of Directors of the Corporation shall fix a record date for the
determination of holders of Class A Preferred Stock entitled to receive payment
of each dividend declared thereon, which record date shall be no more than 30
days prior to the Dividend Payment Date.
(b) As long as any shares of Class A Preferred Stock shall
remain outstanding, in no event shall any dividend be declared or paid upon, nor
shall any distribution be made upon, any Common Stock, other than a dividend or
distribution payable solely in shares of Common Stock of the Corporation, nor
shall any shares of Common Stock be purchased or redeemed by the Corporation,
nor shall any moneys be paid to or made available for a sinking fund for the
purchase or redemption of shares of any Common Stock; provided, however, that in
the event all cumulative dividends in arrears on all outstanding shares of Class
A Preferred Stock have been paid in full, the Corporation will be permitted to
pay dividends in respect of Common Stock not exceeding in the aggregate the cash
amount of the dividend paid on the Class A Preferred Stock in respect of the
most recent calendar quarter, not including any payments for cumulative
dividends in arrears. Notwithstanding the foregoing, the holders of the Series D
Senior Redeemable Preferred Stock shall be entitled to receive dividends
regardless of whether or not all cumulative dividends in arrears on all
outstanding shares of Class A Preferred Stock have been paid in full.
2. Redemption. The shares of the Class A Preferred Stock shall
be redeem able as follows:
2A. Redemption at Option of Holder. Upon the first to occur
of (i) the consolidation or merger of the Corporation with or into any
other corporation or entity (other than a merger in which the
Corporation is the surviving corporation and which will not result in
more than 50% in voting power of the capital stock of the Corporation
outstanding immediately after the effective date of such merger being
owned of record or
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beneficially by persons other than the holders of such capital stock
immediately prior to such merger in substantially the same proportions
in which such capital stock was held immediately prior to such merger),
(ii) a sale of all or substantially all of the properties and assets of
the Corporation as an entirety to any other person, (iii) any
transaction or series of related transactions as a result of which the
persons who were the beneficial holders of a majority in voting power
of the capital stock of the Corporation outstanding immediately before
such transaction (or series of transactions) are not the beneficial
holders, in substantially the same proportions, of a majority of the
voting power of the capital stock of the Corporation following such
transaction (or series of transactions), or (iv) the earlier to occur
of (1) the 180th day following the last to occur of: (A) the Put
Closing Date as defined in that certain Securities Purchase Agreement
among Stratford Capital Partners, L.P., Stratford Equity Partners,
L.P., and the Corporation, dated on or about November 1, 1999 (the
"Stratford Securities Purchase Agreement"), (B) the final Put Option
Closing at which all, or all remaining, Subject Securities are
purchased by the Corporation (as such terms are defined in that certain
Note and Equity Purchase Agreement among the Corporation, Clear
Communications Group, Inc., certain of their subsidiaries, and American
Capital Strategies, Ltd., dated on or about November 1, 1999 (the "ACS
Note and Equity Purchase Agreement")), (C) the Redemption Date for the
Series D Senior Redeemable Preferred Stock as defined in the Stratford
Securities Purchase Agreement, and (D) payment in full of the Notes as
defined in and pursuant to the ACS Note and Equity Purchase Agreement,
or (2) May 1, 2007, then any holder of shares of Class A Preferred
Stock shall, subject to the conditions hereinafter in this subparagraph
2A provided, and subject to the terms of that certain Credit Agreement
dated on or about November 1, 1999, by and among the Corporation, Clear
Communications Group, Inc., their respective subsidiaries, Wachovia
Bank, N.A. and the other lender's parties thereto, have the right to
elect to have all its shares of Class A Preferred Stock redeemed (in
the manner and with the effect provided in subparagraph s 2B and 2C
hereof) not later than the business day prior to the effective date of
such events specified in clauses (i) through (iii), or the date
specified in clause (iv), of this subparagraph 2A. The notice required
by subparagraph 4J(3) in connection with any transaction that would
give rise to a right of redemption pursuant to the preceding sentence
shall state that such transaction creates a right of redemption. Any
holder of shares of Class A Preferred Stock may exercise its right of
election to have such stock re deemed by giving written notice of its
election to the Corporation at the Corporation's principal office, or
at such other office as the Corporation may specify in such notice, by
such date as the Corporation may specify in such notice, which date
shall not be earlier than 10 days following the date on which such
notice was dispatched. Any date on which the Corporation shall be
required to redeem shares of the Class A Preferred Stock as provided in
this subparagraph 2A is hereinafter referred to as a "Redemption Date".
The shares of Class A Preferred Stock to be redeemed on a Redemption
Date shall be redeemed by paying for each share in cash an amount equal
to the sum of $100 plus dividends accrued and unpaid thereon to the
Redemption Date plus any interest accrued and unpaid thereon as
provided in paragraph 1, (any such amount payable on a Redemption
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Date being herein sometimes referred to as the "Redemption Price"). If
on or before such Redemption Date the funds necessary for redemption
shall have been set aside so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares of the
Class A Preferred Stock to be redeemed shall not have been surrendered
for cancellation, after the close of business on such Redemption Date,
the shares to be redeemed shall no longer be deemed outstanding and all
rights with respect to such shares shall, forthwith after the close of
business on the Redemption Date, cease, except only the right of the
holders thereof to receive, upon presentation of the certificate
representing shares to be redeemed, the Redemption Price without
interest thereon subsequent to the Redemption Date.
2B. Redeemed or Otherwise Acquired Shares to Be Retired.
Any shares of the Class A Preferred Stock redeemed pursuant to this
paragraph 2 or otherwise acquired by the Corporation in any manner
whatsoever shall be permanently retired and shall not under any
circumstances be reissued. The Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce the
number of authorized shares of the Class A Preferred Stock accordingly.
2C. Shares to be Redeemed. In case of the redemption, for
any reason, of only a part of the outstanding shares of the Class A
Preferred Stock as to which holders have elected redemption on a
Redemption Date, the shares of the Class A Preferred Stock to be
redeemed shall be selected pro rata, and there shall be so redeemed
from each holder electing redemption in whole shares, as nearly as
practicable to the nearest share, that proportion of all the shares of
Class A Preferred Stock to be redeemed which the number of shares held
of record by such holder bears to the total number of shares of Class A
Preferred Stock. Any shares of the Class A Preferred Stock not redeemed
on a Redemption Date shall be redeemed as soon thereafter as possible
and in the manner in which shares are otherwise redeemed on such
Redemption Date.
3. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
shares of Class A Preferred Stock shall be entitled, subject to the senior
rights of the holders of the Series D Senior Redeemable Preferred Stock, and
before any distribution or payment is made upon any Common Stock or any other
stock ranking junior to the Class A Preferred Stock as to rights on liquidation
but pari passu with the holders of Series C Preferred Stock, to be paid an
amount equal to $100 per share, plus any accrued but unpaid dividends thereon to
the date of such payment, plus any interest accrued and unpaid thereon as
provided in paragraph 1, and the holders of Class A Preferred Stock shall not be
entitled to any further payment (such amounts being herein sometimes referred to
as the "Liquidation Payment"). If upon such liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Class A Preferred Stock, the Series C Preferred
Stock and any other stock ranking pari passu with the Class A Preferred Stock
and the Series C Preferred Stock as to rights in liquidation shall be
insufficient to permit payment to such holders of the full amount to which
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they are entitled, then the entire assets of the Corporation to be so
distributed shall be distributed ratably per share among the holders of the
Class A Preferred Stock, the Series C Preferred Stock and any other stock
ranking pari passu with the Class A Preferred Stock and the Series C Preferred
Stock as to rights in liquidation in proportion to the amounts to which they
respectively are entitled. Upon any such liquidation, dissolution or winding up
of the Corporation, after the holders of Class A Preferred Stock, the Series C
Preferred Stock and any other stock ranking pari passu with the Class A
Preferred Stock and the Series C Preferred Stock as to rights in liquidation
shall have been paid in full the amounts to which they shall be entitled, the
remaining net assets of the Corporation shall be distributed ratably to the
holders of Common Stock and any other stock ranking junior to the Class A
Preferred Stock in liquidation. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Payment and
the place where said sums shall be payable shall be given by mail, postage
prepaid, not less than 30 or more than 60 days prior to the payment date stated
therein, the holders of record of the Class A Preferred Stock, such notice to be
addressed to each shareholder at such holder's post office address as shown by
the records of the Corporation. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations, not the sale or
transfer by the Corporation of all or any part of its assets, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation within the
meaning of any of the provisions of this paragraph 3.
4. Conversion.
4A. Right to Convert Class A Preferred Stock. (a) Subject
to the terms and conditions of this paragraph 4, the holder of any
share or shares of Class A Preferred Stock shall have the right, at its
option at any time, to convert all or any portion of such shares of
Class A Preferred Stock (except that upon any liquidation, dissolution
or winding up of the Corporation the right of conversion shall
terminate at the close of business on the last full business day next
preceding the date fixed for payment of Liquidation Payment), into such
number of fully paid and nonassessable whole shares of Common Stock as
is obtained by multiplying the number of shares of Class A Preferred
Stock so to be converted by $100 and dividing the result by the
conversion price of $2.7411 per share, or by the conversion price as
last adjusted and in effect at the date any share or shares of Class A
Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to herein as the "Conversion
Price").
(b) The rights of conversion contained in this paragraph 4
shall be exercised by the holder of shares of Class A Preferred Stock
by giving written notice that such holder elects to convert a stated
number of shares of Class A Preferred Stock into Common Stock and by
surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other
office or agency of the Corporation as the Corporation may designate by
notice in writing to the holder or holders of the Class A Preferred
Stock) at any time during its usual business hours on the date set
forth
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<PAGE> 6
in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common
Stock shall be issued.
4B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in
subparagraph 4A and surrender of the certificate or certificates for
the share or shares of Class A Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share
or shares of Class A Preferred Stock. To the extent permitted by law,
such conversion shall be deemed to have been effected, and the
Conversion Price shall be determined, as of the close of business on
the date on which such written notice shall have been received by the
Corporation and the certificate or certificates for such share or
shares shall have been surrendered as aforesaid, and at such time the
rights of the holder of such share or shares of Class A Preferred Stock
shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby.
4C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares may be issued upon conversion of the Class A
Preferred Stock into Common Stock. At the time of each conversion, the
Corporation shall pay in cash or in shares of Class A Preferred Stock
valued at $100 per share an amount equal to all dividends, if any,
accrued and unpaid to the date of such conversion, together with any
accrued interest on such dividends, on the shares surrendered for
conversion. In case the number of shares of Class A Preferred Stock
represented by the certificate or certificates surrendered pursuant to
subparagraph 4A exceeds the number of shares converted, the Corporation
shall, upon such conversion, execute and deliver to the holder thereof,
at the expense of the Corporation, a new certificate or certificates
for the number of shares of Class A Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted.
If any fractional interest in a share of Common Stock would, except for
the provisions of the first sentence of this subparagraph 4C, be
deliverable upon any such conversion, the Corporation, in lieu of
delivering the fractional share thereof, shall pay to the holder
surrendering the Class A Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional interest as
determined in good faith by the Board of Directors of the Corporation.
4D. Adjustment of Price Upon Issuance of Common Stock.
Except as provided in subparagraph 4F hereof, if and whenever the
Corporation shall issue or sell, or is in accordance with subparagraphs
4D(1) through 4D(7) deemed to have issued or sold, any shares of its
Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale,
then, forth with upon such issue or sale, the Conversion Price shall be
determined by dividing (i) an
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amount equal to the sum of (a) the number of shares of Common Stock
outstanding immediately prior to such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of
outstanding Class A Preferred Stock) multiplied by the then existing
Conversion Price, and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of
shares of Common Stock outstanding immediately after such issue or sale
(including as outstanding all shares of Common Stock issuable upon
conversion of outstanding Class A Preferred Stock).
For purposes of this subparagraph 4D, the following
subparagraphs 4D(1) to 4D(7) shall also be applicable:
4D(1). Issuance of Rights or Options. In case at any time
the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock
or securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options)
shall be less than the Conversion Price in effect immediately prior to
the time of the granting of such Options, then the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall
be deemed to have been issued for such price per share as of the date
of granting of such Options and thereafter shall be deemed to be
outstanding. Except as otherwise provided in subparagraph 4D(3), no
adjustment of the Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
4D(2). Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder
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<PAGE> 8
are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Corporation
as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share
as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be out standing, provided that (a) except
as otherwise provided in subparagraph 4D(3) below, no adjustment of the
Conversion Price shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities, and
(b) if any such issue or sale of such Convertible Securities is made
upon exercise of any Option to purchase any such Convertible Securities
for which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this subparagraph 4D, no further
adjustment of the Conversion Price shall be made by reason of such issue
or sale.
4D(3). Change in Option Price or Conversion Rate. If (i)
the purchase price provided for in any Option referred to in
subparagraph 4D(1), (ii) the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred
to in subparagraph 4D(l) or 4D(2) or (iii) the rate at which any
Convertible Securities referred to in subparagraph 4D(1) or 4D(2) are
convertible into or exchangeable for Common Stock shall change at any
time (in each case other than under or by reason of provisions designed
to protect against dilution), then the Conversion Price in effect at the
time of such event shall, as required, forthwith be readjusted to such
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold; and on
the expiration of any such Option or the termination of any such right
to convert or exchange such Convertible Securities, the Conversion Price
then in effect hereunder shall, as required, forthwith be readjusted to
the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder
shall no longer be deemed to be outstanding. If the purchase price
provided for in any such Option referred to in subparagraph 4D(l) or the
rate at which any Convertible Securities referred to in subparagraph
4D(l) or 4D(2) are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of
the delivery of Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder shall, as
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<PAGE> 9
required, forthwith be adjusted to such respective amount as would have
been obtained had such Option or Convertible Securities never been
issued and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
reduced.
4D(4). Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock, Options or Convertible Securities,
any Common Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration, and the Conversion Price
shall be reduced as if the Corporation had subdivided its outstanding
shares of Common Stock into a greater number of shares, as provided in
subparagraph 4E hereof.
4D(5). Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Corporation in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be
deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Corporation, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the Corporation, such Options shall be deemed to have
been issued without consideration, and the Conversion Price shall be
reduced as if the Corporation had subdivided its outstanding shares of
Common Stock into a greater number of shares, as provided in
subparagraph 4E hereof.
4D(6). Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be, provided that such shares of Common Stock shall in fact
have been issued or sold.
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4D(7). Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Corporation, and the disposition of
any such shares shall be considered an issue or sale of Common Stock for
the purposes of this subparagraph 4D.
4E. Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall
be proportionately increased.
4F. Certain Issues of Common Stock Excepted. The
Corporation shall not be required to make any adjustment of the
Conversion Price pursuant to subparagraph 4D upon the occurrence of any
of the following events: (i) the issuance of Common Stock upon
conversion of outstanding shares of Class A Preferred Stock, (ii) the
grant of options and the issuance of up to 325,000 shares of Common
Stock upon the exercise of options granted by the Corporation to
employees, officers and directors of the Corporation pursuant to the
Corporation's currently existing Stock Option Plan or pursuant to a
stock option plan approved by the Compensation Committee of the Board of
Directors of the Corporation, (iii) the issuance of shares of Common
Stock pursuant to Section 2.2 of the ISDC Agreement (as defined herein),
and (iv) the issuance of the warrants to purchase shares of the Common
Stock (the "Warrants") and the issuance of shares of Common Stock upon
the exercise of the Warrants pursuant to the terms of (A) the Stratford
Securities Purchase Agreement and (B) the ACS Note and Equity Purchase
Agreement.
4G. Reorganization, Reclassification, Consolidation,
Merger or Sale. If any capital reorganization or reclassification of the
capital stock of the Corporation or any consolidation or merger of the
Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected
in such a way (including, without limitation, by way of consolidation or
merger) that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holders of at least a majority of the
outstanding shares of Class A Preferred Stock) shall be made whereby
each holder of a share or shares of Class A Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the
conversion of such shares or shares of the Class A Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore
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so receivable had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of such
holder to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly practicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or
lesser number of shares of common stock of the surviving corporation is
issuable to holders of Common Stock of the Corporation outstanding
immediately prior to such merger or consolidation, the Conversion Price
in effect immediately prior to such merger or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the
Corporation. The Corporation will not effect any such consolidation or
merger, or any sale of all or substantially all of its assets and
properties, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument (in form reasonably satisfactory to the
holders of at least a majority of the shares of Class A Preferred Stock
at the time outstanding), executed and mailed or delivered to each
holder of shares of Class A Preferred Stock at the last address of such
holder appearing on the books of the Corporation, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
4H. Automatic Conversion. In the event that, at any time
while any of the Class A Preferred Stock shall be outstanding, the
Corporation shall complete an underwritten public offering involving the
sale by the Corporation of shares of Common Stock (i) at a per share
price to the public of not less than 2.5 times the Conversion Price in
effect at the time and (ii) in which the gross proceeds to the
Corporation and/or selling stockholders, as the case may be, before
deduction of underwriters' discounts and commissions and expenses of the
offering, are at least $15,000,000, then all outstanding shares of Class
A Preferred Stock shall, automatically and without further action on the
part of the holders of the Class A Preferred Stock, be converted into
shares of Common Stock in accordance with the terms of paragraph 4A with
the same effect as if the certificates evidencing such shares had been
surrendered for conversion, such conversion to be effective
simultaneously with the closing of such public offering; provided,
however, that certificates evidencing the shares of Common Stock
issuable upon such conversion shall not be issued except on surrender of
the certificates for the shares of the Class A Preferred Stock so
converted.
4I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid, addressed
to each holder of shares of Class A Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice
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shall state the Conversion Price resulting from such adjustment, setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
4J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock
of any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with, or a sale of all
or substantially all its assets to, another corporation, or any
acquisition of beneficial ownership by any person or group of
voting stock of the Corporation representing more than 50% of the
voting power of all outstanding shares of such voting stock,
whether by way of merger or consolidation or other wise;
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
(5) the Corporation shall take any action or there shall
be any event which would result in an automatic conversion of the
Class A Preferred Stock pursuant to subparagraph 4H; or
(6) the Corporation shall take any action or there shall
be any event which would result in a redemption of the Class A
Preferred Stock pursuant to subparagraph 2A,
then, in any one or more of said cases, the Corporation shall give, by
first class mail, postage prepaid, addressed to each holder of any
shares of Class A Preferred Stock at the address of such holder as shown
on the books of the Corporation, (a) at least 20 days' prior written
notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place, and (c) in the case
of any event which would result in an automatic conversion of the Class
A Preferred Stock pursuant to subparagraph 4H, at least 20 days' prior
written
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notice of the date on which the same is expected to be completed. Such
notice in accordance with the foregoing clause (a) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause (b) shall also
specify the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may
be.
4K. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock or
its treasury shares, solely for the purpose of issue upon the conversion
of the Class A Preferred Stock as herein provided, such number of shares
of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Class A Preferred Stock. The Corporation covenants
that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof and, without
limiting the generality of the foregoing, the Corporation covenants that
it will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all times
equal to or less than the effective Conversion Price. The Corporation
will take all such action as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirements of any national
securities exchange upon which the Common Stock of the Corporation may
be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of
Common Stock issued and issuable after such action upon conversion of
the Class A Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Corporation's Articles of
Incorporation.
4L. No Reissuance of Class A Preferred Stock. Shares of
Class A Preferred Stock which are converted into shares of Common Stock
as provided herein shall not be reissued.
4M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of the Class A Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in
respect thereof, provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in
the issuance and delivery of any certificate in a name other than that
of the holder of the Class A Preferred Stock which is being converted.
4N. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Class A Preferred
Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Class A Preferred
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Stock in any manner which interferes with the timely conversion of such
Class A Preferred Stock.
4O. Definition of Common Stock. As used in this paragraph
4, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, $.0001 par value as constituted on the date of
filing these Amended and Restated Articles of Incorporation and shall
also include any capital shares of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof
to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided, however, that the Common Stock receivable upon
conversion of shares of the Class A Preferred Stock of the Corporation,
or in case of any reorganization or reclassification of the outstanding
shares of the Corporation, the stock, securities or assets provided for
in paragraph 4G, shall include only shares designated as Common Stock
of the Corporation on the date of filing these Amended and Restated
Articles of Incorporation.
5. Voting. Except as otherwise required by law or these
Amended and Restated Articles of Incorporation, the holders of the Class A
Preferred Stock and the holders of Common Stock shall be entitled to notice of
any stockholders meeting in accordance with the By-laws of the Corporation and
to vote together as a single class upon any matter submitted to the stockholders
for a vote as follows: (i) the holders of Class A Preferred Stock shall have one
vote for each full share of Common Stock into which their respective shares of
Class A Preferred Stock are convertible on the record date for the vote and (ii)
the holders of Common Stock shall have one vote per share of Common Stock.
6. Restrictions. At any time when shares of Class A Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by these
Amended and Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent (which consent shall not be
unreasonably withheld in the case of clause (d) below) of the holders of a
majority of the outstanding Class A Preferred Stock, given in person or by
proxy, either in writing within 20 days after notice from the Company or at a
special meeting called for that purpose, at which meeting the holders of the
shares of such Class A Preferred Stock shall vote together as a class:
(a) The Corporation will not (i) create or authorize the
creation of any additional class or series of shares unless the same
ranks junior to the Class A Preferred Stock as to the distribution of
assets upon the liquidation, dissolution or winding up of the
Corporation, (ii) increase the authorized amount of the Class A
Preferred Stock or the authorized amount of any additional class or
series of shares unless the same ranks junior to the Class A Preferred
Stock as to the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation, or (iii) create or
authorize any obligation or
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security convertible into shares of Class A Preferred Stock or into
shares of any other class or series unless the same ranks junior to the
Class A Preferred Stock as to the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, whether any
such creation or authorization or increase shall be by means of
amendment of the Articles of Incorporation, merger, consolidation or
otherwise.
(b) The Corporation will not amend, alter or repeal its
Articles of Incorporation or By-laws in any manner, or file any
directors' resolutions pursuant to O.C.G.A. ss. 14-2-602 containing any
provision, in either case, which adversely affects the respective
preferences, qualifications, special or relative rights or privileges of
the Class A Preferred Stock or which in any manner adversely affects the
Class A Preferred Stock or the holders thereof.
(c) The Corporation will not (i) consolidate or merge
with or into any other corporation or other entity, (ii) sell or
otherwise dispose of all or substantially all of its properties and
assets as an entirety to any other person, or (iii) liquidate, dissolve
or wind up its business.
(d) The Corporation will not, directly or indirectly,
acquire any other business entity, or the assets of any other business
entity as a going concern.
(e) The Corporation will not, directly or indirectly,
enter into any material transaction with any affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the
Corporation unless such affiliate is a wholly-owned subsidiary of the
Corporation.
(f) The Corporation will not, directly or indirectly,
engage in any business other than the business in which it was engaged
immediately after the initial issuance of the Class A Preferred Stock.
(g) The Corporation will not enter into any agreement
after the date of filing of these Amended and Restated Articles of
Incorporation which would restrict its right to pay dividends on the
Class A Preferred Stock in shares of Class A Preferred Stock.
(h) The Corporation will not repurchase, redeem or retire
any shares of capital stock of the Corporation other than shares of
Class A Preferred Stock; provided, that no such vote shall be required
to permit the redemption of (i) the Corporation's Series C Convertible
Preferred Stock (ii) the Corporation's Series D Senior Redeemable
Preferred Stock, (iii) the Warrants; or (iv) the shares of Common Stock
issuable upon exercise of the Warrants.
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(i) The Corporation will not amend the terms of any stock
option plan or stock option agreement for the benefit of employees of
the Company.
7. Preemptive Rights. (a) Each holder of Class A Preferred Stock
shall have the right to purchase such holder's Proportionate Percentage (as
hereinafter defined) of any future Eligible Offering (as hereinafter defined).
For the purposes of this paragraph 7, the following terms shall have the
meanings set forth below:
"Proportionate Percentage" means, with respect to a holder of
Class A Preferred Stock as of any date, the result (expressed as a
percentage) obtained by dividing (i) the number of shares of Common
Stock issuable upon conversion of shares of Class A Preferred Stock held
by such holder as of such date, by (ii) the total number of shares of
Common Stock outstanding as of such date (treating, for purposes of such
calculation, all shares of Class A Preferred Stock as having been
converted at such date).
"Eligible Offering" means an offer by the Corporation to sell for
cash shares of capital stock of the Corporation, or any security
convertible into or exchangeable for, or carrying rights or options to
purchase, capital stock of the Corporation, other than an offering of
securities by the Corporation:
(i) to its full-time employees, officers, directors,
consultants or advisors of Common Stock, or options to purchase
Common Stock in connection with or pursuant to any stock option
or stock purchase plan or other compensatory arrangement;
(ii) in connection with any merger of, or acquisition by,
the Corporation or any subsidiary of the Corporation (including,
without limitation, pursuant to the ISDC Agreement);
(iii) in connection with the conversion or exercise of
outstanding securities of the Corporation;
(iv) in any public offering resulting in automatic
conversion of the Class A Preferred Stock pursuant to
subparagraph 4H of paragraph 4; and
(v) to Stratford Capital Partners, L.P., Stratford Equity
Partners, L.P., or American Capital Strategies, Ltd. of the
Warrants or the issuance of Common Stock upon the exercise of
such Warrants.
(b) The Corporation shall, before issuing any securities pursuant
to an Eligible Offering, give written notice thereof to each holder of Class A
Preferred Stock. Such notice shall specify the security or securities the
Corporation proposes to issue and the consideration that the Corporation intends
to receive therefor. For a period of ten (10) days following the date of such
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<PAGE> 17
notice, each such holder shall be entitled, by written notice to the
Corporation, to elect to purchase all or any part of such holder's Proportionate
Percentage of the securities being sold in the Eligible Offering; provided,
however, that if two or more securities shall be proposed to be sold as a "unit"
in an Eligible Offering, any such election must relate to such unit of
securities. In the event that elections pursuant to this paragraph 7 shall not
be made with respect to any securities included in an Eligible Offering within
such ten (10) day period, then the Corporation may issue such securities to
other purchasers, but only for a consideration payable in cash not less than,
and otherwise on no more favorable terms to the purchaser than, that set forth
in the Corporation's notice and only within 180 days after the end of such ten
(10) day period. In the event that any such offer is accepted by a holder of
Class A Preferred Stock, the Corporation shall sell to such holder, and such
holder shall purchase from the Corporation, for the consideration and on the
terms set forth in the notice as aforesaid, the securities that such holder
shall have elected to purchase.
II.
SERIAL PREFERRED STOCK
The Serial Preferred Stock may be issued in one or more series
from time to time by the Board of Directors, pursuant to O.C.G.A. ss. 14-2-602,
subject to the rights of holders of the Class A Preferred Stock. The description
of shares of each series of Serial Preferred Stock, including any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption shall be as
set forth in resolutions adopted by the Board of Directors, and articles of
amendment shall be filed with the Secretary of State of the State of Georgia as
required by law to be filed with respect to the issuance of such Serial
Preferred Stock, prior to the issuance of any shares of such series.
The Board of Directors is expressly authorized, at any time, by
adopting resolutions providing for the issuance of, or providing for a change in
the number of, shares of any particular series of Serial Preferred Stock and, if
and to the extent from time to time required by law, by filing articles of
amendment which are effective without shareholder action to increase or decrease
the number of shares included in each series of Serial Preferred Stock, but not
below the number of shares then issued, and to set or change in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series. Each
designation of Serial Preferred Stock and the terms thereof (which shall be in
addition to those general terms applicable to Serial Preferred Stock set forth
elsewhere in this Article Fourth) shall be set forth in one or more Appendices
to these Articles of Incorporation. Notwithstanding the foregoing, the Board of
Directors shall not be authorized to change the right of holders of the Common
Stock of the Corporation to vote one vote per share on all matters submitted for
shareholder action. The authority of the Board of Directors with respect to each
series of Serial Preferred Stock shall include, but not be limited to, setting
or changing the following:
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(i) the annual dividend rate, if any, on shares of such
series, the times of payment and the date from which dividends
shall be accumulated, if dividends are to be cumulative;
(ii) whether the shares of such series shall be
redeemable and, if so, the redemption price and the terms and
conditions of such redemption;
(iii) the obligations, if any, of the Corporation to
redeem shares of such series pursuant to a sinking fund;
(iv) whether shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or
classes and, if so, the terms and conditions of such conversion
or exchange, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(v) whether the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and,
if so, the extent of such voting rights;
(vi) the rights of the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation; and
(vii) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to
such series.
The shares of Serial Preferred Stock of any one series shall be
identical with each other in all respects except as to the dates from and after
which dividends thereon shall cumulate if cumulative.
III.
COMMON STOCK
1. Dividends. The holders of shares of Common Stock shall be
entitled to receive such dividends as from time to time may be declared by the
Board of Directors of the Corporation, subject to the rights of holders of the
Class A Preferred Stock and the Serial Preferred Stock.
2. Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after payment
shall have been made to holders of the Class A Preferred Stock and the Serial
Preferred Stock of the full amounts to which they shall respectively be entitled
as stated and expressed herein or as may be stated and expressed pursuant
hereto, the holders of Common Stock shall be entitled to share ratably according
to the number
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of shares of Common Stock held by them in all remaining assets of the
Corporation available for distribution to its stockholders.
3. Voting. Except as otherwise provided by law, voting rights
shall be governed by paragraph 5 of subdivision I of this Article Fourth.
FIFTH: Any action required by the law or by the articles of
incorporation or bylaws of the Corporation to be taken at a meeting of the
shareholders of the Corporation and any action which may be taken at a meeting
of the shareholders may be taken without a meeting if a written consent, setting
forth the action so taken, shall be signed by persons entitled to vote at a
meeting those shares having sufficient voting power to cast not less than the
minimum number (or numbers, in the case of voting by groups) of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote were present and voted, provided that action by less than
unanimous written consent may not be taken with respect to any election of
directors as to which shareholders would be entitled to cumulative voting. No
such written consent shall be effective unless the consenting shareholder has
been furnished the same material that would have been required to be sent to
shareholders in a notice of a meeting at which the proposed action would have
been submitted to the shareholders, or unless the consent includes an express
waiver of the right to receive the material. Notice of such action without a
meeting by less than unanimous written consent shall be given within ten (10)
days of the taking of such action to those shareholders of record on the date
when the written consent is first executed and whose shares were not represented
on the written consent.
SIXTH: None of the holders of shares of Common Stock shall be
entitled as a matter of right to purchase, subscribe for or otherwise acquire
any additional shares of stock of the Corporation of any class, or any options
or warrants to purchase, subscribe for or otherwise acquire any such additional
shares, or any shares, evidences of indebtedness or other securities convertible
into or carrying options or warrants to purchase, subscribe for or otherwise
acquire any such additional shares, or any shares, evidence of indebtedness or
other securities convertible into or carrying options or warrants to purchase,
subscribe for or otherwise acquire any additional shares.
SEVENTH: (a) No director of the Corporation shall be personally
liable to the Corporation or its shareholders for monetary damages for breach of
duty of care or other duty as a director, provided that this provision shall
eliminate or limit the liability of a director only to the maximum extent
permitted from time to time by the Georgia Business Corporation Code or any
successor law or laws.
(b) Any repeal or modification of Article Seventh (a) by
the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
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EIGHTH: The mailing address of the initial principal office of
the Corporation is 440 Interstate North Parkway, Atlanta, Georgia 30339.
NINTH: The street address of the initial registered office of the
Corporation is 1230 Peachtree Street, N.E., Promenade II, Suite 3100, Atlanta,
Georgia 30309-3592, located in Fulton County. The initial registered agent of
the Corporation at such office is Terry Ferraro Schwartz.
TENTH: The name and address of the incorporator of the
Corporation is L. Brett Lockwood, Suite 3100, Promenade II, 1230 Peachtree
Street, N.E., Atlanta, Georgia 30309.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Articles of Incorporation to be executed by a duly authorized officer of the
Corporation, on this 4th day of May, 2000.
CLEAR HOLDINGS, INC.
By: /s/ William J. Loughman
------------------------------------------------
William J. Loughman
Chief Financial Officer, Secretary and Treasurer
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APPENDIX A
DESIGNATION IN RESPECT OF
SERIES C PREFERRED STOCK
(the "Series C Designation")
1. Designation. Seventy-five thousand (75,000) shares of the
Serial Preferred Stock, no par value, are hereby constituted as a series of the
Serial Preferred Stock designated as the "Series C Convertible Preferred Stock"
(the "Series C Preferred Stock"). The following is a statement of the
designations, and the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of the Series C Preferred Stock. Except as
otherwise expressly provided herein, all shares of Series C Preferred Stock
shall be identical and shall entitle the holders thereof to the same rights and
privileges.
2. Dividends. (a) The holders of shares of Series C Preferred
Stock shall be entitled to receive dividends at the rate of $6.00 per share per
annum, payable either in cash or, at the election of the Board of Directors of
the Corporation, in shares of Series C Preferred Stock valued at $100 per share,
such dividends to be paid quarterly on April 3, 2000 and on the first business
day of each calendar quarter thereafter (each, a "Dividend Payment Date");
provided, however, that dividends on the Series C Preferred Stock may not be
paid in cash unless all conditions to payment thereof imposed by the terms of
the Series D Senior Redeemable Preferred Stock have been satisfied. Dividends
for the periods ending June 30, September 30 and December 31, 1999 shall accrue
at the rate of $6.00 per share per annum and shall bear interest at the rate of
6% per annum compounded quarterly from such respective dates, which accrued
dividends and interest thereon shall be paid in full on redemption or conversion
of the Series C Preferred Stock, unless earlier paid. All dividends shall be
cumulative and shall accrue on a daily basis from and after the date of issue
whether or not declared and whether or not there are any funds of the
Corporation legally available for the payment of dividends. The Board of
Directors of the Corporation shall fix a record date for the determination of
holders of Series C Preferred Stock entitled to receive payment of each dividend
declared thereon, which record date shall be no more than 30 days prior to the
Dividend Payment Date.
(b) As long as any shares of Series C Preferred Stock shall
remain outstanding, in no event shall any dividend be declared or paid upon, nor
shall any distribution be made upon, any Common Stock or any other stock ranking
junior to the Series C Preferred Stock, other than a dividend or distribution
payable solely in shares of Common Stock or such junior stock, nor shall any
shares of Common Stock or any such junior stock be purchased or redeemed by the
Corporation, nor shall any moneys be paid to or made available for a sinking
fund for the purchase or redemption of shares of any Common Stock or any such
junior stock; provided, however, that in the event all cumulative dividends in
arrears on all outstanding shares of Series C Preferred Stock have been paid in
full, the Corporation will be permitted to pay dividends in respect of Common
Stock or any such junior stock not exceeding in the aggregate the cash amount of
the dividend paid on the Series C Preferred Stock in respect of the most
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recent calendar quarter, not including any payments for cumulative dividends in
arrears. Notwithstanding the foregoing, the holders of the Series D Senior
Redeemable Preferred Stock shall be entitled to receive dividends regardless of
whether or not all cumulative dividends in arrears on all outstanding shares of
Series C Preferred Stock have been paid in full.
3. Redemption. The shares of the Series C Preferred Stock shall
be redeemable as follows:
3A. Redemption at the Option of Holder. Upon the first to
occur of (i) the completion of an underwritten public offering of the
Corporation's Common Stock resulting in gross proceeds (before deduction
of underwriters' commissions and discounts and expenses of the offering)
of not less than $15 million; (ii) the consolidation or merger of the
Corporation with or into any other corporation or entity (other than a
merger in which the Corporation is the surviving corporation and which
will not result in more than 50% in voting power of the capital stock of
the Corporation outstanding immediately after the effective date of such
merger being owned of record or beneficially by persons other than the
holders of such capital stock immediately prior to such merger in
substantially the same proportions in which such capital stock was held
immediately prior to such merger); (iii) a sale of all or substantially
all of the properties and assets of the Corporation as an entirety to
any other person; (iv) any transaction or series of related transactions
as a result of which the persons who were the beneficial holders of a
majority in voting power of the capital stock of the Corporation
outstanding immediately before such transaction (or series of
transactions) are not the beneficial holders, in substantially the same
proportions, of a majority of the voting power of the capital stock of
the Corporation following such transaction (or series of transactions);
or (v) the earlier to occur of (1) the 180th day following the last to
occur of: (A) the Put Closing Date as defined in that certain Securities
Purchase Agreement among Stratford Capital Partners, L.P., Stratford
Equity Partners, L.P., and the Corporation, dated on or about November
1, 1999 (the "Stratford Securities Purchase Agreement"), (B) the final
Put Option Closing at which all, or all remaining, Subject Securities
are purchased by the Corporation (as such terms are defined in that
certain Note and Equity Purchase Agreement among the Corporation, Clear
Communications Group, Inc., certain of their subsidiaries, and American
Capital Strategies, Ltd., dated on or about November 1, 1999 (the "ACS
Note and Equity Purchase Agreement")), (C) the Redemption Date for the
Series D Senior Redeemable Preferred Stock as defined in the Stratford
Securities Purchase Agreement, and (D) payment in full of the Notes as
defined in and pursuant to the ACS Note and Equity Purchase Agreement,
or (2) May 1, 2007, then any holder of Shares of Series C Preferred
Stock shall, subject to the conditions hereinafter in this paragraph 3
provided, and subject to the terms of that certain Credit Agreement
dated on or about November 1, 1999, by and among the Corporation, Clear
Communications Group, Inc., their respective subsidiaries, Wachovia
Bank, N.A. and the other lender's parties thereto, have the right to
have all its shares of Series C Preferred Stock redeemed (in the manner
and with the effect provided in subparagraphs 3D and 3E hereof) not
later than the closing of the
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public offering referred to in clause (i), not later than the business
day prior to the effective date of such events specified in clauses
(ii) through (iv), or the date specified in clause (v), of this
subparagraph 3A. The notice required by subparagraph 5J(3) in
connection with any transaction that would give rise to a right of
redemption pursuant to the preceding sentence shall state that such
transaction creates a right of redemption. Any holder of shares of
Series C Preferred Stock may exercise its right of election to have such
stock redeemed by giving written notice of its election to the
Corporation at the Corporation's principal office, or at such other
office as the Corporation may specify in such notice, by such date as
the Corporation may specify in such notice, which date shall not be
earlier than 10 days following the date on which such notice was
dispatched.
3B. Redemption at Option of the Corporation. At any time
prior to July 31, 1999, the Corporation may elect to redeem all, but not
less than all, outstanding shares of Series C Preferred Stock (in the
manner and with the effect specified in subparagraphs 3D and 3E hereof)
by giving written notice by mail, postage prepaid, to the holders of
record of the Series C Preferred Stock specifying the Redemption Date
(which shall be not less than 10 days from the date such notice is
given), the Redemption Price (as specified in subparagraph 3C) and that
the right to convert the Series C Preferred Stock into Common Stock
shall terminate at the close of business on the day preceding the
Redemption Date.
3C. Redemption Procedure. Any date on which the
Corporation is required to redeem any shares of Series C Preferred Stock
by reason of an election pursuant to subparagraph 3A or 3B is herein
referred to as a "Redemption Date". The shares of Series C Preferred
Stock to be redeemed on a Redemption Date shall be redeemed by paying
for each share in cash an amount equal to the sum of $100 (in the case
of redemption at the option of the holder pursuant to subparagraph 3A)
or $110 (in the case of redemption at the option of the Corporation
pursuant to subparagraph 3B) plus, in each case, dividends accrued and
unpaid thereon to the Redemption Date plus any interest accrued and
unpaid thereon as provided in paragraph 2, (any such amount payable on a
Redemption Date being herein sometimes referred to as the "Redemption
Price"). If on or before such Redemption Date the funds necessary for
redemption shall have been set aside so as to be and continue to be
available therefor, then, notwithstanding that any certificate for
shares of the Series C Preferred Stock to be redeemed shall not have
been surrendered for cancellation, after the close of business on such
Redemption Date, the shares to be redeemed shall no longer be deemed
outstanding and all rights with respect to such shares shall, forthwith
after the close of business on the Redemption Date, cease, except only
the right of the holders thereof to receive, upon presentation of the
certificate representing shares to be redeemed, the Redemption Price
without interest thereon subsequent to the Redemption Date.
3D. Redeemed or Otherwise Acquired Shares to Be Retired.
Any shares of the Series C Preferred Stock redeemed pursuant to this
paragraph 3 or otherwise
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acquired by the Corporation in any manner whatsoever shall be
permanently retired and shall not under any circumstances be reissued.
The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the number of authorized shares of
the Series C Preferred Stock accordingly.
3E. Shares to be Redeemed. In case of the redemption, for
any reason, of only a part of the outstanding shares of the Series C
Preferred Stock on a Redemption Date, the shares of the Series C
Preferred Stock to be redeemed shall be selected pro rata, and there
shall be so redeemed from each holder electing redemption in whole
shares, as nearly as practicable to the nearest share, that proportion
of all the shares of Series C Preferred Stock to be redeemed which the
number of shares held of record by such holder bears to the total number
of shares of Series C Preferred Stock. Any shares of the Series C
Preferred Stock not redeemed on a Redemption Date shall be redeemed as
soon thereafter as possible and in the manner in which shares are
otherwise redeemed on such Redemption Date.
4. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
shares of Series C Preferred Stock shall be entitled, subject to the senior
rights of the holders of the Series D Senior Redeemable Preferred Stock, and
before any distribution or payment is made upon any Common Stock or any other
stock ranking junior to the Series C Preferred Stock as to rights on liquidation
but pari passu with the holders of Class A Convertible Preferred Stock, to be
paid an amount equal to $100 per share, plus any accrued but unpaid dividends
thereon to the date of such payment, plus any interest accrued and unpaid
thereon as provided in paragraph 2, and the holders of Series C Preferred Stock
shall not be entitled to any further payment (such amounts being herein
sometimes referred to as the "Liquidation Payment"). If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Series C Preferred Stock, the
Class A Convertible Preferred Stock and any other stock ranking pari passu with
the Series C Preferred Stock and the Class A Convertible Preferred Stock as to
rights in liquidation shall be insufficient to permit payment to such holders of
the full amount to which they are entitled, then the entire assets of the
Corporation to be so distributed shall be distributed ratably per share among
the holders of Series C Preferred Stock, the Class A Convertible Preferred Stock
and any other stock ranking pari passu with the Series C Preferred Stock and the
Class A Convertible Preferred Stock as to rights in liquidation in proportion to
the amounts to which they respectively are entitled. Upon any such liquidation,
dissolution or winding up of the Corporation, after the holders of Series C
Preferred Stock, the Class A Convertible Preferred Stock and any other stock
ranking pari passu with the Series C Preferred Stock and the Class A Convertible
Preferred Stock as to rights in liquidation shall have been paid in full the
amounts to which they shall be entitled, the remaining net assets of the
Corporation shall be distributed ratably to the holders of Common Stock and any
other stock ranking junior to the Series C Preferred Stock in liquidation.
Written notice of such liquidation, dissolution or winding up, stating a
payment date, the amount of the Liquidation Payment and the place where said
sums shall be payable shall be given by mail, postage prepaid, not less
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than 30 or more than 60 days prior to the payment date stated therein, to the
holders of record of the Series C Preferred Stock, such notice to be addressed
to each shareholder at such holder's post office address as shown by the records
of the Corporation. Neither the consolidation or merger of the Corporation into
or with any other corporation or corporations, nor the sale or transfer by the
Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
any of the provisions of this paragraph 4.
5. Conversion.
5A. Right to Convert Series C Preferred Stock. (a)
Subject to the terms and conditions of this paragraph 5, the holder of
any share or shares of Series C Preferred Stock shall have the right, at
its option at any time after July 31, 1999, to convert all or any
portion of such shares of Series C Preferred Stock (except that upon any
liquidation, dissolution or winding up of the Corporation the right of
conversion shall terminate at the close of business on the last full
business day next preceding the date fixed for payment of the
Liquidation Payment), into such number of fully paid and nonassessable
whole shares of Common Stock as is obtained by multiplying the number of
shares of Series C Preferred Stock so to be converted by $100 and
dividing the result by the conversion price of $2.7411 per share, or by
the conversion price as last adjusted and in effect at the date any
share or shares of Series C Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred
to herein as the "Conversion Price").
(b) The rights of conversion contained in this paragraph 5 shall
be exercised by the holder of shares of Series C Preferred Stock by
giving written notice that such holder elects to convert a stated number
of shares of Series C Preferred Stock into Common Stock and by surrender
of a certificate or certificates for the shares so to be converted to
the Corporation at its principal office (or such other office or agency
of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Series C Preferred Stock) at any time
during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with ad dress) in which
the certificate or certificates for shares of Common Stock shall be
issued.
5B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in
subparagraph 5A and surrender of the certificate or certificates for the
share or shares of Series C Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of whole
shares of Common Stock issuable upon the conversion of such share or
shares of Series C Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected, and the Conversion
Price shall be determined, as of the close of business on the date on
which such written notice shall have been received by the Corporation
and the certificate or certificates for such
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share or shares shall have been surrendered as aforesaid, and at such
time the rights of the holder of such share or shares of Series C
Preferred Stock shall cease, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.
5C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares may be issued upon conversion of the Series C
Preferred Stock into Common Stock. At the time of each conversion, the
Corporation shall pay in cash or in shares of Series C Preferred Stock
valued at $100 per share an amount equal to all dividends, if any,
accrued and unpaid to the date of such conversion, together with any
accrued interest on such dividends, on the shares surrendered for
conversion. In case the number of shares of Series C Preferred Stock
represented by the certificate or certificates surrendered pursuant to
subparagraph 5A exceeds the number of shares converted, the Corporation
shall, upon such conversion, execute and deliver to the holder thereof,
at the expense of the Corporation, a new certificate or certificates for
the number of shares of Series C Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted.
If any fractional interest in a share of Common Stock would, except for
the provisions of the first sentence of this subparagraph 5C, be
deliverable upon any such conversion, the Corporation, in lieu of
delivering the fractional share thereof, shall pay to the holder
surrendering the Series C Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional interest as
determined in good faith by the Board of Directors of the Corporation.
5D. Adjustment of Price Upon Issuance of Common Stock.
Except as provided in subparagraph 5F hereof, if and whenever the
Corporation shall issue or sell, or is in accordance with subparagraphs
5D(1) through 5D(7) deemed to have issued or sold, any shares of its
Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale,
then, forth with upon such issue or sale, the Conversion Price shall be
determined by dividing (i) an amount equal to the sum of (a) the number
of shares of Common Stock outstanding immediately prior to such issue or
sale (including as outstanding all shares of Common Stock issuable upon
conversion of outstanding Series C Preferred Stock) multiplied by the
then existing Conversion Price, and (b) the consideration, if any,
received by the Corporation upon such issue or sale, by (ii) the total
number of shares of Common Stock outstanding immediately after such
issue or sale (including as outstanding all shares of Common Stock
issuable upon conversion of outstanding Series C Preferred Stock).
For purposes of this subparagraph 5D, the following
subparagraphs 5D(1) to 5D(7) shall also be applicable:
5D(1). Issuance of Rights or Options. In case at any time
the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise)
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any rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") whether or not
such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Conversion Price in
effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options and thereafter shall be
deemed to be outstanding. Except as otherwise provided in subparagraph
5D(3), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
5D(2). Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption
in a merger or otherwise) or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the
Conversion Price in effect immediately prior to the time of such issue
or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities
shall be deemed to have been issued for such price per share as of the
date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be out standing, provided that (a) except as
otherwise provided in subparagraph 5D(3) below, no adjustment of the
Conversion Price shall be made upon the actual issue of such Common
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Stock upon conversion or exchange of such Convertible Securities, and
(b) if any such issue or sale of such Convertible Securities is made
upon exercise of any Option to purchase any such Convertible Securities
for which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this subparagraph 5D, no further
adjustment of the Conversion Price shall be made by reason of such issue
or sale.
5D(3). Change in Option Price or Conversion Rate. If (i)
the purchase price provided for in any Option referred to in
subparagraph 5D(1), (ii) the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred
to in subparagraph 5D(1) or 5D(2) or (iii) the rate at which any
Convertible Securities referred to in subparagraph 5D(1) or 5D(2) are
convertible into or exchangeable for Common Stock shall change at any
time (in each case other than under or by reason of provisions designed
to protect against dilution), then the Conversion Price in effect at the
time of such event shall, as required, forthwith be readjusted to such
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold; and on
the expiration of any such Option or the termination of any such right
to convert or exchange such Convertible Securities, the Conversion Price
then in effect hereunder shall, as required, forthwith be readjusted to
the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder
shall no longer be deemed to be outstanding. If the purchase price
provided for in any such Option referred to in subparagraph 5D(1) or the
rate at which any Convertible Securities referred to in subparagraph
5D(1) or 5D(2) are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of
the delivery of Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder shall, as required, forthwith
be adjusted to such respective amount as would have been obtained had
such Option or Convertible Securities never been issued and had
adjustments been made upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced.
5D(4). Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock, Options or Convertible Securities,
any Common Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration, and the Conversion Price
shall be reduced as if the Corporation had subdivided its outstanding
shares of Common Stock into a greater number of shares, as provided in
subparagraph 5E hereof.
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5D(5). Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Corporation in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be
deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Corporation, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the Corporation, such Options shall be deemed to have
been issued without consideration, and the Conversion Price shall be
reduced as if the Corporation had subdivided its outstanding shares of
Common Stock into a greater number of shares, as provided in
subparagraph 5E hereof.
5D(6). Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be, provided that such shares of Common Stock shall in fact
have been issued or sold.
5D(7). Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Corporation, and the disposition of
any such shares shall be considered an issue or sale of Common Stock for
the purposes of this subparagraph 5D.
5E. Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall
be proportionately increased.
5F. Certain Issues of Common Stock Excepted. The
Corporation shall not be required to make any adjustment of the
Conversion Price pursuant to subparagraph
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5D upon the occurrence of any of the following events: (i) the issuance
of Common Stock upon conversion of outstanding shares of Series C
Preferred Stock, or outstanding shares of the Corporation's Class A
Convertible Preferred Stock, (ii) the grant of options and the issuance
of shares of Common Stock upon the exercise of options granted by the
Corporation to employees, officers and directors of the Corporation
pursuant to the Corporation's currently existing Stock Option Plan or
pursuant to a stock option plan approved by the Compensation Committee
of the Board of Directors of the Corporation, provided that the total
number of shares issued upon exercise of such options, whether before or
after the adoption of this Series C Designation, does not exceed
325,000; and (iii) the issuance of the warrants to purchase shares of
the Common Stock (the "Warrants") and the issuance of shares of Common
Stock upon the exercise of the Warrants pursuant to the terms of (A) the
Stratford Securities Purchase Agreement and (B) the ACS Note and Equity
Purchase Agreement.
5G. Reorganization, Reclassification, Consolidation,
Merger or Sale. If any capital reorganization or reclassification of the
capital stock of the Corporation or any consolidation or merger of the
Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected
in such a way (including, without limitation, by way of consolidation or
merger) that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holders of at least a majority of the
outstanding shares of Series C Preferred Stock) shall be made whereby
each holder of a share or shares of Series C Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the
conversion of such shares or shares of the Series C Preferred Stock,
such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in
any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price) shall thereafter be applicable, as nearly practicable,
in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights. In the event of
a merger or consolidation of the Corporation as a result of which a
greater or lesser number of shares of common stock of the surviving
corporation is issuable to holders of Common Stock of the Corporation
outstanding immediately prior to such merger or consolidation, the
Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Common Stock
of the Corporation. The Corporation will not effect any such
consolidation or merger, or any sale of all or substantially all of its
assets and
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properties, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument (in form reasonably satisfactory to the
holders of at least a majority of the shares of Series C Preferred Stock
at the time outstanding), executed and mailed or delivered to each
holder of shares of Series C Preferred Stock at the last address of such
holder appearing on the books of the Corporation, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
5H. Automatic Conversion. In the event that, at any time
while any of the Series C Preferred Stock shall be outstanding, the
Corporation shall complete an underwritten public offering involving the
sale by the Corporation of shares of Common Stock (i) at a per share
price to the public of not less than 2.5 times the Conversion Price in
effect at the time and (ii) in which the gross proceeds to the
Corporation and/or selling stockholders, as the case may be, before
deduction of underwriters' discounts and commissions and expenses of the
offering, are at least $15,000,000, then all outstanding shares of
Series C Preferred Stock shall, automatically and without further action
on the part of the holders of the Series C Preferred Stock, be converted
into shares of Common Stock in accordance with the terms of paragraph 5A
with the same effect as if the certificates evidencing such shares had
been surrendered for conversion, such conversion to be effective
simultaneously with the closing of such public offering; provided,
however, that certificates evidencing the shares of Common Stock
issuable upon such conversion shall not be issued except on surrender of
the certificates for the shares of the Series C Preferred Stock so
converted.
5I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid, addressed
to each holder of shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, which notice shall
state the Conversion Price resulting from such adjustment, setting forth
in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock
of any class or other rights;
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(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with, or a sale of all
or substantially all its assets to, another corporation, or any
acquisition of beneficial ownership by any person or group of
voting stock of the Corporation representing more than 50% of the
voting power of all outstanding shares of such voting stock,
whether by way of merger or consolidation or otherwise;
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation; or
(5) the Corporation shall take any action or there shall
be any event which would result in a redemption of the Series C
Preferred Stock pursuant to subparagraph 3A,
then, in any one or more of said cases, the Corporation shall give, by
first class mail, postage prepaid, addressed to each holder of any
shares of Series C Preferred Stock at the address of such holder as
shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place, and (c) in the case
of any event which would result in an automatic conversion of the Series
C Preferred Stock pursuant to subparagraph 5H, at least 20 days' prior
written notice of the date on which the same is expected to be
completed. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall
be entitled thereto, and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as
the case may be.
5K. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock or
its treasury shares, solely for the purpose of issue upon the conversion
of the Series C Preferred Stock as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of
all outstanding shares of Series C Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall
be duly and validly issued and fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof and,
without limiting the generality of the foregoing, the Corporation
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covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is
at all times equal to or less than the effective Conversion Price. The
Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation
of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the Common Stock of the
Corporation may be listed. The Corporation will not take any action
which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action
upon conversion of the Series C Preferred Stock would exceed the total
number of shares of Common Stock then authorized by the Corporation's
Articles of Incorporation.
5L. No Reissuance of Series C Preferred Stock. Shares of
Series C Preferred Stock which are converted into shares of Common Stock
as provided herein shall not be reissued.
5M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of the Series C Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in
respect thereof, provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in
the issuance and delivery of any certificate in a name other than that
of the holder of the Series C Preferred Stock which is being converted.
5N. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Series C Preferred
Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Series C Preferred Stock in any manner which
interferes with the timely conversion of such Series C Preferred Stock.
5O. Definition of Common Stock. As used in this paragraph
5, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, $.0001 par value as constituted on the date of
filing these Amended and Restated Articles of Incorporation and shall
also include any capital shares of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof
to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided however, that the Common Stock receivable upon
conversion of shares of the Class A Preferred Stock of the Corporation,
or in case of any reorganization or reclassification of the outstanding
shares of the Corporation, the stock, securities or assets provided for
in paragraph 5G, shall include only shares designated as Common Stock of
the Corporation on the date of filing these Amended and Restated
Articles of Incorporation.
6. Voting. Except as otherwise required by law or these by
the Articles of Incorporation of the Corporation or this Series C Designation,
the holders of the Series C
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Preferred Stock and the holders of Common Stock shall be entitled to notice of
any stockholders meeting in accordance with the By-laws of the Corporation and
to vote together as a single class upon any matter submitted to the stockholders
for a vote as follows: (i) the holders of Series C Preferred Stock shall have
one vote for each full share of Common Stock into which their respective shares
of Series C Preferred Stock are convertible on the record date for the vote and
(ii) the holders of Common Stock shall have one vote per share of Common Stock.
7. Restrictions. At any time when shares of Series C Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by this
Series C Designation, and in addition to any other vote required by law, without
the prior consent (which consent shall not be unreasonably withheld in the case
of clause (d) below) of the holders of a majority of the shares of outstanding
Series C Preferred Stock, given in person or by proxy, either in writing within
20 days after notice from the Company or at a special meeting called for that
purpose, at which meeting the holders of the shares of such Series C Preferred
Stock shall vote together as a class:
(a) The Corporation will not (i) create or authorize the
creation of any additional class or series of shares unless the same
ranks junior to the Series C Preferred Stock as to the distribution of
assets upon the liquidation, dissolution or winding up of the
Corporation, (ii) increase the authorized amount of the Series C
Preferred Stock or the authorized amount of any additional class or
series of shares unless the same ranks junior to the Series C Preferred
Stock as to the distribution of assets upon the liquidation, dissolution
or winding up of the Corporation, or (iii) create or authorize any
obligation or security convertible into shares of Series C Preferred
Stock or into shares of any other class or series unless the same ranks
junior to the Series C Preferred Stock as to the distribution of assets
upon the liquidation, dissolution or winding up of the Corporation,
whether any such creation or authorization or increase shall be by means
of amendment of the Articles of Incorporation, designation of a series
of the Serial Preferred Stock of the Corporation, merger, consolidation
or otherwise.
(b) The Corporation will not amend, alter or repeal its
Articles of Incorporation or By-laws in any manner, or file any
directors' resolutions pursuant to OCGA 14-2-602 containing any
provision, in either case, which adversely affects the respective
preferences, qualifications, special or relative rights or privileges of
the Series C Preferred Stock or which in any manner adversely affects
the Series C Preferred Stock or the holders thereof.
(c) The Corporation will not (i) consolidate or merge with or
into any other corporation or other entity, (ii) sell or otherwise
dispose of all or substantially all of its properties and assets as an
entirety to any other person, or (iii) liquidate, dissolve or wind up
its business.
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(d) The Corporation will not, directly or indirectly, acquire
any other business entity, or the assets of any other business entity as
a going concern.
(e) The Corporation will not, directly or indirectly, enter
into any material transaction with any affiliate (as defined in Rule 405
under the Securities Act of 1933, as amended) of the Corporation unless
such affiliate is a wholly-owned subsidiary of the Corporation.
(f) The Corporation will not, directly or indirectly, engage
in any business other than the business in which it was engaged
immediately after the initial issuance of the Series C Preferred Stock.
(g) The Corporation will not enter into any agreement after
the date of filing of these Amended and Restated Articles of
Incorporation which would restrict its right to pay dividends on the
Series C Preferred Stock in shares of Series C Preferred Stock.
(h) The Corporation will not repurchase, redeem or retire any
shares of capital stock of the Corporation other than shares of Series C
Preferred Stock, provided that no such vote shall be required for the
redemption of the Corporation's Class A Convertible Preferred Stock in
accordance with the terms of the Corporation's Articles of
Incorporation, and provided, further, that no such vote shall be
required for the redemption of (i) the Series D Senior Redeemable
Preferred Stock, (ii) the Corporation's Class A Convertible Preferred
Stock, (iii) the Warrants or (iv) the shares of Common Stock issuable
upon exercise of the Warrants.
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APPENDIX B
DESIGNATION IN RESPECT OF
SERIES D SENIOR REDEEMABLE PREFERRED STOCK
1. Establishment and Designation of Series. There is hereby established
a series of Preferred Stock designated "Series D Senior Redeemable Preferred
Stock" ("Series D Preferred Stock"), to consist of an aggregate of 100,000
shares, no par value, and to have the preferences, limitations and relative
rights, including voting rights, as set forth herein.
2. Dividends. The holders of Series D Preferred Stock shall be entitled
to receive out of funds legally available for the declaration of dividends,
cumulative dividends in cash, when, as and if declared by the Board of
Directors, at the annual rate of $8.00 per share, payable quarterly on the last
day of each January, April, July and October of each year, beginning January 31,
2000, except if such date is a Saturday, Sunday or legal holiday then such
dividend shall be payable on the first immediately preceding day which is not a
Saturday, Sunday or legal holiday (the date such dividends are payable hereunder
is referred to as a "Dividend Payment Date"). Such dividends shall commence to
accrue on the shares of Series D Preferred Stock and be cumulative from and
after the date of issuance of such shares of Series D Preferred Stock and shall
be deemed to accumulate and shall be payable for any period less than a full
quarter on the basis of a year of 360 days with equal 30 day months. So long as
any of the Series D Preferred Stock remains outstanding, no cash dividends shall
be paid upon, or declared or set apart for, the Common Stock, $.01 par value per
share of the Corporation ("Common Stock") or any other capital stock of the
Corporation (including all other classes of preferred stock), unless and until
all cumulative dividends on the then outstanding shares of Series D Preferred
Stock for all past dividend periods at all times shall have been paid in full in
cash and not by PIK Dividends (as defined below). Subject to the limitation set
forth in the following sentence, at the option of the Company, the dividends
pursuant to this Section 2 shall be payable by the issuance and delivery on the
applicable Dividend Payment Date of additional Series D Preferred Stock in an
aggregate number of shares equal to (a) the aggregate number of outstanding
shares of Series D Preferred Stock on the Dividend Payment Date times $11.00,
(b) divided by $100, rounded up to the nearest whole share of Series D Preferred
Stock (the "PIK Dividends"). The right of the Company to make PIK Dividends
shall only be available with respect to dividends payable on or prior to October
31, 2001 and for all dividends payable after October 31, 2001, the Company shall
pay all such dividends in cash on the due date thereof.
3. Preference on Liquidation, Dissolution or Winding Up.
A. Definition. A consolidation or merger of the Corporation or
a sale or transfer of substantially all of its assets as an entirety,
may at the option of the holders of a majority of the issued and
outstanding Series D Preferred Stock,
B-1
<PAGE> 37
be regarded as "liquidation, dissolution or winding up of the affairs of
the Corporation" within the meaning of this Section 3.
B. Ranking. With respect to the payment of dividends,
redemption rights and the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Series D Preferred Stock shall rank senior to all other
capital stock of the Corporation.
C. Liquidation. During any proceedings for the voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of the Series D Preferred Stock shall be
entitled to receive $100 in cash for each share of Series D Preferred
Stock (together with all accrued and unpaid dividends on each such share
of Series D Preferred Stock) (the "Liquidation Value"), before any
distribution of the assets of the Corporation shall be made to the
holders of any shares of the other capital stock of the Corporation, or
funds necessary for such payment shall have been set aside in trust for
the account of the holders of the outstanding Series D Preferred Stock
so as to be and continue available therefor. If upon such liquidation,
dissolution or winding up, the assets distributable to the holders of
the Series D Preferred Stock shall be insufficient to permit the payment
to them of the Liquidation Value per share, the assets of the
Corporation shall be distributed to the holders of the Series D
Preferred Stock ratably until they shall have received the full amount
to which they would otherwise be entitled in accordance with the terms
of Articles of Incorporation of the Corporation. If the assets of the
Corporation are sufficient to permit the payment of such amounts to the
holders of the Series D Preferred Stock, the remainder of the assets of
the Corporation, if any, after the distributions as aforesaid shall be
distributed and divided ratably among the holders of the other capital
stock of the Corporation then outstanding according to their respective
shares.
4. Voting Rights. In addition to any voting rights provided by law, the
holders of shares of Series D Preferred Stock shall have the following voting
rights:
A. Except as otherwise provided herein, the holder of the Preferred
Stock shall have the exclusive right, voting separately as a single
class, to elect one director of the Corporation.
B. In addition to any other vote or consent of shareholders required
by law or by the Articles of Incorporation of the Corporation, the
consent of the holders of the Preferred Stock, voting separately as a
single class, shall be necessary in advance for:
B-2
<PAGE> 38
(1) The issuance of any additional shares (or options,
warrants or other rights to acquire such shares or securities
convertible into such shares) of Series D Preferred Stock or other
classes of preferred stock which rank senior or on parity with the
Series D Preferred Stock as to dividends, redemption rights and/or
liquidation preferences; and
(2) Any waiver or amendment of the Securities Purchase
Agreement dated on or about November 1, 1999, by and among the
Corporation, Stratford Capital Partners, L.P. and Stratford Equity
Partners, L.P. (the "Securities Purchase Agreement") or any other
Transaction Document (as defined in the Securities Purchase Agreement).
C. The foregoing rights of holders of shares of Series D
Preferred Stock to take any actions as provided in this Section 4 may
be exercised at any annual meeting of shareholders or at a special
meeting of shareholders held for such purpose or at any adjournment
thereof or by written consent of the holders of the number of shares of
Series D Preferred Stock required to authorize such action at an annual
or special meeting of shareholders.
5. Redemption. The Corporation may redeem, and shall be required to
redeem, shares of Series D Preferred Stock, as provided in this Section 5;
provided that the Corporation is legally permitted to then redeem shares of
Series D Preferred Stock in accordance with the applicable provisions of the
Georgia Business Corporation Code:
A. Mandatory Redemption. Any holder of Series D Preferred
Stock may require, at such holder's sole discretion, the Corporation to
redeem all of its shares of Series D Preferred Stock at a price equal
to the Liquidation Value per share on the date fixed for redemption
("Redemption Price"), upon the occurrence of one or more of the
following events or dates:
(1) an Event of Default (as defined in the Securities Purchase
Agreement) other than a Sale (as defined in the Securities
Purchase Agreement);
(2) a Qualified Public Offering (as defined in the Securities
Purchase Agreement);
(3) November 1, 2006; or
(4) any Sale.
B. Optional Redemption. The Corporation may, at its sole
discretion, redeem shares of Series D Preferred Stock at any time at
the Redemption Price,
B-3
<PAGE> 39
provided, that, any partial redemption shall be an amount not less than
$750,000 and in an amount which is an integral multiple of $50,000.
C. Notice of Redemption. At least 20 days prior to the
redemption of any shares of Series D Preferred Stock, the Corporation
shall transmit notice to each holder of record of the shares of Series
D Preferred Stock to be redeemed at such holder's address set forth in
the stock records of the Corporation sent by first class mail postage
prepaid. Such notice shall state the date fixed for redemption (the
"Redemption Date") and the redemption price and shall call upon the
holder to surrender to the Corporation on the Redemption Date at the
place designated in the notice such holder's certificate or
certificates representing shares of Series D Preferred Stock to be
redeemed. In case of redemption of only a portion of the outstanding
Series D Preferred Stock, the redemption shall be made pro rata. On or
after the Redemption Date, each holder of shares of Series D Preferred
Stock called for redemption shall surrender the certificate or
certificates evidencing such shares to the Corporation at the place
designated in such notice in exchange for payment of the Redemption
Price. If funds legally available for such purpose are not sufficient
for the redemption, then the certificates representing shares of Series
D Preferred Stock surrendered for redemption shall be deemed not to be
surrendered and such shares shall remain outstanding. If such notice of
redemption shall have been duly given, and if on the Redemption Date
funds necessary for the redemption (including an amount equal to the
accrued but unpaid dividends through the Redemption Date) shall have
been deposited by the Corporation with a bank or trust company,
designated in such notice, having capital, surplus and undivided
profits aggregating at least $50,000,000 according to its then latest
published statement of condition, in trust for the pro rata benefit of
the holders of the shares so called for redemption, and the Corporation
may otherwise redeem shares of Series D Preferred Stock pursuant to
this Section 5, then, notwithstanding that any certificate evidencing
shares of Series D Preferred Stock called for redemption shall not have
been surrendered, the shares so called for redemption and represented
by such certificate shall be deemed to be no longer outstanding and,
except for the right of the holder thereof to receive the redemption
price upon surrender of such certificate, all rights with respect to
the shares so called for redemption shall forthwith cease and terminate
as of the Redemption Date. Notwithstanding the foregoing, in the event
of any redemption pursuant to Section 5.A (1) and (3) above, the
Redemption Price may, at the election of the Company, be paid by
delivery of a Put Note (as defined in the Securities Purchase
Agreement) to the holders of the Series D Preferred Stock.
6. Retirement of Shares. Any shares of Series D Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation shall be deemed
retired and shall be canceled and may not under any circumstances thereafter be
reissued or otherwise disposed of by the Corporation.
B-4
<PAGE> 40
7. Conversion. The shares of Series D Preferred Stock are not
convertible into Common Stock.
B-5
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
O2WIRELESS SOLUTIONS, INC.
<PAGE> 2
BYLAWS
OF
O2WIRELESS SOLUTIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - DEFINITIONS.................................................................................. 1
ARTICLE II - GENERAL PROVISIONS REGARDING NOTICES........................................................ 1
Section 1. NOTICES......................................................................... 1
Section 2. WAIVER OF NOTICE................................................................ 2
ARTICLE III - SHAREHOLDERS' MEETINGS..................................................................... 3
Section 1. PLACE OF MEETING................................................................ 3
Section 2. ANNUAL MEETING.................................................................. 3
Section 3. SPECIAL MEETINGS................................................................ 3
Section 4. NOTICE TO SHAREHOLDERS.......................................................... 4
Section 5. FIXING OF RECORD DATE........................................................... 4
Section 6. QUORUM AND VOTING REQUIREMENTS.................................................. 5
Section 7. PROXIES......................................................................... 6
Section 8. INFORMAL ACTIONS BY SHAREHOLDERS................................................ 6
ARTICLE IV - DIRECTORS................................................................................... 7
Section 1. GENERAL POWERS.................................................................. 7
Section 2. NUMBER, TENURE, QUALIFICATIONS.................................................. 7
Section 3. VACANCIES, HOW FILLED........................................................... 7
Section 4. PLACE OF MEETING................................................................ 7
Section 5. COMPENSATION.................................................................... 7
Section 6. REGULAR MEETINGS................................................................ 7
Section 7. SPECIAL MEETINGS................................................................ 7
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER.................................. 8
Section 9. QUORUM.......................................................................... 8
Section 10. MANNER OF ACTING................................................................ 8
Section 11. COMMITTEES...................................................................... 8
Section 12. ACTION WITHOUT FORMAL MEETING................................................... 9
Section 13. CONFERENCE CALL MEETINGS........................................................ 9
ARTICLE V - OFFICERS..................................................................................... 9
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 1. GENERALLY...................................................................... 9
Section 2. COMPENSATION................................................................... 10
Section 3. RESIGNATION AND REMOVAL........................................................ 10
Section 4. VACANCIES...................................................................... 10
Section 5. CHAIRMAN ...................................................................... 10
Section 6. PRESIDENT...................................................................... 10
Section 7. VICE PRESIDENT................................................................. 11
Section 8. SECRETARY...................................................................... 11
Section 9. TREASURER...................................................................... 11
Section 10. DEPUTY OFFICERS................................................................ 11
Section 11. ASSISTANT OFFICERS............................................................. 11
ARTICLE VI - INDEMNIFICATION............................................................................ 12
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS..................................... 12
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES..................................... 12
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION....................................... 12
Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED
INDEMNIFICATION................................................................ 13
Section 5. SHAREHOLDER-APPROVED INDEMNIFICATION........................................... 14
Section 6. ADVANCES FOR EXPENSES.......................................................... 15
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND
AGENTS......................................................................... 15
Section 8. INSURANCE...................................................................... 15
Section 9. EXPENSES FOR APPEARANCE AS WITNESS............................................. 15
ARTICLE VII - REIMBURSEMENT OF NON-DEDUCTIBLE - PAYMENTS TO
OFFICERS AND EMPLOYEES.................................................................... 15
ARTICLE VIII - FISCAL YEAR.............................................................................. 16
ARTICLE IX - ANNUAL STATEMENTS.......................................................................... 16
ARTICLE X - CAPITAL STOCK............................................................................... 17
Section 1. FORM........................................................................... 17
Section 2. TRANSFER....................................................................... 17
Section 3. RIGHTS OF HOLDER............................................................... 17
Section 4. LOST OR DESTROYED CERTIFICATES................................................. 17
ARTICLE XI - SEAL....................................................................................... 18
ARTICLE XII - REGISTERED OFFICE AND REGISTERED AGENT.................................................... 18
ARTICLE XIII - AMENDMENTS............................................................................... 18
Section 1. AMENDMENTS GENERALLY........................................................... 18
Section 2. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS................................. 18
</TABLE>
(ii)
<PAGE> 4
BYLAWS
OF
O2WIRELESS SOLUTIONS, INC.
ARTICLE I.
DEFINITIONS
As used in these Bylaws, the terms set forth below shall have the
meanings indicated, as follows:
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
"Chief Executive Officer" shall mean the Chairman of the Board of
Directors of the Corporation, or such other officer as shall be designated by
the Board as having the duties of the Chief Executive Officer, as described in
Section 5 of Article V of these Bylaws.
"Code" shall mean the Georgia Business Corporation Code, as amended
from time to time.
"Corporation" shall mean O2WIRELESS SOLUTIONS, INC., a Georgia
corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 7 of Article V of these Bylaws.
"Secretary of State" shall mean the Secretary of State of Georgia.
"Voting group" shall have the meaning set forth in subsection (a) of
Section 6 of Article III of these Bylaws.
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these Bylaws, or as otherwise required by applicable law:
(a) Any notice required by these Bylaws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice are
<PAGE> 5
impracticable, notice may be communicated by a newspaper of general circulation
in the area where published, or by radio, television, or other form of public
broadcast communication.
(c) Written notice by the Corporation to any shareholder, if in a
comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown in
the Corporation's current record of shareholders; provided that if the
Corporation has more than 500 shareholders of record entitled to vote at a
meeting, it may utilize a class of mail other than first class if the notice of
the meeting is mailed, with adequate postage prepaid, not less than 30 days
before the date of the meeting.
(d) Written notice to the Corporation may be addressed to its
registered agent at its registered office or to the Corporation or its Secretary
at its principal office shown in its most recent annual registration with the
Secretary of State.
(e) Except as provided in subsection (c) of this Section 1, written
notice, if in a comprehensible form, is effective at the earliest of the
following:
(1) When received, or when delivered, properly addressed,
to the addressee's last known principal place of
business or residence;
(2) Five days after its deposit in the mail, as evidenced
by the postmark, if mailed with first-class postage
prepaid and correctly addressed; or
(3) On the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested,
and the receipt is signed by or on behalf of the
addressee.
(f) Oral notice is effective when communicated if communicated in a
comprehensible manner.
(g) In calculating time periods for notice under these Bylaws, when a
period of time measured in days, weeks, months, years, or other measurement of
time is prescribed for the exercise of any privilege or the discharge of any
duty, the first day shall not be counted but the last day shall be counted.
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required
by the Articles of Incorporation, these Bylaws or applicable law:
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of
the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting
business at the meeting; and
-2-
<PAGE> 6
(2) Waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
(c) Neither the business transacted nor the purpose of the meeting need
be specified in the waiver, except that any waiver by a shareholder of the
notice of a meeting of shareholders with respect to an amendment of the Articles
of Incorporation, a plan of merger or share exchange, a sale of assets or any
other action which would entitle the shareholder to exercise statutory
dissenter's rights under the Code and obtain payment for his shares shall not be
effective unless:
(1) Prior to the execution of the waiver, the shareholder shall
have been furnished the same material that under the Code
would have been required to be sent to the shareholder in a
notice of the meeting, including notice of any applicable
dissenters' rights as provided in the Code; or
(2) The waiver expressly waives the right to receive the
material required to be furnished.
(d) A director may waive any notice required to be given to such
director by the Code, the Articles of Incorporation, or these Bylaws before or
after the date and time stated in the notice. Except as provided by subsection
(e) of this Section 2, the waiver must be in writing, signed by the director
entitled to the notice, and delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within
or outside the State of Georgia as the place of meeting for any annual or
special shareholders' meeting. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place within or outside the
State of Georgia as the place for the holding of such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of meeting shall
be the principal office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall
be held on the second Tuesday in April of each year, if not a legal holiday (and
if such is a legal holiday, then on the next following day not a legal holiday),
at such time and place as the Board shall determine, at which time the
shareholders shall elect a Board and transact such other business as may be
properly brought before the meeting. Notwithstanding the foregoing, the Board
may cause the annual meeting of shareholders to be held on such other date in
any year as the Board shall determine to be in the best interests of the
Corporation, and any business transacted at that meeting shall have the same
validity as if transacted on the date designated herein.
-3-
<PAGE> 7
Section 3. SPECIAL MEETINGS. Except to the extent otherwise prescribed
by statute or the Articles of Incorporation, special meetings of the
shareholders, for any purpose or purposes, may be called by the Chief Executive
Officer, or by the presiding officer of the Board, if any. The Chief Executive
Officer or the Secretary shall call a special meeting when: (1) requested in
writing by any two or more of the directors; or (2) requested in writing by
shareholders owning shares representing at least twenty-five percent (25%) of
all the votes entitled to be cast on any issue proposed to be considered at such
meeting. Any such written request shall be signed and dated and shall state the
purpose or purposes of the proposed meeting.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these Bylaws.
(b) The Corporation shall give notice to each shareholder entitled to
vote thereat of the date, time and place of each annual and special
shareholders' meeting no fewer than ten (10) nor more than sixty (60) days
before the meeting date.
(c) Unless otherwise required by the Code with respect to meetings at
which specified actions will be considered (including but not limited to
mergers, certain share exchanges, certain asset sales by the Corporation, and
dissolution of the Corporation), notice of an annual meeting need not contain a
description of the purpose or purposes for which the meeting is called.
(d) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by the
terms of these Bylaws to be set) therefor, notice of the date, time and place of
any adjourned meeting need not be given otherwise than by the announcement at
the meeting before adjournment. If a new record date for the adjourned meeting
is or must be fixed, however, notice of the adjourned meeting must be given in
accordance with these Bylaws as if such adjourned meeting were a newly-called
meeting.
(f) If any corporate action proposed to be considered at a meeting of
shareholders would or might give rise to statutory dissenters' rights under the
Code, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Code.
(g) If any corporate action which would give rise to statutory
dissenters' rights under the Code is taken by written consent of shareholders
without a meeting, or is taken at a meeting with respect to which less than all
shareholders were entitled to receive notice, or is otherwise taken without a
vote of shareholders, the Corporation shall cause notice thereof, including the
information concerning statutory dissenters' rights contemplated by paragraph
(b) above, to be given, not more than ten (10) days after the adoption of such
action by shareholder vote at a meeting or by written consent to those
shareholders who did not execute such written consent or who were not entitled
to receive notice of such meeting, or to all shareholders if such action was
otherwise taken without a vote of shareholders.
-4-
<PAGE> 8
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders, or shareholders entitled to demand a
special meeting of shareholders, or shareholders entitled to take any other
action, the Board may fix in advance (but not retroactively from the date the
Board takes such action) a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the meeting or action requiring such determination of shareholders. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, the close of business on the last
business day before the first notice of such meeting is delivered to
shareholders shall be the record date. If no record date is fixed for
determining shareholders entitled to take action without a meeting, the date the
first shareholder signs the consent shall be the record date for such purpose.
If no record date is fixed for determining shareholders entitled to demand a
special meeting, or to take other action, the date of receipt of notice by the
Corporation of demand for such meeting, or the date on which such other action
is to be taken by the shareholders, shall be the record date for such purpose.
(b) A separate record date may be established for each voting group
entitled to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to vote at
a shareholders meeting is effective for any adjournment of the meeting unless
the Board fixes a new record date, which it must do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
(d) For the purpose of determining shareholders entitled to a
distribution by the Corporation (other than one involving a purchase, redemption
or other acquisition of the Corporation's shares), the record date shall be the
date fixed for such purpose by the Board, or if the Board does not fix such a
date, the date on which the Board authorizes such distribution.
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation
or the Code:
(i) A "voting group" with respect to any given matter means
all shares of one or more class or series which, under
the Articles of Incorporation or the Code, are entitled
to vote and be counted together collectively on that
matter, and unless specified otherwise in the Articles
of Incorporation, the Code or these Bylaws, all shares
entitled to vote on a given matter shall be deemed to
be a single voting group for purposes of that matter.
(ii) Each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a
shareholders' meeting.
(iii) A majority of the votes entitled to be cast on the
matter by a voting group constitutes a quorum of that
voting group for action on that matter.
(iv) The presence of a quorum of each voting group entitled
to vote thereon shall be the requisite for transaction
of business on a given matter.
-5-
<PAGE> 9
(v) Action on a matter other than election of directors is
approved by a voting group if a quorum of such voting
group exists and the number of votes cast within such
voting group in favor of such action exceeds the number
of votes cast within such voting group against such
action.
(vi) Except as otherwise provided in these Bylaws, all
shares entitled to vote for election of directors shall
vote thereon as a single voting group, and directors
shall be elected by a plurality of votes cast by shares
entitled to vote in the election in a meeting at which
a quorum of such voting group is present.
(b) Once a share is represented for any purpose other than solely to
object to holding a meeting or transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these Bylaws to be, set for that adjourned meeting.
(c) If a quorum for transaction of business shall not be present at a
meeting of shareholders, the shareholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock shall be present. No notice
other than announcements at the meeting before adjournment shall be required of
the new date, time or place of the adjourned meeting, unless a new record date
for such adjourned meeting is, or is required by law or these Bylaws to be,
fixed. At such adjourned meeting (for which no new record date is, or is
required to be, set) at which a quorum shall be present in person or by proxy,
any business may be transacted that might have been transacted at the meeting
originally called.
Section 7. PROXIES. At every meeting of the shareholders, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be: (i) effective unless given in writing and signed,
either personally by the shareholder or his attorney-in-fact; or (ii) effective
until received by the Secretary or other officer or agent authorized to tabulate
votes; or valid after eleven months from its date, unless said proxy expressly
provides for a longer period.
Section 8. INFORMAL ACTIONS BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if written consent (which may take the form of one or more counterpart
copies), setting forth the action so taken, shall be signed by all the holders
of all the shares entitled to vote with respect to the subject matter thereof
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such consent shall have the same force and effect as a
unanimous vote of the shareholders; provided, however, that no such consent
which purports to be an approval of any plan of merger, share exchange, asset
sale or other transaction (i) as to which shareholder approval is required by
the Code and (ii) with respect to which specific disclosure requirements to
voting shareholders are imposed by the Code, shall be effective unless:
(1) prior to the execution of the consent, each consenting
shareholder shall have been furnished the same material which,
under the Code, would have been required to be sent to
shareholders in a notice of a meeting at which the proposed
action would have been submitted to the shareholders for
action, including notice of any applicable dissenters' rights;
or:
-6-
<PAGE> 10
(2) the written consent contains an express waiver of the right to
receive the material otherwise required to be furnished.
ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. All corporate powers of the Corporation
shall be exercised by or under the authority of, and the business and affairs of
the Corporation managed under the direction of, its Board, subject to any
limitation set forth in the Articles of Incorporation, or any amendment to these
Bylaws approved by the shareholders of the Corporation, or any otherwise lawful
agreement among the shareholders of the Corporation.
Section 2. NUMBER, TENURE, QUALIFICATIONS. The Board shall consist of
one or more individuals, the precise number to be fixed by resolution of the
Board from time to time. Each member of the Board shall hold office until the
annual meeting of shareholders held next after his election and until his
successor has been duly elected and has qualified, or until his earlier
resignation, removal from office, or death. Directors shall be natural persons
who are eighteen (18) years of age or older, but need not be shareholders or
residents of Georgia unless the Articles of Incorporation require otherwise.
Section 3. VACANCIES, HOW FILLED. If any vacancy shall occur in the
membership of the Board by reason of the resignation, removal or death of a
director, or due to an increase in the number of directors, the remaining
directors shall continue to act, and such vacancies may be filled by the
affirmative vote of the majority of the directors then in office, though less
than a quorum, and if not therefore filled by action of the directors, may be
filled by the shareholders at any meeting held during the existence of such
vacancy. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office.
Section 4. PLACE OF MEETING. The Board may hold its meetings at such
place or places within or without the State of Georgia as it may from time to
time determine.
Section 5. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by resolution
of the Board.
Section 6. REGULAR MEETINGS. A regular annual meeting of the Board
shall be held, without other notice than this bylaw, immediately after, and at
the same place as, the annual meeting of shareholders. The Board may provide, by
resolution, the time and place within or without the State of Georgia, for the
holding of additional regular meetings without other notice than such
resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chief Executive Officer or the presiding officer of the Board, if
different from the Chief Executive Officer, on not less than two (2) days'
notice to each director by mail, telegram, cablegram or other form of wire or
wireless communication, or personal delivery or other form of communication
authorized under the circumstances by the Code, and shall be called by the Chief
Executive Officer or the Secretary in like manner and on like notice on the
written request of any two (2) or more members of the Board. Such notice shall
state the time, date and place of such meeting, but need not describe the
purpose of the meeting. Any such special meeting shall be held at such time and
place as shall be stated in the notice of the meeting.
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Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these Bylaws.
Section 9. QUORUM. At all meetings of the Board, unless otherwise
provided in the Articles of Incorporation or other provisions of these Bylaws,
the presence of a majority of the Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum a majority of the Directors
present at any meeting may adjourn from time to time until a quorum be had.
Notice of the time and place of any adjourned meeting need only be given by
announcement at the meeting at which adjournment is taken.
Section 10. MANNER OF ACTING. Except as expressly otherwise provided by
the Articles of Incorporation or other provisions of these Bylaws, if a quorum
is present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board. A director who is present at a meeting when
corporate action is taken is deemed to have assented to the action unless:
(1) He objects at the beginning of the meeting (or promptly upon
his arrival) to holding it or transacting business at the
meeting;
(2) His dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(3) He does not vote in favor of the action taken and delivers
written notice of his dissent or abstention to the presiding
officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting.
Section 11. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation, the
Board may create one or more committees and appoint members of the Board to
serve on them. Each committee may have one or more members, who serve at the
pleasure of the Board.
(b) The provisions of these Bylaws and of the Code which govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board, shall apply as well to committees created
under this Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these
Bylaws and the resolution of the Board creating such committee, each committee
may exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action
required by the Code to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
(3) Exercise any authority which the Board may have to amend the
Articles of Incorporation;
(4) Adopt, amend, or repeal bylaws; or
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(5) Approve a plan of merger not requiring shareholder approval.
Section 12. ACTION WITHOUT FORMAL MEETING. Except as expressly
otherwise provided in the Articles of Incorporation, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting if written consent thereto (which may take the
form of one or more counterparts) is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of the proceedings of the Board or committee. A consent executed in
accordance herewith has the effect of a meeting vote and may be described as
such in any document.
Section 13. CONFERENCE CALL MEETINGS. Members of the Board, or any
committee of the Board, may participate in a meeting of the Board or committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can simultaneously hear each
other during the meeting, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
ARTICLE V.
OFFICERS
Section 1. GENERALLY. The Board shall from time to time elect or
appoint such officers as it shall deem necessary or appropriate to the
management and operation of the Corporation, which officers shall hold their
offices for such terms as shall be determined by the Board and shall exercise
such powers and perform such duties as are specified in these Bylaws or in a
resolution of the Board. Except as specifically otherwise provided in
resolutions of the Board, the following requirements shall apply to election or
appointment of officers:
(a) The Corporation shall have, at a minimum, the following officers,
which officers shall bear the titles designated therefor by resolution of the
Board, but in the absence of such designation shall bear the titles set forth
below:
TITLE
Chairman
President
Vice-President
Treasurer
Secretary
(b) All officers of the Corporation shall serve at the pleasure of the
Board, and in the absence of specification otherwise in a resolution of the
Board, each officer shall be elected to serve until the next succeeding annual
meeting of the Board and the election and qualification of his successor,
subject to his earlier death, resignation or removal.
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(c) Any person may hold two or more offices simultaneously, and no
officer need be a Shareholder of the Corporation.
(d) If so provided by resolution of the Board, any officer may be
delegated the authority to appoint one or more officers or assistant officers,
which appointed officers or assistant officers shall have the duties and powers
specified in the resolution of the Board.
Section 2. COMPENSATION. Officers of the Corporation shall be entitled
to reimbursement for any reasonable expenses incurred by them in the execution
of the functions and duties of their respective offices, provided that any
compensation so paid shall be solely for the purpose of reimbursement of
expenses incurred and not in consideration of service as an officer of the
Corporation. Further provided, that nothing contained herein shall be construed
to preclude any officer from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 3. RESIGNATION AND REMOVAL. Any officer may resign by
delivering a written resignation to the Chief Executive Officer or the Secretary
of the Corporation at its principal office. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. An officer may be removed for cause only
after reasonable notice and opportunity to be heard by the Board of Directors
prior to action thereon. An officer may be removed without cause at any time by
the Board of Directors, subject to the terms and conditions of an employment
agreement in effect, if any, between such officer and the Corporation prior to
such removal. The Board of Directors may delegate the power to remove officers
to a committee, whether such committee already exists or is formed specifically
for such purpose, pursuant to Article IV, Section 11 of these Bylaws.
Section 4. VACANCIES. A vacancy in any office, because of resignation,
removal or death may be filled by the Board for the unexpired portion of the
term, or if so provided by resolution of the Board, by an officer of the
Corporation to whom has been delegated the authority to appoint the holder of
such vacated office.
Section 5. CHAIRMAN. The Chairman of the Board of the Corporation shall
be the Chief Executive Officer of the Corporation. Subject to the control of the
Board, the Chief Executive Officer shall in general manage, supervise and
control all of the business and affairs of the Corporation. He shall, when
present, preside at all meetings of all of the stockholders. He may sign,
individually or in conjunction with any other proper officer of the Corporation
thereunto authorized by the Board, certificates for shares of the Corporation,
any deeds, mortgages, bonds, policies of insurance, contracts, investment
certificates, or other instruments which the Board has authorized to be
executed, except in cases where the execution thereof shall be expressly
delegated by the Board or by the Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of the Chief
Executive Officer of the Corporation and such other duties as may be prescribed
by the Board from time to time.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall be the principal operating officer of the Corporation, shall
have general and active management of the business of the Corporation, shall see
that all orders and resolutions of the Board are carried out, shall report to
the Board and may sign or sign and seal under the seal of the Corporation,
individually or in conjunction with any other proper officer of the Corporation
thereunto authorized by the Board, certificates for shares of the Corporation,
any deeds, mortgages, bonds, policies of insurance, contracts, investment
certificates or other instruments, except where required or permitted by Georgia
Business Corporation Code to be otherwise
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signed and executed or except where the signing and execution thereof shall be
expressly delegated by the Board to some other officer or agent of the
Corporation. The President also shall perform such other duties and have such
other powers as the Chief Executive Officer or the Board may from time to time
duly prescribe.
Section 7. VICE PRESIDENT. The Vice President shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as shall from time-to-time be
imposed by the Board of Directors or delegated by the President.
Section 8. SECRETARY. The Secretary shall: (a) attend and keep the
minutes of the meetings of Shareholders and of the Board's meetings in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as otherwise required by law
or the provisions of the Articles of Incorporation; (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents for which a seal is required, the
execution of which on behalf of the Corporation under its seal is duly
authorized; (d) maintain, or cause an agent designated by the Board to maintain,
a record of the Corporation's Shareholders in a form that permits the
preparation of a list of the names and addresses of all Shareholders in
alphabetical order; (e) have responsibility for the custody, maintenance and
preservation of those corporate records which the Corporation is required by the
Code or otherwise to create, maintain or preserve; and (f) in general perform
all duties incident to the legal office of "Secretary," as described in the
Code, and such other duties as from time to time may be assigned by the
President or the Board.
Section 9. TREASURER. The Treasurer, unless otherwise determined by the
Board, shall: (a) have charge and custody of and be responsible for all funds
and securities of the Corporation; receive and give receipts for monies due and
payable to the Corporation from any source whatsoever, and deposit all such
monies in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected by the Board; and (b) in general perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned by the President or the Board.
Section 10. DEPUTY OFFICERS. The Board may create one or more deputy
officers whose duties shall be, among any other designated thereto by the Board,
to perform the duties of the officer to which such office has been deputized in
the event of the unavailability, death or inability or refusal of such officer
to act. Deputy officers may hold such titles as designated therefor by the
Board; however, any office designated with the prefix "Vice" or "Deputy" shall
be, unless otherwise specified by resolution of the Board, automatically a
deputy officer to the office with the title of which the prefix term is
conjoined. Deputy officers shall have such other duties as prescribed by the
Board from time to time.
Section 11. ASSISTANT OFFICERS. The Board may appoint one or more
officers who shall be assistants to principal officers of the Corporation, or
their deputies, and who shall have such duties as shall be delegated to such
assistant officers by the Board or such principal officers, including the
authority to perform such functions of those principal officers in the place of
and with full authority of such principal officers as shall be designated by the
Board or (if so authorized) by such principal officers. The Board may by
resolution authorize appointment of assistant officers by those principal
officers to which such appointed officers will serve as assistants.
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ARTICLE VI.
INDEMNIFICATION
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS. As used in this
Article VI, the term:
(1) "Corporation" (when spelled with an initial capital letter)
includes any domestic or foreign predecessor entity of the
"Corporation" (as defined in Article I of these Bylaws) in a
merger or other transaction in which the predecessor's existence
ceased upon consummation of the transaction.
(2) "director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as a
director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise. A director is
considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose
duties on, or otherwise involve services by, him to the plan or to
participants in or beneficiaries of the plan. Director includes,
unless the context requires otherwise, the estate or personal
representative of a director.
(3) "expenses" include attorneys' fees.
(4) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with
respect to a proceeding.
(5) "party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(6) "proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES. Unless otherwise
provided by the Articles of Incorporation, to the extent that a director has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue, or matter therein,
because he is or was a director of the Corporation, the Corporation shall
indemnify the director against reasonable expenses incurred by him in connection
therewith.
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION.
(a) Except as provided in subsections (d) and (e) of this Section 3, or
as otherwise provided in the Articles of Incorporation, the Corporation may
indemnify or obligate itself to indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the Corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
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(b) A director's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a) of this Section 3.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct set
forth in subsection (a) of this Section 3.
(d) The Corporation may not indemnify a director under this Section 3:
(1) In connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the
Corporation; or
(2) In connection with any other proceeding in which he was
adjudged liable on the basis that personal benefit was
improperly received by him.
(e) Indemnification permitted under this Section 3 in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED
INDEMNIFICATION.
(a) The Corporation may not indemnify a director under Section 3 of
this Article VI unless a determination has been made in the specific case that
indemnification of the director is permissible in the circumstances because he
has met the standard of conduct set forth in subsection (a) of such Section 3.
(b) The determination required by subsection (a) hereof shall be made:
(1) By the Board by majority vote of a quorum consisting of
directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under paragraph (1) of this
subsection (b), by majority vote of a committee duly
designated by the Board (in which designation directors who
are parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding;
(3) By special legal counsel:
(A) Selected by the Board or its committee in the manner
prescribed in paragraph (1) or (2) of this subsection; or
(B) If a quorum of the Board cannot be obtained under
paragraph (1) of this subsection and a committee cannot
be designated under paragraph (2) of this subsection,
selected by majority vote of the full Board (in which
directors who are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the
proceeding may not be voted on the determination.
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(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, as set forth in
subsection (b) hereof, except that if such determination is made by special
legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled to select counsel
under paragraph (3) of subsection (b) of this Section 4.
Section 5. SHAREHOLDER-APPROVED INDEMNIFICATION.
(a) Without regard to any limitations contained in any other section of
this Article VI, the Corporation may, if authorized by its shareholders by a
majority of votes which would be entitled to be cast in a vote to amend the
Corporation's Articles of Incorporation (which authorization may take the form
of an amendment to the Articles of Incorporation or a contract, resolution or
bylaw approved or ratified by the requisite shareholder vote), indemnify or
obligate itself to indemnify a director made a party to a proceeding, including
a proceeding brought by or in the right of the Corporation.
(b) The Corporation shall not indemnify a director under this Section 5
for any liability incurred in a proceeding in which the director is adjudged
liable to the Corporation or is subjected to injunctive relief in favor of the
Corporation:
(1) For any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(2) For acts or omissions which involve intentional misconduct or
a knowing violation of law;
(3) For any type of liability for unlawful distribution under
Section 14-2-832 of the Code, or any successor statute; or
(4) For any transaction from which he received an improper
personal benefit.
(c) Where approved or authorized in the manner described in subsection
(a) of this Section 5, the Corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
(1) The director furnishes the Corporation a written affirmation
of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection (b) of this
Section 5; and
(2) The director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to
indemnification under this Section 5.
Section 6. ADVANCES FOR EXPENSES.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
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(1) The director furnishes the Corporation a written affirmation
of his good faith belief that he has met the standard of
conduct set forth in subsection (a) of Section 3 of this
Article VI; and
(2) The director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to
indemnification under this Article.
(b) The undertaking required by paragraph (2) of subsection (a) of this
Section 6 must be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
repayment.
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS. Except
as otherwise provided in the Articles of Incorporation, an officer of the
Corporation who is not a director is entitled to mandatory indemnification under
Section 2 of this Article VI, and is entitled to permissive indemnification and
advancement of expenses under the standards and procedures set forth in Section
3, 4 and 5 of this Article VI, to the same extent as a director, consistent with
public policy.
Section 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the Corporation or who, while a director, officer,
employee, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the Corporation would have power to
indemnify him against the same liability under this Article VI or applicable
law.
Section 9. EXPENSES FOR APPEARANCE AS WITNESS. Nothing contained in
this Article VI shall be deemed to limit the Corporation's power to pay or
reimburse expenses incurred by a director or officer in connection with his
appearance as a witness in a proceeding at a time when he has not been made a
named defendant or respondent to the proceeding.
ARTICLE VII.
REIMBURSEMENT OF NON-DEDUCTIBLE
PAYMENTS TO OFFICERS AND EMPLOYEES
In the event any payments to an officer or employee of the Corporation,
such as salary, commission, bonus, interest or rent expenses incurred by him, is
thereafter disallowed in whole or in part by the Internal Revenue Service as a
proper deduction for income tax purposes under Section 162 of the Internal
Revenue Code of 1986 (or disallowed under any similar statutory section which
may subsequently replace such Section 162), such disallowed payments shall be
deemed to be an obligation owed by such officer or employee to the Corporation.
Such disallowed payments shall be reimbursed by such officer or employee to the
Corporation on or before ninety (90) days following the final determination of
such disallowance by the Internal Revenue Service or entry of the final judgment
of such determination if adjudicated. It shall be the duty of the Board to
enforce reimbursement of each such amount disallowed, including the withholding
from future compensation payments to such officer or employee until the amount
owed to the Corporation has been recovered.
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ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board
or, in the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE IX.
ANNUAL STATEMENTS
(a) No later than four months after the close of each fiscal year, and
in any case prior to the next annual meeting of shareholders, the Corporation
shall prepare:
(i) A balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of the fiscal
year, and
(ii) A profit and loss statement showing the results of its
operation during the fiscal year.
Upon written request, the Corporation shall mail promptly to any
shareholder of record a copy of the most recent such balance sheet and profit
and loss statement. If prepared for other purposes, the Corporation shall also
furnish upon written request a statement of sources and applications of funds
and a statement of changes in shareholders' equity for the fiscal year. If
financial statements are prepared by the Corporation on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared, and disclose that they are prepared, on that basis. If financial
statements are prepared otherwise than on the basis of generally accepted
accounting principles, they must so disclose and must be prepared on the same
basis as other reports or statements prepared by the Corporation for the use of
others.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the Chief Executive Officer or the person
responsible for the Corporation's accounting records:
(1) Stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation;
and
(2) Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the
statements prepared for the preceding year.
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ARTICLE X.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this Section
1, the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
exhibit the holder's name, the number of shares and class of shares and series,
if any, represented thereby, the name of the Corporation and a statement that
the Corporation is organized under the laws of the State of Georgia. Each
certificate shall be signed by one or more officers of the Corporation specified
by resolution of the Board, but in the absence of such specifications, shall be
valid if executed by the Chief Executive Officer or any Deputy or Assistant
thereto, and such execution is countersigned by the Secretary, or any Deputy or
Assistant thereto. Each stock certificate may but need not be sealed with the
seal of the Corporation.
(b) If authorized by resolution of the Board, the Corporation may issue
some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these Bylaws, or by any legal agreement among the
shareholders of the Corporation.
Section 2. TRANSFER. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been lost,
stolen or destroyed, upon compliance with the provisions of Section 4, Article X
of these Bylaws.
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat
the holder of record of any share of the Corporation as the person entitled to
vote such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if the
Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
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ARTICLE XI.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
ARTICLE XII.
REGISTERED OFFICE AND REGISTERED AGENT; OFFICE
(a) The Corporation shall maintain at all times a registered office in
State of Georgia and a registered agent at that office.
(b) The Corporation may have other offices at such places within or
without the State of Georgia as the Board may from time to time designate or the
business of the Corporation may require or make desirable.
ARTICLE XIII.
AMENDMENTS
Section 1. AMENDMENTS GENERALLY.
(a) Except as otherwise provided in subsection (c) of this Section 1,
or in the Articles of Incorporation or by applicable law, the Board may amend or
repeal any provision of these Bylaws or adopt any new bylaw, unless the
shareholders have adopted, amended or repealed a particular bylaw provision and,
in doing so, have expressly reserved to the shareholders the right of amendment
or repeal therefor.
(b) The Corporation's shareholders have the right to amend or repeal
any provision of these Bylaws, or to adopt new bylaw provisions, even though
such provisions may also be adopted, amended or repealed by the Board.
(c) Any provision of these Bylaws limiting the authority of the Board
or establishing staggered terms for directors may be adopted, amended or
repealed only by the shareholders.
Section 2. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS.
(a) Except as provided in Section 14-2-1113 of the Code or any
successor statute thereto (relating to the adoption of certain voting
requirements in connection with certain corporate business combinations with
statutorily defined "interested shareholders"), any bylaw which sets a greater
quorum or voting requirement for shareholders (or voting groups of shareholders)
than the minimum required by the Code may not be adopted, amended or repealed by
the Board.
(b) Except as otherwise provided in the Articles of Incorporation, a
bylaw that fixes a greater quorum or voting requirement for the Board than the
minimum required by the Code:
-18-
<PAGE> 22
(1) May be adopted, amended, or repealed by the shareholders only
by the affirmative vote of a majority of the votes entitled to
be cast; or
(2) May be adopted, amended, or repealed by the directors only by
a majority of the entire Board.
(c) A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the Board may be amended or repealed only by a
specified vote of either the shareholders or the Board, if such bylaw provision
so provides.
-19-
<PAGE> 1
EXHIBIT 4.3
CREDIT AGREEMENT
DATED AS OF NOVEMBER 1, 1999
AMONG
CLEAR COMMUNICATIONS GROUP, INC.
AS BORROWER
CLEAR HOLDINGS, INC.,
TWR TELECOM, INC.,
TWR LIGHTING, INC.,
ROOKER TOWER COMPANY,
CLEAR PROGRAM MANAGEMENT, INC.,
SPECIALTY DRILLING, INC.,
CELLULAR TECHNOLOGY INTERNATIONAL, INC.,
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC.,
CLEAR TOWER CORPORATION
AND
ISDC, INC.,
AS AFFILIATE GUARANTORS
---------------------------------------------
THE LENDERS FROM TIME TO TIME
PARTY HERETO
---------------------------------------------
AND
WACHOVIA BANK, N.A.
AS AGENT AND AS A LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 1 AMOUNTS AND TERMS OF LOANS......................................................................2
1.1 Loans...........................................................................................2
1.2 Interest and Related Fees.......................................................................8
1.3 Payments and Prepayments.......................................................................12
1.4 Term of the Agreement..........................................................................14
1.5 Loan Accounts..................................................................................14
1.6 Capital Adequacy and Other Adjustments.........................................................14
1.7 Taxes..........................................................................................15
1.8 Optional Prepayment/Replacement of Lender in Respect of
Increased Costs................................................................................16
1.9 Voluntary Termination or Reduction of Certain Commitments......................................17
1.10 Affiliate Guaranty.............................................................................17
SECTION 2 AFFIRMATIVE COVENANTS..........................................................................20
2.1 Compliance With Laws...........................................................................20
2.2 Maintenance of Properties; Insurance...........................................................21
2.3 Inspections....................................................................................21
2.4 Corporate or Company Existence, Etc............................................................22
2.5 Further Assurances.............................................................................22
2.6 Year 2000 Compatibility........................................................................22
2.7 Pledge of Stock................................................................................22
2.8 Conforming Leasehold Interests; Matters Relating to Additional
Real Property Collateral.......................................................................22
2.9 Interest Rate Protection.......................................................................25
2.10 Life Insurance.................................................................................25
2.11 Motor Vehicles.................................................................................25
SECTION 3 NEGATIVE COVENANTS.............................................................................25
3.1 Indebtedness...................................................................................26
3.2 Liens and Related Matters......................................................................26
3.3 Investments; Joint Ventures....................................................................28
3.4 Contingent Obligations.........................................................................29
3.5 Restricted Junior Payments.....................................................................31
3.6 Restriction on Fundamental Changes.............................................................31
3.7 Disposal of Assets or Subsidiary Stock.........................................................32
3.8 Transactions with Affiliates...................................................................32
3.9 Management Fees and Compensation...............................................................33
3.10 Conduct of Business............................................................................33
3.11 Changes Relating to Subordinated Indebtedness..................................................33
3.12 Fiscal Year....................................................................................33
3.13 Subsidiaries...................................................................................33
SECTION 4 FINANCIAL REPORTING/COVENANTS..................................................................34
4.1 Financial Statements and Other Reports.........................................................34
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
4.2 Financial Covenants............................................................................36
4.3 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement...................................................................38
SECTION 5 REPRESENTATIONS AND WARRANTIES.................................................................38
5.1 Disclosure.....................................................................................38
5.2 No Material Adverse Effect.....................................................................38
5.3 No Default.....................................................................................39
5.4 Organization, Powers, Capitalization and Good Standing.........................................39
5.5 Financial Statements...........................................................................40
5.6 Intellectual Property..........................................................................40
5.7 Investigations, Audits, Etc....................................................................40
5.8 Employee Matters...............................................................................40
5.9 Financial Condition and Solvency...............................................................41
5.10 Subsidiaries...................................................................................41
5.11 Capitalization/Acquisition Transactions........................................................41
5.12 Compliance with Laws and Agreements............................................................41
5.13 Litigation and Environmental Matters...........................................................42
SECTION 6 DEFAULT, RIGHTS AND REMEDIES...................................................................42
6.1 Event of Default...............................................................................42
6.2 Suspension of Commitments......................................................................46
6.3 Acceleration...................................................................................46
6.4 Performance by Agent...........................................................................46
SECTION 7 CONDITIONS TO LOANS............................................................................46
7.1 Conditions to Initial Loans....................................................................47
7.2 Conditions to All Loans........................................................................51
SECTION 8 ASSIGNMENT AND PARTICIPATION...................................................................52
8.1 Assignments and Participations in Loans and Notes..............................................52
8.2 Agent..........................................................................................53
8.3 Amendments, Consents and Waivers for Certain Actions...........................................57
8.4 Set Off and Sharing of Payments................................................................57
8.5 Disbursement of Funds..........................................................................57
8.6 Disbursements of Advances; Payment.............................................................58
8.7 Documentation Agent and Syndication Agent......................................................60
SECTION 9 MISCELLANEOUS..................................................................................60
9.1 Indemnities....................................................................................60
9.2 Amendments and Waivers.........................................................................61
9.3 Notices........................................................................................61
9.4 Failure or Indulgence Not Waiver; Remedies Cumulative..........................................62
9.5 Marshalling; Payments Set Aside................................................................63
9.6 Severability...................................................................................63
9.7 Lenders' Obligations Several; Independent Nature of Lenders' Rights............................63
9.8 Headings.......................................................................................63
9.9 Applicable Law.................................................................................63
9.10 Successors and Assigns.........................................................................63
9.11 No Fiduciary Relationship......................................................................63
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
9.12 Construction...................................................................................63
9.13 Confidentiality................................................................................64
9.14 Consent to Jurisdiction and Service of Process.................................................64
9.15 Waiver of Jury Trial...........................................................................64
9.16 Survival of Warranties and Certain Agreements..................................................65
9.17 Entire Agreement...............................................................................65
9.18 Counterparts; Effectiveness....................................................................65
9.19 Press Release; Public Offering Materials.......................................................65
9.20 Expenses and Attorneys Fees....................................................................66
SECTION 10 DEFINITIONS....................................................................................66
10.1 Certain Defined Terms..........................................................................66
10.2 Other Definitional Provisions..................................................................87
</TABLE>
-iii-
<PAGE> 5
CREDIT AGREEMENT
PREAMBLE. This CREDIT AGREEMENT, dated as of November 1, 1999 (the
"Closing Date"), is made and entered into by and among CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"); CLEAR HOLDINGS, INC., a
Georgia corporation and sole shareholder of Borrower ("Parent"); TWR TELECOM,
INC., a Texas corporation and wholly-owned Subsidiary of Borrower ("TWR"); TWR
LIGHTING, INC., a Texas corporation and wholly-owned Subsidiary of TWR ("TLI");
ROOKER TOWER COMPANY, a Tennessee corporation and wholly-owned Subsidiary of
TWR ("RTC"); CLEAR PROGRAM MANAGEMENT, INC., a Georgia corporation and
wholly-owned Subsidiary of Borrower ("CPM"); SPECIALTY DRILLING, INC., a Texas
corporation and wholly-owned Subsidiary of Borrower ("SDI"); CELLULAR
TECHNOLOGY INTERNATIONAL, INC., a Missouri corporation and wholly-owned
Subsidiary of Borrower ("CTI"); COMMUNICATIONS DEVELOPMENT SYSTEMS, INC., a New
Jersey corporation and wholly-owned Subsidiary of Borrower ("CDS"); CLEAR TOWER
CORPORATION, a Georgia corporation and wholly-owned Subsidiary of Borrower
("Tower"); and ISDC, INC., a Georgia corporation and wholly-owned Subsidiary of
Borrower ("ISD"; Parent, TWR, TLI, RTC, CPM, SDI, CTI, CDS, Tower and ISD,
together with each other Subsidiary or other Affiliate of Borrower which,
pursuant to the operation and effect of Section 3.13 below, hereafter becomes a
guarantor of the Obligations, hereinafter called, collectively, the "Affiliate
Guarantors" and, individually, an "Affiliate Guarantor"); each Lender (as
hereinafter defined) from time to time party to this Agreement; and WACHOVIA
BANK, N.A., a national banking association (in its individual capacity,
"Wachovia"), as a Lender (as hereinafter defined), and as agent for each Lender
from time to time party to this Agreement (Wachovia, acting in such capacity,
hereinafter sometimes called "Agent"). Capitalized terms used in this
Agreement, and not otherwise expressly defined herein, shall have the meanings
given to such terms in Section 10.
R E C I T A L S:
WHEREAS, Borrower has applied to Lenders for certain financial
accommodations in order to facilitate the Current Acquisitions (as hereinafter
defined), supplement working capital and for certain related purposes, all as
more particularly described below; and
WHEREAS, Lenders have agreed to extend such financial accommodations
to Borrower for such purposes in the manner and subject to the terms and
conditions set forth below; and
WHEREAS, Affiliate Guarantors will obtain direct and material economic
benefits from such financial accommodations being made available to Borrower
pursuant hereto, and have agreed to join with Borrower in executing this
Agreement in order to provide their credit support in respect thereof;
<PAGE> 6
CREDIT AGREEMENT
PREAMBLE. This CREDIT AGREEMENT, dated as of November 1, 1999
(the "Closing Date"), is made and entered into by and among CLEAR
COMMUNICATIONS GROUP, INC., a Georgia corporation ("Borrower"); CLEAR HOLDINGS,
INC., a Georgia corporation and sole shareholder of Borrower ("Parent"); TWR
TELECOM, INC., a Texas corporation and wholly-owned Subsidiary of Borrower
("TWR"); TWR LIGHTING, INC., a Texas corporation and wholly-owned Subsidiary of
TWR ("TLI"); ROOKER TOWER COMPANY, a Tennessee corporation and wholly-owned
Subsidiary of TWR ("RTC"); CLEAR PROGRAM MANAGEMENT, INC., a Georgia
corporation and wholly-owned Subsidiary of Borrower ("CPM"); SPECIALTY
DRILLING, INC., a Texas corporation and wholly-owned Subsidiary of Borrower
("SDI"); CELLULAR TECHNOLOGY INTERNATIONAL, INC., a Missouri corporation and
wholly-owned Subsidiary of Borrower ("CTI"); COMMUNICATIONS DEVELOPMENT
SYSTEMS, INC., a New Jersey corporation and wholly-owned Subsidiary of Borrower
("CDS"); CLEAR TOWER CORPORATION, a Georgia corporation and wholly-owned
Subsidiary of Borrower ("Tower"); and ISDC, INC., a Georgia corporation and
wholly-owned Subsidiary of Borrower ("ISD"; Parent, TWR, TLI, RTC, CPM, SDI,
CTI, CDS, Tower and ISD, together with each other Subsidiary or other Affiliate
of Borrower which, pursuant to the operation and effect of Section 3.13 below,
hereafter becomes a guarantor of the Obligations, hereinafter called,
collectively, the "Affiliate Guarantors" and, individually, an "Affiliate
Guarantor"); each Lender (as hereinafter defined) from time to time party to
this Agreement; and WACHOVIA BANK, N.A., a national banking association (in its
individual capacity, "Wachovia"), as a Lender (as hereinafter defined), and as
agent for each Lender from time to time party to this Agreement (Wachovia,
acting in such capacity, hereinafter sometimes called "Agent"). Capitalized
terms used in this Agreement, and not otherwise expressly defined herein, shall
have the meanings given to such terms in Section 10.
R E C I T A L S:
WHEREAS, Borrower has applied to Lenders for certain
financial accommodations in order to facilitate the Current Acquisitions (as
hereinafter defined), supplement working capital and for certain related
purposes, all as more particularly described below; and
WHEREAS, Lenders have agreed to extend such financial
accommodations to Borrower for such purposes in the manner and subject to the
terms and conditions set forth below; and
WHEREAS, Affiliate Guarantors will obtain direct and material
economic benefits from such financial accommodations being made available to
Borrower pursuant hereto, and have agreed to join with Borrower in executing
this Agreement in order to provide their credit support in respect thereof;
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing recitals
and the agreements, provisions and covenants herein contained, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Affiliate Guarantors,
Lenders and Agent, each intending to be legally bound, hereby acknowledge,
covenant and agree as follows:
SECTION 1
AMOUNTS AND TERMS OF LOANS
1.1 Loans. Subject to the terms and conditions of this
Agreement, including, particularly, satisfaction of all those conditions
precedent set forth in Sections 7.1 and 7.2, and in reliance upon the
representations and warranties of each Loan Party contained herein and in each
Loan Document:
(A) Term Loan. Each Lender agrees, severally and not jointly,
to lend to Borrower on the Closing Date, its Pro Rata Share of a term loan (the
"Term Loan") in the aggregate principal amount of Ten Million Five Hundred
Thousand Dollars ($10,500,000), in a maximum amount for each Lender of its
"Term Loan Commitment" as specified opposite its name on its signature page to
this Agreement (as each of the same may be reduced or added to pursuant hereto
or to a Lender Addition Agreement, herein called, individually, as to each
Lender, its "Term Loan Commitment" and, collectively, as to all Lenders, their
"Term Loan Commitments"). The Term Loan shall be disbursed in a lump sum on the
Closing Date. Amounts borrowed under this subsection 1.1(A) and repaid may not
be reborrowed. The proceeds of the Term Loan shall be used, in part, together
with Borrower's own funds and funds received from the Junior Capital Infusion,
to finance the payment of the Current Acquisitions Closing Costs and to
refinance outstanding Indebtedness under the Existing Credit Agreement.
Borrower shall repay the Term Loan through periodic payments of principal on
the dates and in the amounts indicated below:
<TABLE>
<CAPTION>
Installment Nos. Installment Amounts
---------------- -------------------
<S> <C>
1 through and including 12 $ 83,400.00
13 through and including 24 $166,667.00
25 through and including 36 $208,333.00
37 through and including 48 $208,333.00
49 through and including 56 $208,333.00
57 Balance Due
</TABLE>
with the first such installment (Installment No. 1 above) being due and payable
on February 1, 2000, and each subsequent installment being due and payable on
the first day of each succeeding calendar month, except that the final such
installment (Installment No. 57 above) shall be due and payable (if not sooner
paid) on the Expiry Date, and shall be in any event in that amount, whether
more or less, necessary to pay in full the then entire principal balance of the
Term Loan (the "Balance Due"). The Term Loan shall also be subject to mandatory
prepayment, and may be voluntarily prepaid, subject to and in accordance with
the terms of Sections 1.3(B) and 6.3.
-2-
<PAGE> 8
(B) Revolving Loans. Each Lender agrees, severally and not
jointly, to lend to Borrower during the period from the Closing Date to (but
excluding) the Expiry Date its Pro Rata Share of any Loans requested by
Borrower to be made by Lenders under this Section 1.1(B) during such period, up
to an aggregate maximum amount for each Lender of its "Revolving Loan
Commitment" as specified opposite its name on its signature page, and up to an
aggregate maximum amount for all Lenders of Eleven Million Five Hundred
Thousand Dollars ($11,500,000) (as each of the same may be reduced or added to
pursuant hereto or to a Lender Addition Agreement, herein called, individually,
as to each Lender, its "Revolving Loan Commitment," and, collectively, as to
all Lenders, their "Revolving Loan Commitments") and, subject to the terms and
conditions of Section 1.1(C), to permit Borrower to obtain Letters of Credit
from time to time; provided, however, that the maximum amount of Loans which
may be outstanding hereunder at any one time, when aggregated with all then
outstanding L/C Exposure, shall not exceed the lesser of: (i) the aggregate
Revolving Loan Commitments or (ii) the Maximum Lending Multiple, as defined
below in this Section 1.1(B) (the lesser amount so determined hereinafter
sometimes referred to as the "Maximum Revolving Loan Balance"). Loans
outstanding from time to time made pursuant to the Revolving Loan Commitments
are sometimes called herein "Revolving Loans". Revolving Loans may be borrowed,
repaid and reborrowed, but, subject to earlier payment in accordance with the
provisions of the last paragraph of this Section 1.1(B) and Section 6.3, shall
be repaid in full on the Expiry Date, on which date the Revolving Loan
Commitments shall cease to be effective and no Revolving Loans may be obtained.
The proceeds of the initial Revolving Loans, to be made on the Closing Date,
shall be used, in part, together with Borrower's own funds and funds received
from the Junior Capital Infusion, to finance payment of the Current
Acquisitions Closing Costs and to refinance outstanding Indebtedness under the
Existing Credit Agreement. The proceeds of subsequent Revolving Loans shall be
used to supplement Borrower's or its Subsidiaries' working capital, to finance
their making of Capital Expenditures and for other general corporate purposes
of Borrower and its Subsidiaries consistent with the terms and conditions of
this Agreement; provided, however, that, unless otherwise may be approved in
writing by Agent and all Lenders, in their sole discretion, from time to time,
no proceeds of any Revolving Loan shall be used to finance, in whole or in
part, an Approved Acquisition. Written or telephonic notice must be provided to
Agent by Borrower by 11:00 a.m. (Atlanta time), on the Business Day that such
Revolving Loan is requested to be made, in the case of any Revolving Loan
requested to be made as a Base Rate Loan, and by 11:00 a.m. (Atlanta time) on
the third Business Day prior to the Business Day, in the case of any Revolving
Loan requested to be made as a LIBOR Loan. All Revolving Loans requested
telephonically by Borrower must be confirmed in writing by Borrower to Agent
within one (1) Business Day. Each such written notice (or written confirmation
of telephonic notice) shall be made in substantially the form of the "Notice of
Borrowing" annexed hereto as EXHIBIT A. As used in this Section 1.1(B), the
"Maximum Lending Multiple" shall mean Eleven Million Three Hundred Fifty-Six
Thousand Nine Hundred Sixty-Six and No/100 Dollars ($11,356,966) initially,
i.e., from the Closing Date through November 30, 1999, and shall be adjusted on
a monthly basis thereafter by Agent, effective as of the first day of each
calendar month, beginning on December 1, 1999, based on the product of (i)
EBITDA, determined for the Test Period ending as of the last day of Borrower's
most recently completed fiscal month for which financial statements have been
delivered to Agent in accordance with Section 4.1(A); e.g., as of December 1,
1999, EBITDA will be determined based on Borrower's financial statements for
the fiscal month ended October 31, 1999 (but,
-3-
<PAGE> 9
during the Annualization Period, EBITDA shall be Annualized); multiplied by
(ii) two and five-tenths (2.5).
Borrower acknowledges that Lenders do not presently intend to
make, or permit to remain outstanding, Revolving Loans in an aggregate amount
in excess of the Maximum Revolving Loan Balance (such Revolving Loans in excess
of the Maximum Revolving Loan Balance being referred to as "Excess Revolving
Loans"); and if any such Excess Revolving Loans continue to exist for three (3)
Business Days or more after demand for repayment, the same shall constitute an
Event of Default. Notwithstanding the foregoing, however, if at any time
subsequent to the Closing Date, Borrower requests that Lenders make, or permit
to remain outstanding Excess Revolving Loans, the Requisite Lenders may, in
their sole discretion, elect to cause all Lenders to make, or permit to remain
outstanding, such Excess Revolving Loans, provided, however, that the Requisite
Lenders shall not cause all Lenders to make, or permit to remain outstanding,
either (i) Revolving Loans (including Excess Revolving Loans) which are in the
aggregate in excess of the Revolving Loan Commitments or (ii) Excess Revolving
Loans in excess of ten percent (10%) of the Maximum Revolving Loan Balance at
such time (without giving effect to the making of any such Excess Revolving
Loan), or (iii) Excess Revolving Loans which remain outstanding for more than
twenty one (21) consecutive days in any event. If Excess Revolving Loans are
made, or permitted to remain outstanding, pursuant to the preceding sentence,
then (a) the Maximum Revolving Loan Balance shall be deemed increased by the
amount of such Excess Revolving Loans, but only for so long as the Requisite
Lenders allow such Excess Revolving Loans to be outstanding and (b) all Lenders
that have committed to make Revolving Loans shall be bound to make, or permit
to remain outstanding, such Excess Revolving Loans based upon their Pro Rata
Shares thereof in accordance with the terms of this Agreement.
(C) Letters of Credit.
(1) Subject to the terms and conditions set forth herein, in
addition to Revolving Loans, Borrower may request the issuance of Letters of
Credit for its own account by the Issuing Lender, in a form reasonably
acceptable to the Issuing Lender, at any time and from time to time during the
term of the Revolving Loan Commitments. Letters of Credit issued hereunder
shall constitute utilization of the Revolving Loan Commitments. In the event of
any inconsistency between the terms and conditions hereof and the terms and
conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Lender relating to any Letter of Credit, the terms and conditions hereof shall
govern and control.
(2) To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), Borrower
shall deliver to the Issuing Lender and the Agent (if not the Issuing Lender),
at least three (3) Business Days in advance of the requested date of issuance,
amendment, renewal or extension, a notice requesting the issuance of a Letter
of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, the date of issuance, amendment, renewal or extension, the date on
which such Letter of Credit is to expire (which shall comply with paragraph (3)
of this Section), the amount of such Letter of Credit, whether the Letter of
Credit is a "standby" or "commercial" Letter of Credit, the name and
-4-
<PAGE> 10
address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Lender, Borrower also shall submit a letter of credit
application on the Issuing Lender's standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit Borrower shall be deemed to represent and warrant
that), after giving effect to such issuance, amendment, renewal or extension
(i) the aggregate LC Exposure of the Issuing Lender (determined for these
purposes without giving effect to the participations therein of the Lenders
pursuant to paragraph (4) of this Section) shall not exceed the LC Commitment.
(3) Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one (1) year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one (1) year after such renewal or extension) provided that
any such Letter of Credit may provide for automatic extensions thereof to a
date not later than one (1) year beyond its current expiration date, and (ii)
the date that is five (5) Business Days prior to the Expiry Date. No Letter of
Credit may be extended beyond the date that is five (5) Business Days prior to
the Expiry Date, however.
(4) Upon its issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) in accordance with terms
hereof, without any further action on its part, the Issuing Lender shall be
deemed to have granted to each Lender, and each Lender shall be deemed to have
acquired from the Issuing Lender, a participation in such Letter of Credit
equal to such Lender's Pro Rata Share of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Agent, for the account of the Issuing Lender, such Lender's applicable Pro
Rata Share of each LC Disbursement made by the Issuing Lender and not
reimbursed by Borrower on the date due as provided in paragraph (5) of this
Section, or of any reimbursement payment in respect of any Letter of Credit
required to be refunded to Borrower for any reason. Each Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
paragraph in respect of Letters of Credit is absolute and unconditional,
provided that the Issuing Lender has complied with the terms hereof in
connection therewith, and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default or Event of Default or any subsequent
reduction or termination of the Revolving Loan Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(5) If the Issuing Lender shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse the Issuing Lender
in respect of such LC Disbursement by paying to the Agent for the account of
the Issuing Lender an amount equal to such LC Disbursement not later than 1:00
p.m. (Atlanta time), on (i) the Business Day that the Borrower receives notice
of such LC Disbursement, if such notice is received prior to 1:00 p.m. (Atlanta
time), or (ii) the Business Day immediately following the day that the Borrower
receives such notice, if such notice is not received prior to such time,
provided that Borrower may, subject to the conditions to borrowing set forth
herein, request that such payment be financed with a Revolving Loan in an
equivalent amount and, to the extent so financed,
-5-
<PAGE> 11
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting Revolving Loan. If Borrower fails to make such payment when due,
Agent shall notify each Lender of the applicable LC Disbursement and the
payment then due from the Borrower in respect thereof, and such Lender shall
pay to the Agent its Pro Rata Share of the payment then due from Borrower, in
the same manner as provided herein with respect to Revolving Loans made by such
Lender, and Agent shall promptly pay to the Issuing Lender the amounts so
received by it from the Lenders. Promptly following receipt by Agent of any
payment from Borrower pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that the Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Lender, then to
such Lenders and the Issuing Lender as their interests may appear. Any payment
made directly by a Lender pursuant to this paragraph to reimburse the Issuing
Lender for any LC Disbursement shall not constitute a Loan and, in any event,
shall not relieve Borrower of its obligation to reimburse such LC Disbursement.
(6) (i) Borrower's obligation to reimburse LC Disbursements
as provided in paragraph (5) of this Section shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
hereof under any and all circumstances whatsoever, irrespective of (A) any lack
of validity or enforceability of any Letter of Credit, or any term or provision
therein, (B) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, (C) payment by the Issuing
Lender under a Letter of Credit against presentation of a draft or other
document that does not comply strictly with the terms of such Letter of Credit
and (D) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of Borrower's obligations hereunder.
(7) Neither the Agent, the Lenders nor the Issuing Lender
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit by the Issuing Lender or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of
the Issuing Lender; provided that the foregoing shall not be construed to
excuse the Issuing Lender from liability to Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Issuing Lender's gross
negligence or willful misconduct when determining whether drafts and other
documents presented under a Letter of Credit comply with the terms thereof.
Subject in all respects to the foregoing, the parties hereto expressly agree
that:
(a) the Issuing Lender may accept documents that appear on
their face to be in substantial compliance with the terms of a Letter
of Credit without responsibility for further investigation, regardless
of any notice or information to the contrary, and may make payment
upon presentation of documents that appear on their face to be in
substantial compliance with the terms of such Letter of Credit;
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(b) the Issuing Lender shall have the right, in its sole
discretion, to decline to accept such documents and to make such
payment if such documents are not in strict compliance with the terms
of such Letter of Credit; and
(c) this paragraph (7) shall establish the standard of care
to be exercised by the Issuing Lender when determining whether drafts
and other documents presented under a Letter of Credit comply with the
terms thereof (and the parties hereto hereby waive, to the extent
permitted by applicable law, any standard of care inconsistent with
the foregoing).
(8) The Issuing Lender shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment
under any Letter of Credit. The Issuing Lender shall promptly notify Agent and
Borrower by telephone (confirmed by telecopy) of such demand for payment and
whether the Issuing Lender has made or will make an LC Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall not
relieve Borrower of its obligation to reimburse the Issuing Lender and the
Lenders with respect to any such LC Disbursement.
(9) If the Issuing Lender shall make any LC Disbursement in
respect of any Letter of Credit, then, unless, Borrower shall reimburse the
Issuing Lender for such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date that Borrower reimburses such LC Disbursement, at the rate per annum
then applicable to Revolving Loans. Interest accrued pursuant to this paragraph
shall be for the account of the Issuing Lender, except that interest accrued on
and after the date of payment by any Lender pursuant to paragraph (5) of this
Section to reimburse the Issuing Lender shall be for the account of such Lender
to the extent of such payment.
(10) If either (i) a Default or Event of Default shall occur
and be continuing and the Borrower receives notice from the Agent or the
Requisite Lenders demanding the deposit of cash collateral pursuant to this
paragraph, Borrower shall immediately deposit with the Issuing Lender an amount
in cash equal to the LC Exposure on such date; provided that the obligation to
deposit cash collateral in an amount equal to the LC Exposure shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default described in clauses (F) or (G) of Section 6.1. Such deposit
shall be held by the Agent as Collateral in the first instance for the LC
Exposure hereunder and thereafter for the payment of any other Obligations of
the Loan Parties hereunder.
(D) Acquisition Loans.
Each Lender further agrees, severally and not jointly, to
lend to Borrower during the period from the Closing Date to (but excluding) the
Acquisition Loan Expiry Date, its Pro Rata Share of each Acquisition Loan made
by Lenders under this subsection 1.1(D) during such period, up to an aggregate
maximum amount for each Lender of its "Acquisition Loan
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Commitment," as specified opposite its name on its signature page to this
Agreement, and in an aggregate maximum amount for all Lenders of Three Million
Dollars ($3,000,000) (as each of the same may be reduced, or added to pursuant
hereto or to a Lender Addition Agreement, herein called, individually, as to
each Lender, its "Acquisition Loan Commitment" and, collectively, as to all
Lenders, their "Acquisition Loan Commitments"). Each Loan made pursuant to the
Acquisition Loan Commitments is sometimes called herein an "Acquisition Loan."
Effective on the Acquisition Loan Expiry Date, the Acquisition Loan Commitments
shall cease to be effective and no Acquisition Loans may be obtained. The
Acquisition Loans outstanding on the Acquisition Loan Expiry Date (the
"Acquisition Loan Balance") shall be repaid over a term of three (3) years,
beginning on November 1, 2001, and concluding on the Expiry Date, in monthly
installments, with payments commencing on November 1, 2001, and continuing on
the first day of each succeeding calendar month, with each installment (except
the final installment) to be equal in amount to one thirty-sixth (1/36th) of
the Acquisition Loan Balance, and with the final installment to be equal to the
then unpaid principal amount of the Acquisition Loan Balance. The Acquisition
Loans shall also be subject to mandatory prepayment, and may be voluntarily
prepaid, subject to and in accordance with the terms of Sections 1.3(B) and
6.3. The entire proceeds of each Acquisition Loan shall be used to finance an
Approved Acquisition (as hereinafter defined), including all expenses
associated therewith, but for no other purpose.
Borrower shall request each Acquisition Loan not later than
thirty (30) days prior to the intended disbursement date thereof, by giving
written notice to Agent to such effect, specifying the intended amount thereof,
desired interest rate option and intended disbursement date thereof (which
shall be a Business Day), provided that the foregoing is not intended, and
shall not be construed, to reduce any obligations of Borrower, contained in the
definition of "Approved Acquisition," as hereinafter set forth in Section 10.1,
to give notices and provide data to enable any intended Acquisition to become
an Approved Acquisition hereunder.
(E) Notes. Borrower shall execute and deliver to each Lender
(i) on the Closing Date, a Note to evidence such Lender's Pro Rata Share of the
Term Loan, such Note to be in the principal amount of such Lender's Term Loan
Commitment, (ii) on the Closing Date, a Note to evidence such Lender's Pro Rata
Share of the Revolving Loans, such Note to be in the principal amount of such
Lender's Revolving Loan Commitment, and (iii) on the Closing Date, a Note to
evidence such Lender's Pro Rate Share of the Acquisition Loans, such Note to be
in the principal amount of such Lender's Pro Rata Share of the Acquisition Loan
Commitment. In the event of an assignment under subsection 8.1, Borrower shall,
upon surrender of the assigning Lender's Notes, issue new Notes to reflect the
interests of the assigning Lender, if any, and the Person to which interests
are to be assigned.
1.2 Interest and Related Fees.
(A) Loans shall bear interest at the rates set forth in
either paragraphs (1) or (2) below:
(1) Unless Borrower elects otherwise in respect of any Loans
pursuant to paragraph (2) below, all Loans shall bear interest at the sum of
the Base Rate plus the Applicable Margin. As used herein, (i) "Base Rate" means
a variable rate of interest equal to the greater of
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the Prime Rate or (B) the sum of the Federal Funds Effective Rate plus one-half
of one percent (1/2%) per annum; and (ii) "Base Rate Loans" means Loans bearing
interest at rates determined by reference to the Base Rate plus the Applicable
Margin. Each such determination by Agent of the Base Rate, in the absence of
manifest error, shall be binding and conclusive on all parties hereto.
(2) Provided no Default or Event of Default then exists,
Borrower may, on or after the third (3rd) Business Day after the Closing Date,
request that Loans be made as LIBOR Loans and that outstanding portions of any
Loans be converted to LIBOR Loans. Any such request, which must be made (if at
all) in writing in the applicable Notice of Borrowing, shall pertain to Loans
in an aggregate minimum amount of Two Million Dollars ($2,000,000) and integral
multiples of Five Hundred Thousand Dollars ($500,000) in excess thereof. Once
given, a LIBOR Loan request shall be irrevocable and Borrower shall be bound
thereby. "LIBOR" means, for each Interest Period, a rate per annum equal to:
(a) the rate of interest determined by Agent at which deposits in U.S. dollars
approximately equal in principal amount to or comparable to the amount of a
given LIBOR Loan for a term equal or comparable to the relevant Interest Period
as reported on Telerate Page 3750 at approximately 11:00 a.m. (London time) on
that Business Day which is two (2) Business Days prior to the first day of such
Interest Period; provided, however, that (i) if two or more such offered rates
appear on such page in respect of the foregoing, the arithmetic mean of such
rates shall be used, and (ii) if Telerate ceases to provide LIBOR quotations,
such rate shall be the rate of interest at which comparable deposits in U.S.
dollars are offered as of the determination date by The Chase Manhattan Bank
(or any successor entity) to prime banks in the London interbank market;
divided by (b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) Business Days prior to the
beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) which are required to
be maintained by a member bank of the Federal Reserve System; such rate to be
rounded upward to the next whole multiple of one-sixteenth of one percent
(.0625%); and "LIBOR Loans" means Loans bearing interest at rates determined by
reference to LIBOR plus the Applicable Margin. Each such determination of LIBOR
by Agent, in the absence of manifest error, shall be binding and conclusive on
all parties hereto.
Each LIBOR Loan may be obtained for periods of one (1) month, two (2) months,
three (3) or six (6) months (each being an "Interest Period"), at the
Borrower's option. With respect to LIBOR Loans: (a) the Interest Period will
commence on the date that the LIBOR Loan is made or the date on which a Base
Rate Loan is converted into a LIBOR Loan, as applicable, or in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires, (b) if
the Interest Period expires on a day that is not a Business Day, then it will
expire on the next Business Day (or, if such next Business Day is in the next
calendar month, on the preceding Business Day), and (c) no Interest Period
shall extend beyond the Expiry Date in any event. Upon the expiration of an
Interest Period, in the absence of a new LIBOR Loan request submitted to Agent
not less than three (3)
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Business Days prior to the end of such Interest Period, any LIBOR Loan then
maturing shall be automatically converted to a Base Rate Loan. There may be no
more than six (6) LIBOR Loans outstanding at any one time. Loans which are not
made the subject of a LIBOR Loan request shall be made (or continued) as Base
Rate Loans.
If the introduction of, or any change in the interpretation of, any law, rule,
or regulation, in each case, occurring after the Closing Date, would increase
the cost to any Lender of making or maintaining a LIBOR Loan, then Agent, on
behalf of all affected Lenders, shall submit a certificate to Borrower
demonstrating in reasonable detail the calculation of the increased cost and
requiring payment thereof to Agent for the benefit of the affected Lenders
within ten (10) days after the date of the certificate. Each Lender shall use
reasonable efforts to reduce or eliminate any claim for compensation pursuant
to this paragraph, including but not limited to designating a different Lending
Office for its making of LIBOR Loans if such designation will avoid the need
for, or reduce the amount of, such claim and will not, in the reasonable
judgment of such Lender, be materially disadvantageous to such Lender or result
in an increase in the aggregate amount payable by the Borrower.
Any Obligations other than the Loans, including without limitation, any accrued
interest, fees or reimbursable expenses, which are not paid when due, shall
themselves bear interest at the Base Rate plus the Applicable Margin, until
fully paid and satisfied, subject, however, to subsections (G) and (H) below,
and except as otherwise may be expressly provided in any Loan Document(s)
evidencing or giving rise to such Obligations.
(B) Unused Revolving Loan Fees. Unless and until the
Revolving Loan Commitments are terminated, Borrower shall pay Agent, for the
benefit of all Lenders committed to make Revolving Loans (based upon their
respective Pro Rata Shares thereof), a fee in an amount equal to (i) (a) the
total of the Revolving Loan Commitments as in effect on the first day of each
calendar quarter (except that the first such calculation shall be based on the
total of the Revolving Loan Commitments as in effect on the Closing Date) less
(b) the average daily balance of the Revolving Loans and LC Exposure computed
for the calendar quarter (or portion thereof) in question multiplied by (ii)
the Applicable Margin (pertaining to "Unused Loan Fees"). Such fee is to be
paid quarterly in arrears on the first day of each calendar quarter for the
preceding calendar month, or portion thereof, commencing on the first of such
days succeeding the Closing Date; i.e., the first such fee shall be due and
payable on January 1, 2000, and cover the period from the Closing Date through
December 31, 1999.
(C) Unused Acquisition Loan Fees. Unless and until the
Acquisition Loan Commitments are terminated, Borrower shall pay Agent, for the
benefit of all Lenders committed to make Acquisition Loans (based upon their
respective Pro Rata Shares thereof), a fee in an amount equal to (i) (a) the
total of the Acquisition Loan Commitments as in effect on the first day of each
calendar month (except that the first such calculation shall be based on the
total of the Acquisition Loan Commitments in effect on the Closing Date), less
(b) the average daily balance of the Acquisition Loans computed for the
calendar quarter (or portion thereof) in question multiplied by (ii) either (A)
three-fourths of one percent (3/4%) per annum, if the average daily balance of
Acquisition Loans in any one calendar quarter, as so computed, is less than
fifty percent (50%) of the Aggregate Acquisition Loan Commitments in effect at
the
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beginning of such calendar quarter, or (B) the Applicable Margin (pertaining to
"Unused Loan Fees"), if otherwise. Such fee is to be paid quarterly in arrears
on the first day of each calendar quarter for the preceding calendar quarter,
or portion thereof, commencing on the first of such days succeeding the Closing
Date; i.e., the first such fee shall be due and payable on January 1, 2000, and
cover the period from the Closing Date through December 31, 1999.
(D) Commitment Fee. On the Closing Date, Borrower shall pay
to Agent, for the benefit of all Lenders, to be allocated among them, based on
their respective Pro Rata Shares of the Commitments as of the Closing Date, a
commitment fee of Two Hundred Fifty Thousand Dollars ($250,000), representing
one percent (1%) of the aggregate Commitments in effect on the Closing Date.
(E) Letter of Credit Fees. Borrower agrees to pay with
respect to Letters of Credit outstanding hereunder the following fees:
(i) to Agent for the account of each Lender a participation
fee with respect to its participation in each "standby" Letter of
Credit, which shall be equal to the product of (i) the rate per annum
equal to the then Applicable Margin used in determining interest on
LIBOR Loans (regardless whether then available), times (ii) such
Lender's LC Exposure in respect of such standby Letter of Credit,
payable in advance upon issuance of such Letter of Credit;
(ii) to Agent for the account of each Lender a participation
fee with respect to its participations in "commercial" Letters of
Credit, which shall accrue at a rate per annum equal to the then
Applicable Margin used in determining interest on LIBOR Loans
(regardless whether then available) on the average daily amount of
such Lender's LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including
the Closing Date to but excluding the later of the date on which such
Lender's Revolving Loan Commitment terminates and the date on which
there shall no longer be any such Letters of Credit outstanding
hereunder, payable quarterly in arrears, on each January 1, April 1,
and October 1 hereafter and at maturity; and
(iii) to the Issuing Lender (x) a fronting fee for its own
account, in amounts and at times separately agreed between Borrower
and the Issuing Lender, and (y) the Issuing Lender's standard fees
with respect to the issuance, amendment, renewal or extension of any
Letter of Credit or the processing of drawings thereunder.
All participation fees and fronting fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(F) Agent's and Arranger's Fees. Borrower shall also pay to
each of the Agent and Arranger, for its own account, such fees as are set forth
in the Fee Letter at the time or times specified therein.
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(G) Computation of Interest and Related Fees; Interest
Payment Dates. Interest on all Loans and all other Obligations and any fees set
forth in this subsection 1.2 shall be calculated daily on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed in the
period during which it accrues. The date of funding of a Base Rate Loan and the
first day of an Interest Period with respect to a LIBOR Loan shall be included
in the calculation of interest. The date of payment of a Base Rate Loan and the
last day of an Interest Period with respect to a LIBOR Loan shall be excluded
from the calculation of interest. If a Loan is repaid on the same day that it
is made, one (1) day's interest shall be charged. Interest on all Base Rate
Loans shall be payable in arrears on the first day of each calendar month and
on the Expiry Date, whether by acceleration or otherwise. Interest on LIBOR
Loans shall be payable in arrears on the first day of each calendar month, at
the end of each Interest Period and on the Expiry Date (whether by acceleration
or otherwise). Such first day of each calendar month shall be excluded in
calculating the amount of interest payable on such day, and be included in
calculating the amount of interest payable on the next succeeding interest
payment date.
(H) Default Rate of Interest. After the occurrence of any
Event of Default and for so long as it continues, all Loans and other
Obligations shall bear interest at a rate that is two percent (2%) in excess of
the rates otherwise payable under this Agreement. Furthermore, during any
period in which any Default or Event of Default has occurred and is continuing,
as the Interest Periods for LIBOR Loans then in effect expire, such Loans shall
be converted into Base Rate Loans and the LIBOR election provided in Section
1.2(A)(2) will not be available to Borrower so long as such Default or Event of
Default is continuing.
(I) Excess Interest. Under no circumstances will the rate of
interest chargeable in respect of any Obligations be in excess of the maximum
amount permitted by law. If any excess interest is charged and paid in error,
then the excess amount will be promptly refunded to Borrower.
(J) LIBOR Breakage Fee. In the event of any payment of a
LIBOR Loan on any day that is not the last day of the Interest Period
applicable thereto (regardless of the source of such prepayment and whether
voluntary, by acceleration or otherwise), Borrower shall pay Agent, for the
benefit of all affected Lenders, an amount (the "LIBOR Breakage Fee") equal to
the amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) sustained by each such affected
Lender in connection with the re-employment of such funds) that any such
affected Lender may sustain as a result of the payment of such LIBOR Loan on a
day that is not the last day of the Interest Period applicable thereto. Agent,
on behalf of all affected Lenders, shall submit a certificate to Borrower
demonstrating in reasonable detail the calculation of any LIBOR Breakage Fee
and requiring payment thereof to Agent for the benefit of the affected Lenders
within ten (10) days after the date of such certificate.
1.3 Payments and Prepayments.
(A) Payments. All payments by Borrower of the Obligations
shall be made in same day funds and delivered to Agent, for the benefit of
Agent and Lenders, as applicable, by
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wire transfer to such account and place as Agent may from time to time
designate. Borrower shall receive credit on the day of receipt for funds
received by Agent by [2:00 p.m.] (Atlanta time). In the absence of timely
receipt, such funds shall be deemed to have been paid on the next Business Day.
Unless any payment owing hereunder is prescribed to be due on a date certain,
such payment shall be due and payable within ten (10) days after Borrower's
receipt of written demand therefor from Agent or Requisite Lenders, as the case
may be. Whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, the payment may be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest and fees due hereunder. Borrower hereby
authorizes and directs Lenders to make Revolving Loans, on the basis of their
Pro Rata Shares, for the payment of interest, fees and expenses reimbursable to
Lenders or Agent, if and to the extent that such Obligations are not paid by
Borrower when due, provided that Lenders shall have no obligation to do so.
(B) Prepayment of the Term Loan and Acquisition Loan Balance.
The principal amount of the Term Loan and, from and after the Acquisition Loan
Expiry Date, the Acquisition Loan Balance, shall be subject to mandatory
prepayment in amounts equal to (i) (1) one hundred percent (100%) of the net
cash proceeds of sales of assets of Borrower or any Affiliate Guarantor (other
than the sale of any Inventory in the ordinary course of business) concurrently
with the receipt of such proceeds by Borrower or such Affiliate Guarantor,
unless Borrower's or such Affiliate Guarantor's intent is to invest such
proceeds in productive replacement assets used in its business (in which case,
such proceeds shall, instead, be applied to repay any Revolving Loans then
outstanding), provided that such proceeds are, in fact, so reinvested within
sixty (60) days after such receipt (but this provision shall not be deemed a
consent to any such sale not otherwise permitted pursuant hereto); (2) one
hundred percent (100%) of the net cash proceeds of any debt or equity
securities issued by Borrower or any Affiliate Guarantor after the Closing Date
(excepting therefrom the second tranche of the ACS Investment or any such
proceeds derived from the issuance of equity securities to management or
employees), or of any funds borrowed by Borrower after the Closing Date (other
than under this Agreement), concurrently with the receipt of such proceeds by
Borrower or such Affiliate Guarantor (but this provision shall not be deemed a
consent to the incurrence of any such debt or the issuance of any such
securities not otherwise permitted pursuant to hereto); (3) one hundred percent
(100%) of any proceeds which Borrower or any Affiliate Guarantor may derive
from the termination of any unfunded Pension Plans or any other similar
extraordinary events subsequent to the Closing Date; and (4) one hundred
percent (100%) of any funds necessary to meet the requirements set forth in
Section 1.9 relative to termination or reduction of certain Commitments
pursuant thereto. Each such prepayment shall be applied, first, to the Term
Loan, in the manner prescribed below until it is fully paid and, then, to the
Acquisition Loan Balance, in the same said manner, until it is fully paid. The
principal amount of the Term Loan and the Acquisition Loan Balance may also be
voluntarily prepaid, in whole or in part, at Borrower's option, on any Business
Day, out of any other internally generated funds then available to Borrower,
provided that (i) Borrower provides Agent with at least three (3) Business
Days' advance written notice thereof, and (ii) any such voluntary prepayment is
in a minimum amount of One Hundred Thousand Dollars ($100,000) and equal
integral multiples in excess thereof. All prepayments of less than the entire
principal balance of the Term Loan or the Acquisition Loan Balance, whether
mandatory or voluntary, under this Section shall be applied to the principal
installments thereof then remaining to be paid
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in the reverse order of their respective maturities; i.e., from last-to-first.
Any such prepayment, whether mandatory or voluntary, shall, if applicable, be
accompanied by the payment of any LIBOR Breakage Fee then due.
1.4 Term of the Agreement. All Commitments shall cease and
all Obligations shall become due and payable on the Expiry Date, unless any
earlier date is elsewhere expressly prescribed herein or in any Loan Document
with respect thereto, in which event such earlier date shall control. Upon such
date and following repayment in full of all such Obligations, this Agreement
will terminate. Notwithstanding any such termination, however, unless and until
all such Obligations have been fully paid and satisfied (excepting therefrom
any constituting at the time contingent indemnity obligations arising
hereunder), Agent, for the benefit of Agent and Lenders, shall be entitled to
retain the security interests in the Collateral granted under the Security
Documents and the ability to exercise all rights and remedies available under
the Loan Documents and applicable laws.
1.5 Loan Accounts. Agent will maintain loan account records
for (a) all Loans, Letters of Credit, interest charges and payments thereof,
(b) the charging and payment of all fees, costs and expenses and (c) all other
debits and credits pursuant to this Agreement and the other Loan Documents. The
balance in the loan accounts shall be presumptive evidence of the amounts due
and owing to Lenders (absent manifest error), provided that any failure by
Agent so to record shall not limit or affect the Borrower's obligation to pay.
Within ten (10) days after the first day of each calendar month, Agent shall
provide a statement to Borrower for each loan account setting forth the
principal of each account and interest due thereon. Borrower may deliver a
written objection within thirty (30) days after receipt of such statement;
otherwise, such statement will be conclusive evidence of the Obligations
therein stated absent manifest error. Unless a Default or Event of Default has
occurred and is continuing, Borrower shall have the right to direct the
application of any and all payments made on the Obligations (including any made
from funds withdrawn from the Dominion Account). During the continuance of any
Default or Event of Default, Borrower irrevocably waives the right to direct
the application of any and all such payments and Borrower hereby irrevocably
agrees that Agent shall have the continuing exclusive right to apply and
reapply payments in any manner it deems appropriate.
1.6 Capital Adequacy and Other Adjustments. In the event that
the adoption after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements (other than reserve requirements taken into
account in calculating LIBOR) or similar requirements or compliance by any
Lender or any corporation controlling such Lender with any request or directive
first made after the Closing Date regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by such Lender or any corporation controlling such
Lender and thereby reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder, then
Borrower shall from time to time within ten (10) days after notice and demand
from such Lender (together with the certificate referred to in the next
sentence and with a copy to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to
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compensate such Lender for such reduction. A certificate as to the amount of
such cost and showing in reasonable detail the basis of the computation of such
cost submitted by such Lender to Borrower and Agent shall be conclusive absent
manifest error. Each Lender shall use reasonable efforts to reduce or eliminate
any claim for compensation pursuant to this subsection, including but not
limited to designating a different Lending Office for the Loans if such
designation will avoid the need for, or reduce the amount of, such claim and
will not, in the sole discretion of such Lender, be materially disadvantageous
to such Lender or result in an increase in the aggregate amount payable by
Borrower. The failure or delay of any Lender to demand compensation pursuant
hereto shall not constitute a waiver of such Lender's right to demand such
compensation; provided, however, that Borrower shall not be required to
compensate a Lender pursuant hereto for any increased costs or reductions more
than six (6) months prior to the date that such demand for compensation is made
(but if an event giving rise to such demand for compensation has retroactive
effect, then, the retroactive period shall be tacked to such six (6) months
period for purposes hereof).
1.7 Taxes.
(A) No Deductions. Subject to subsection (C) below, any and
all payments or reimbursements made hereunder or under the Notes shall be made
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, however, taxes imposed on the net income of a Lender or Agent (all
such taxes, levies, imposts, deductions, charges or withholdings and all
liabilities with respect thereto, excluding, however, such taxes imposed on net
income, as hereinabove excepted therefrom herein "Tax Liabilities"). Subject to
subsection (C) below, and excluding any withholding required for taxes imposed
on the net income of a Lender or Agent, if Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable hereunder to any
Lender or Agent, then the sum payable hereunder shall be increased as may be
necessary so that, after making all required deductions, such Lender or Agent
receives an amount equal to the sum it would have received had no such
deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the
Closing Date, (1) any changes in any existing law, rule or regulation or in the
interpretation or application thereof, (2) any new law, rule or regulation
enacted or any interpretation or application thereof, or (3) compliance by
Agent or any Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality does
or shall subject Agent or any Lender to any tax on the recording, registration,
notarization or other formalization of the Loans or the Notes and the result of
any of the foregoing is to increase the cost to Agent or any such Lender of
making or continuing any Loan hereunder, as the case may be, or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly
pay to Agent or such Lender, upon its demand, any additional amounts necessary
to compensate Agent or such Lender, on an after-tax basis, for such additional
cost or reduced amount receivable, as determined by Agent or such Lender with
respect to this Agreement or the other Loan Documents. Before making any such
demand, Agent or such Lender shall designate a different Lending Office if such
designation will avoid the need for, or reduce the amount of, such demand and
will not, in the reasonable judgment of Agent or such Lender, be otherwise
materially disadvantageous to Agent, the Lender or the Borrower in any respect.
If Agent or
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such Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify Borrower of the event by reason of which
Agent or such Lender has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or such
Lender to Borrower and Agent shall be rebuttably presumed to be correct. Such
certificate shall set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid hereunder and the
method by which such amount or amounts were determined. The failure or delay of
any Lender to demand compensation pursuant hereto shall not constitute a waiver
of such Lender's right to demand such compensation; provided, however, that
Borrower shall not be required to compensate a Lender pursuant hereto for any
additional amounts more than six (6) months prior to the date that such demand
for compensation is made (but if an event giving rise to such demand for
compensation has retroactive effect, then, the retroactive period shall be
tacked to such six (6) months period for purposes hereof).
(C) Foreign Lenders. Each Lender organized under the laws of
a jurisdiction outside the United States (a "Foreign Lender") as to which
payments to be made under this Agreement or under the Notes are exempt from
United States withholding tax or are subject to United States withholding tax
at a reduced rate under an applicable statute or tax treaty shall provide to
Borrower and Agent (1) a properly completed and executed Internal Revenue
Service Form 4224 or Form 1001 or other applicable form, certificate or
document prescribed by the Internal Revenue Service of the United States
certifying as to such Foreign Lender's entitlement to such exemption or reduced
rate of withholding with respect to payments to be made to such Foreign Lender
under this Agreement and under the Notes (a "Certificate of Exemption") or (2)
a letter from any such Foreign Lender stating that it is not entitled to any
such exemption or reduced rate of withholding (a "Letter of Non-Exemption").
Prior to becoming a Lender under this Agreement and within fifteen (15) days
after a reasonable written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement
shall provide a Certificate of Exemption or a Letter of Non-Exemption to
Borrower and Agent. If a Foreign Lender is entitled to an exemption with
respect to payments to be made to such Foreign Lender under this Agreement (or
to a reduced rate of withholding) and does not provide a Certificate of
Exemption to Borrower and Agent within the time periods set forth in the
preceding sentence, Borrower shall withhold taxes from payments to such Foreign
Lender at the applicable statutory rates and Borrower shall not be required to
pay any additional amounts as a result of such withholding, provided that all
such withholding shall cease or decrease, as applicable, upon delivery by such
Foreign Lender of a valid and correct Certificate of Exemption to Borrower and
Agent.
1.8 Optional Prepayment/Replacement of Lender in Respect of
Increased Costs. Within fifteen (15) days after receipt by Borrower of written
notice and demand from any Lender (an "Affected Lender") for payment of
additional costs as provided in subsection 1.2(A) or Section 1.6, provided no
Default or Event of Default then exists, Borrower may, at its option, notify
Agent and such Affected Lender of its intention to do one of the following:
(A) Subject to compliance with Sections 1.9 and 8.1, Borrower
may obtain, at Borrower's expense, a replacement Lender ("Replacement Lender")
for such Affected Lender, which Replacement Lender shall be reasonably
satisfactory to Agent. In the event Borrower
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obtains a Replacement Lender within ninety (90) days following notice of its
intention to do so, the Affected Lender shall sell and assign its Loans and
delegate its obligations under each of its Commitments to such Replacement
Lender, provided that Borrower has reimbursed such Affected Lender for its
increased costs for which it is entitled to reimbursement under this Agreement
through the date of such sale and assignment; or
(B) In lieu of the foregoing, Borrower may prepay in full all
outstanding Obligations owed to such Affected Lender and terminate each of such
Affected Lender's Commitments, in which case the aggregate Commitments will be
reduced by the amount of such Commitments so terminated concurrently with the
prepayment referred to in the next sentence. Borrower shall, within ninety (90)
days following notice of its intention to do so, prepay in full all outstanding
Obligations owed to such Affected Lender (including such Affected Lender's
increased costs for which it is entitled to reimbursement under this Agreement
through the date of such prepayment), and terminate such Affected Lender's
obligations under its respective Commitments.
1.9 Voluntary Termination or Reduction of Certain
Commitments. Borrower may voluntarily terminate, or from time to time reduce,
the Revolving Loan Commitments or the Acquisition Loan Commitments, or both, at
its option, provided, however, that (i) any such termination is accompanied by
full prepayment of all Loans then outstanding under the Commitment being
terminated, (ii) any such reduction is in the minimum amount of One Million
Dollars ($1,000,000) and integral multiples of Five Hundred Thousand Dollars
($500,000) in excess thereof; and (iii) any such reduction is accompanied by
prepayment of Loans outstanding under the Commitment being reduced by that
amount necessary so that (i) in the case of Revolving Loans, the Maximum
Revolving Loan Balance is not exceeded (after giving effect to such Commitment
reduction), and (ii) in the case of Acquisition Loans, total Acquisition Loans
then outstanding do not exceed the aggregate of the Acquisition Loan
Commitments (after giving effect to such Commitment reduction). Borrower shall
notify Agent of any election to terminate or reduce its Commitments at least
three (3) Business Days prior to the intended effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, Agent shall advise the
lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable, and any termination or reduction of
Commitments shall be permanent. Each reduction of Commitments shall be made
ratably among the applicable Lenders in accordance with their respective
Commitments being reduced.
1.10 Affiliate Guaranty.
(A) The Guarantee. The Affiliate Guarantors hereby jointly
and severally guarantee to the Agent and the Lenders the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of all
Obligations (such Obligations herein called, collectively, the "Guaranteed
Obligations"), in each case strictly in accordance with the terms hereof. The
Affiliate Guarantors hereby further jointly and severally agree that if
Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Affiliate
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or
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renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
(B) Obligations Unconditional. The obligations of the
Affiliate Guarantors hereunder are absolute and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of Borrower under this Agreement, the Notes
or any other Loan Document or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor (other than, subject to clause
(C) below, full payment and satisfaction of all Guaranteed Obligations), it
being the intent of this Section that the obligations of the Affiliate
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that, to the extent permitted by applicable law, the
occurrence of any one or more of the following shall not alter or impair the
liability of the Affiliate Guarantors hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to any
of the Affiliate Guarantors, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended,
or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein on the part of Borrower to be done shall
fail to be done or be omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
this Agreement or the Notes or any other Loan Document shall be waived
or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part
or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Agent as security for any of the Guaranteed Obligations shall
fail to be perfected.
The Affiliate Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that Agent
or any Lender exhaust any right, power or remedy or proceed against Borrower
under this Agreement or the Notes or any other Loan Document, or against any
other Person under any other Guaranty of, or security for, any of the
Guaranteed Obligations.
(C) Reinstatement. The obligations of the Affiliate
Guarantors hereunder shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
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bankruptcy or reorganization or otherwise and the Affiliate Guarantors jointly
and severally agree that they will indemnify each Agent and Lender on demand
for all reasonable costs and expenses (including, without limitation,
reasonable fees and disbursements of legal counsel) incurred by Agent or such
Lender in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
(D) Deferral of Subrogation. Each Affiliate Guarantor hereby
subordinates to Agent and the Lenders all rights of subrogation or contribution
against Borrower, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Bankruptcy Code) or
otherwise by reason of any payment by it pursuant to the provisions hereof
until all Obligations (other than any constituting contingent indemnity
obligations) are fully paid and satisfied and all Commitments are terminated.
(E) Remedies. The Affiliate Guarantors jointly and severally
agree that, as between the Affiliate Guarantors and Agent and Lenders, the
Guaranteed Obligations may be declared to be forthwith due and payable as
provided herein (and shall be deemed to have become automatically due and
payable in the circumstances provided herein) for purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable)
as against Borrower and that, in the event of such declaration in accordance
with the terms hereof (whether or not due and payable by the Borrower) shall
forthwith become due and payable by the Affiliate Guarantors for purposes
hereof.
(F) Instrument for the Payment of Money. Each Affiliate
Guarantor hereby acknowledges that its guaranty herein constitutes an
instrument for the payment of money.
(G) Continuing Guaranty. The guaranty set forth herein is a
continuing guaranty, and shall apply to all Guaranteed Obligations, whenever
and howsoever arising.
(H) Rights of Contribution. The Affiliate Guarantors hereby
agree, as between themselves, that if any Affiliate Guarantor shall become an
"Excess Funding Guarantor" (as defined below) by reason of the payment by such
Affiliate Guarantor of any Guaranteed Obligations, each other Affiliate
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Affiliate Guarantor's "Pro Rata Share" (as defined below and determined, for
this purpose, without reference to the properties, debts and liabilities of
such Excess Funding Guarantor) of the "Excess Payment" (as defined below) in
respect of such Guaranteed Obligations. The payment obligation of an Affiliate
Guarantor to any Excess Funding Guarantor under this Section shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Affiliate Guarantor under the other provisions of this
Section 1.11 and such Excess Funding Guarantor shall not exercise any right or
remedy with respect to such excess until payment and satisfaction in full of
all such obligations. For purposes hereof, (i) "Excess Funding Guarantor"
means, in respect of any Guaranteed Obligations, an Affiliate Guarantor that
has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess
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Payment" means, in respect of any Guaranteed Obligations, the amount paid by an
Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations (iii) "Pro Rata Share" means, for any Affiliate Guarantor, the
ratio (expressed as a percentage) of (x) the amount by which the aggregate
present fair saleable value of all assets of such Affiliate Guarantor
(excluding any shares of stock of any other Affiliate Guarantor) exceeds the
amount of all the debts and liabilities of such Affiliate Guarantor (including
contingent, subordinated, unmatured and unliquidated liabilities, but excluding
the obligations of such Affiliate Guarantor hereunder and any obligations of
any other Affiliate Guarantor that have been guaranteed by such Affiliate
Guarantor) to (y) the amount by which the aggregate fair saleable value of all
assets of all of the Affiliate Guarantors exceeds the amount of all the debts
and liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of the Affiliate Guarantor
hereunder) of the Affiliate Guarantors, determined (A) with respect to any
Affiliate Guarantor that is a party hereto on the Closing Date, as of the
Closing Date, and (B) with respect to any other Affiliate Guarantor, as of the
date such Affiliate Guarantor becomes an Affiliate Guarantor hereunder.
(I) Limitation on Guaranteed Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Affiliate Guarantors hereunder,
after giving effect to the contribution rights provided herein above, would
otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability hereunder, then, notwithstanding any other provision hereof to
the contrary, the amount of such liability shall, without any further action by
any Affiliate Guarantor, Agent, any Lender or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
SECTION 2
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as the Commitments
are in effect and until payment in full of all Obligations, unless Requisite
Lenders shall otherwise give their prior written consent, Borrower shall
perform and comply with, and shall cause each of the other Loan Parties to
perform and comply with, all covenants in this Section 2 applicable to such
Person.
2.1 Compliance With Laws. Borrower will (a) comply with, and
will cause each of the Loan Parties to comply with, the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority as
now in effect and which may be imposed in the future in all jurisdictions in
which Borrower or the Loan Parties are now doing business or may hereafter be
doing business, noncompliance with which would reasonably be expected to have a
Material Adverse Effect, and (b) maintain or obtain, and will cause each of the
Loan Parties to maintain or obtain, all licenses, qualifications and permits
now held or hereafter required to be held by Borrower and its Subsidiaries, for
which the loss, suspension, revocation or failure to obtain or renew would
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower will cause all Loan
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Parties to continuously hold all FCC Licenses and Franchises required for the
operation of their respective businesses, including all Franchises required by
the FCC or any state Governmental Authority in connection with the ownership
and operation of their respective businesses, in any such case where the
failure to hold any such FCC License or Franchise, would reasonably be expected
to have a Materially Adverse Effect. Borrower will also cause all Loan Parties
to comply in all material respects with all applicable filing and operating
requirements of all of such FCC Licenses and Franchises, and any and all other
regulations promulgated by the FCC and state Governmental Authorities,
including, as applicable, the "no hazard" clearance determination issued by the
FAA, the antenna structure registration certificate issued by the FCC, and any
state health permit or public utility license, if required. The foregoing shall
not preclude the Borrower or any Loan Party from contesting any taxes or other
payments claimed to be owing at any time to any Governmental Authority, if they
are being diligently contested in good faith and if appropriate expense
provisions have been recorded (if and to the extent required in conformity with
GAAP).
2.2 Maintenance of Properties; Insurance. Borrower will
maintain, and cause the Loan Parties to maintain, in good repair, working order
and condition (ordinary wear and tear excepted) all material properties used in
the respective businesses of Borrower and the Loan Parties and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower further will maintain and cause the Loan Parties to maintain, with
financially sound and reputable insurers, public liability, property damage and
business interruption insurance with respect to its business and properties and
the business and properties of the Loan Parties against loss or damage of the
kinds and in the amounts customarily carried or maintained by companies of
established reputation engaged in similar businesses and will deliver evidence
thereof to Agent. Borrower further shall cause Agent, pursuant to endorsements
and assignments and assignments in form and substance reasonably satisfactory
to be named as loss payee in the case of casualty insurance, additional insured
in the case of all liability insurance and assignee in the case of all business
interruption insurance. Without limiting the generality of the foregoing,
Borrower will cause each Loan Party to (x) maintain or cause to be maintained
flood insurance with respect to each Flood Hazard Property in amounts approved
by Agent, or provide evidence acceptable to Agent that such insurance is not
available and (y) maintain or cause to be maintained replacement value casualty
insurance on all tangible Collateral under such policies of insurance, in each
case with such insurance companies, in such amounts, with such deductibles, and
covering such terms and risks as are at all times satisfactory to the Agent in
its commercially reasonable judgment. Each such policy of insurance shall (A)
name the Agent for the benefit of the Lenders as an additional insured
thereunder as its interests may appear and (B) in the case of each business
interruption and casualty insurance policy, contain a loss payable clause or
endorsement, satisfactory in form and substance to the Agent that names Agent
for the benefit of the Lenders as the loss payee thereunder for any covered
loss and provides for at least thirty (30) days prior written notice to Agent
of any modifications or cancellation of such policy.
2.3 Inspections. Borrower shall permit any authorized
representatives of Agent to (i) visit and inspect any of the properties of
Borrower or any of the Loan Parties, including its and their financial and
accounting records, and to make copies and take extracts therefrom, (ii) to
discuss its and their affairs, finances and business with Borrower's and the
Loan Parties' officers or managers and certified public accountants, and (iii)
to visit any
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Collateral Location and inspect the Collateral, observe its use, maintenance or
storage, and confirm Borrower's and the Affiliate Guarantors' compliance with
the terms of the Security Documents; in each case, at such reasonable times
during normal business hours as may be reasonably requested by Agent.
2.4 Corporate or Company Existence, Etc. Except as otherwise
may be expressly permitted by Section 3.6, Borrower will, and will cause each
of the Loan Parties to, at all times preserve and keep in full force and effect
its corporate or company existence and all rights and Franchises material to
its business.
2.5 Further Assurances. Borrower shall, and shall cause each
of the Loan Parties to, from time to time, execute such financing statements,
documents and reports as Agent or Requisite Lenders at any time may reasonably
request to evidence, perfect or otherwise implement the guaranties and security
for repayment of the Obligations contemplated by the Loan Documents.
2.6 Year 2000 Compatibility. Unless Borrower has done so
already by the Closing Date, as soon as practicable, but in any event by not
later than November 30, 1999, Borrower will (and will cause each Loan Party to)
take all action reasonably necessary to ensure that its computer based systems
are capable of the following: (i) handling date information involving all and
any dates before, during and/or after January 1, 2000, including accepting
input, providing output and performing date calculations in whole or in part;
(ii) operating, accurately without interruption on and in respect of any and
all dates before, during and/or after January 1, 2000 and without any material,
adverse change in performance; and (iii) storing and providing date input
information without creating any ambiguity as to the century (systems
satisfying clauses (i) through (iii) above herein sometimes referred to as
being "Y2K Compliant"). Subsequent to November 30, 1999, Borrower shall monitor
the Loan Parties' being Year 2000 Compliant, and shall report promptly to Agent
in writing in the event of any actual or anticipated failure by any Loan Party
to be (or remain) Year 2000 Compliant, specifying in detail the nature of the
failure, the equipment or systems involved and Borrower's plan to address and
resolve such failure.
2.7 Pledge of Stock. On the Closing Date, (i) as to Borrower,
Parent shall, and (ii) as to all Subsidiaries (whether direct or indirect) of
Borrower existing on the Closing Date, and upon the establishment, creation or
acquisition thereof, as to each such Subsidiary established, created or
acquired subsequent to the Closing Date in accordance with Section 3.13 below,
Borrower shall, or (as the case may be) shall cause each of its Subsidiaries
to, pledge to Agent, as security for payment of the Obligations, pursuant to
one or more Pledge Agreements, all Equity Interests owned in Borrower by Parent
or by Borrower or any such Subsidiary in any such Subsidiaries of Borrower.
2.8 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral.
(A) If any Loan Party acquires any Material Leasehold
Property subsequent to the Closing Date each of the Loan Parties shall use its
reasonable efforts (without requiring Loan
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Party to relinquish any material rights or incur any material obligations or to
expend more than a nominal amount of money over and above the reimbursement, if
required, of the landlord's out-of-pockets costs, including attorneys' fees) to
cause such Leasehold Property to be a Conforming Leasehold Interest.
(B) From and after the Closing Date, in the event that (i)
any Loan Party acquires any fee simple interest in real property or any
Material Leasehold Property, or the Agent determines in its sole discretion to
place a Mortgage on any Real Property Asset owned on the Closing Date by any
Loan Party (if a Mortgage was not placed on any such Real Property Asset as of
the Closing Date), or (ii) at the time any Person becomes a Subsidiary
Guarantor, such Person owns or holds any fee interest in real property or any
Material Leasehold Property, in either case excluding any such Real Property
Asset the encumbering of which requires the consent of any applicable lessor or
(in the case of clause (ii) above) any then-existing senior lienholder, where
the Loan Parties are unable to obtain such lessor's or senior lienholder's
consent (any such non-excluded Real Property Asset described in the foregoing
clause (i) or (ii) being a "Additional Mortgaged Property"), such Loan Party
shall deliver to Agent, as soon as practicable after such Person acquires such
Additional Mortgaged Property, but, in any event within thirty (30) days
thereafter, the following:
(i) Additional Mortgages. A fully executed and notarized
Mortgage (an "Additional Mortgage"), in proper form for recording in
all appropriate places in all applicable jurisdictions, encumbering
the interest of such Loan Party in such Additional Mortgaged Property;
(ii) Recorded Leasehold Interests. In the case of any
Additional Mortgaged Property consisting of a Leasehold Property,
copies of all leases between such Loan and the applicable lessor.
(iii) Landlord's Agreement. In the case of any Additional
Mortgaged Property consisting of a Leasehold Property, (a) a
Landlord's Agreement with respect thereto and where required by the
terms of any lease, the consent of the mortgagee, ground lessor or
other party and (b) evidence that such Leasehold Property is a
Recorded Leasehold Interest;
(iv) Matters Relating to Flood Hazard Properties. (A)
Evidence as to whether any Additional Mortgaged Property is a Flood
Hazard Property and (B) if such Additional Mortgaged Property is a
Flood Hazard Property, evidence that the applicable Loan Party, has
obtained flood insurance with respect to each Flood Hazard Property in
amounts approved by Agent, or evidence acceptable to Agent that such
insurance is not available;
(v) Title Insurance. (A) If required by Agent, ALTA mortgagee
title insurance policies or unconditional commitments therefor (the
"Additional Mortgage Policies') issued by the Title Company with
respect to the Additional Mortgaged Property, in an amount
satisfactory to Agent, insuring fee simple title to, or a valid
leasehold interest in, each such Additional Mortgaged Property vested
in such Loan Party
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and assuring Agent that such Additional Mortgage creates a valid and
enforceable first priority mortgage Lien on such Additional Mortgaged
Property, subject only to such standard exceptions as may be
reasonably acceptable to Agent and Permitted Encumbrances, which
Additional Mortgage Policy (I) shall include all endorsement for
matters reasonably requested by Agent and (II) shall provide for
affirmative insurance and such reinsurance as the Agent may reasonably
request, all of the foregoing to be in form and substance reasonably
satisfactory to Agent; and (B) evidence satisfactory to Agent that
such Loan Party has (I) delivered to the Title Company all
certificates and affidavits required by the Title Company m connection
with the issuance of the Additional Mortgage Policy and (II) paid to
the Title Company or to the appropriate Governmental Authorities all
expenses and premiums of the Title Company in connection with the
issuance of the Additional Mortgage Policy and all recording and stamp
taxes (including mortgage recording and intangible taxes) payable in
connection with recording the Additional Mortgage in the appropriate
real estate records;
(vi) Title Reports. If no Additional Mortgage Policy is
required with respect to such Additional Mortgaged Property, a title
report issued by the Title Company with respect thereto, dated not
more than (30) days prior to the date such Additional Mortgage is to
be recorded and satisfactory in and substance to the Agent;
(vii) Copies of Documents Relating to Title Exceptions.
Copies of all recorded documents listed as exceptions to title or
otherwise referred to in the Additional Mortgage Policy or in the
title reports delivered pursuant to clause (vi);
(viii) Environmental Audit. If required by Agent, reports and
other information in form, scope and substance satisfactory to Agent
and prepared by environmental consultants satisfactory to Agent,
concerning any environmental hazards or liabilities to which any Loan
Party may be subject with respect to such Additional Mortgaged
Property;
(ix) Environmental Indemnity Agreement. An environmental
indemnity agreement favoring the Agent and Lenders substantially in
the same form as annexed hereto as EXHIBIT N with respect to such
Additional Mortgaged Property (or an amendment adding such Additional
Mortgaged Property as covered property under any existing
environmental indemnity agreement executed pursuant hereto); and
(x) Opinions of Counsel. (1) A favorable opinion of counsel
(which counsel shall be satisfactory to the Agent and Special
Counsel), as to the due authorization, execution and delivery by such
Loan Party of such Additional Mortgage and such other matters as Agent
may reasonably request, and (2) if required by Agent, an opinion of
counsel (which counsel shall be satisfactory to Agent) in the state in
which such Additional Mortgaged Property is located with respect to
the enforceability of the form of Additional Mortgages to be recorded
in such state and such other matters (including any matters governed
by the laws of such state regarding personal property security
interests in respect of any Collateral) as Agent may reasonably
request, in each case in form and substance reasonably satisfactory to
Agent.
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(C) Each of the Loan Parties shall permit an independent real
estate appraiser satisfactory to Agent, upon reasonable notice, to visit and
inspect any Additional Mortgaged Property for the purpose of preparing an
appraisal of such Additional Mortgaged Property satisfying the requirements of
all applicable laws and regulations (in each case to the extent required under
such laws and regulations as determined by Agent in its sole discretion).
2.9 Interest Rate Protection. As soon as practicable after
the Closing Date, but any event not later than ninety (90) days after the
Closing Date, Borrower will purchase (and shall expend not more than an amount
acceptable to the Requisite Lenders in connection therewith) Interest Rate
Protection Products, satisfactory to the Requisite Lenders, which may, but need
not, be offered by a Lender (or an Affiliate of a Lender), which will cap the
maximum interest rate payable by the Borrower hereunder at not more than eleven
and one-half percent (11 1/2%) per annum, with respect to at least forty
percent (40%) of the aggregate Commitments for a period of not less than three
(3) years.
2.10 Life Insurance. As soon as practicable after the Closing
Date, but in any event not later than sixty (60) days after the Closing Date,
Borrower shall have obtained, and at all times thereafter Borrower shall
maintain, fully paid up term life insurance policies from a nationally
recognized life insurer on the lives of Stephen F. Johnston, Sr. and Michael W.
Riley, in the minimum respective amounts of $1,500,000 and $1,000,000, on which
Agent shall be named beneficiary and sole collateral assignee. The foregoing
shall be in addition to, and separate and apart from, any other life insurance
on the lives of Stephen F. Johnston, Sr. and/or Michael W. Riley which, now or
hereafter, may be assigned to ACS as security for the ACS Investment, which
assignments are hereby expressly permitted and as to which neither the Agent
nor any Lender shall have any right, title or claim.
2.11 Motor Vehicles. In furtherance of Section 5(a) of the
Security Agreement, but not in limitation thereof, as soon as practicable after
the Closing Date, but in any event not later than twenty-one (21) days after
the Closing Date, Borrower will assemble all certificates of title (or similar
indicia of ownership) in respect of all motor vehicles then owned by any Loan
Party and deliver same to Agent to hold as additional Collateral together with
signed applications to have Agent's status as first lienholder noted thereon
and cash in an amount sufficient to accommodate re-registration. Thereafter,
not later than twenty-one (21) days after any Loan Party acquires ownership of
any other motor vehicles, Borrower shall cause the certificates of title
therefor (or similar indicia of ownership) to have Agent's status as first
lienholder noted directly thereon and the same to be delivered to Agent with
such notation within such twenty-one (21) day period, thereafter to be held by
it as additional Collateral.
SECTION 3
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as the Commitments
are in effect and until payment in full of all Obligations, unless Requisite
Lenders shall otherwise give their prior
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written consent, Borrower shall perform and comply with, and shall cause each
of the other Loan Parties to perform and comply with, all covenants in this
Section 3 applicable to such Person.
3.1 Indebtedness. Borrower will not, and will not permit any
of its Subsidiaries, directly or indirectly, to create, incur, assume,
guaranty, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness, except:
(A) the Obligations;
(B) intercompany Indebtedness among or between Borrower and
its Subsidiaries which are Affiliate Guarantors; provided that the obligations
of each obligor of such Indebtedness shall: (1) be subordinated in right of
payment to the Obligations from and after such time as any portion of the
Obligations shall become due and payable and remain unpaid (whether at stated
maturity, by acceleration or otherwise); (2) at Agent's request, be evidenced
by promissory notes, which shall have been pledged to Agent, for the benefit of
Agent and Lenders, as security for the Obligations; and (3) have such other
terms and provisions as Agent or Requisite Lenders may reasonably require;
(C) Indebtedness not to exceed One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) in the aggregate at any time outstanding secured
by purchase money Liens or incurred with respect to Capital Leases;
(D) Existing Subordinated Indebtedness under the Seller
Notes;
(E) Subordinated Indebtedness to ACS in respect of the ACS
Investment which is existing on, or committed to be made as of, the Closing
Date;
(F) Subordinated Indebtedness owing subsequent to the Closing
Date to sellers in respect of Approved Acquisitions;
(G) Performance and payment bonds in an aggregate amount at
any time outstanding not to exceed Five Million Dollars ($5,000,000);
(H) Existing Indebtedness (if any) identified on SCHEDULE 3.1
hereto;
(I) Escrowed Seller Debts, to the extent fully paid and
satisfied by January 7, 2000;
(J) renewals, replacements or extensions of the foregoing.
3.2 Liens and Related Matters.
(A) No Liens. Borrower will not, and will not permit any of
the Loan Parties, directly or indirectly, to create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of Borrower or any
of the Loan Parties, whether now owned or hereafter acquired, or any income or
profits therefrom, except Permitted Encumbrances, and will defend
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the Collateral, and the right, title and interest of Agent as lienholder
therein, against, and take such other action as is necessary to remove, any
Lien on the Collateral, except Permitted Encumbrances. "Permitted Encumbrances"
means the following:
(1) Liens for taxes, assessments or other governmental
charges not yet due and payable or which are being contested in good
faith; provided, that, in the case of contested Liens, a reserve or
other, appropriate provision shall have been made therefor in
accordance with GAAP;
(2) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by law, which
are incurred in the Ordinary Course of Business for sums not more than
thirty (30) days delinquent or which are being contested in good
faith; provided that, in the case of contested Liens, a reserve or
other appropriate provision shall have been made therefor;
(3) Liens (other than any Lien imposed by the Employee
Retirement Income Security Act of 1974 or any rule or regulation
promulgated thereunder) incurred or deposits made in the Ordinary
Course of Business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety,
stay, customs and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return of money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(4) deposits, made in the Ordinary Course of Business, to
secure liability to insurance carriers;
(5) Liens for purchase money obligations; provided that: (a)
the purchase of the asset subject to any such Lien is permitted under
Section 4.2(E); (b) the Indebtedness secured by any such Lien is
permitted under Section 3.1; and (c) any such Lien encumbers only the
asset so purchased;
(6) any attachment or judgment Lien not otherwise
constituting a Default or an Event of Default under subsection 6.1(H);
(7) easements, rights of way, restrictions, and other similar
charges or encumbrances not interfering in any material respect with
the Ordinary Course of Business;
(8) any interest or title of a lessor or sublessor under any
lease;
(9) Liens in favor of Agent, for the benefit of Agent and
Lenders;
(10) a subordinated Lien on certain assets of Borrower and
its Subsidiaries granted to ACS to secure payment of the ACS
Investment, obtained in compliance with the terms of the ACS
Subordination Agreement;
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(11) assignments of life insurance to ACS permitted under
Section 2.11;
(12) existing Liens in favor of holders of Escrowed Seller
Debt, to the extent such Liens are terminated not later than January
7, 2000;
(13) other Liens existing on the date hereof and set forth on
SCHEDULE 3.2 hereto; and
(14) any other Liens approved in writing at any time by the
Requisite Lenders.
(B) No Negative Pledges. Borrower will not, and will not
permit any of the Loan Parties, directly or indirectly, to enter into or assume
any agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired other than (i) such prohibitions contained in the Loan
Documents, (ii) such prohibitions contained in agreements for purchase money
Liens or capital leases which cover only the assets so purchased or leased, as
the case may be (and, in each instance, proceeds thereof) and (iii) such
prohibitions as are contained in software licenses prohibiting the creation of
any Liens with respect to any interest in such licenses.
(C) No Restrictions on Subsidiary Distributions. Except as
may be provided herein, Borrower will not, and will not permit any of the Loan
Parties, directly or indirectly, to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of Borrower or any such Subsidiary to: (i) pay dividends or make
any other distributions; (ii) subject to any subordination provisions made for
the benefit of Agent and Lenders, pay any Indebtedness owed to Borrower or any
other Loan Party; (iii) make loans or advances to Borrower or any other
Subsidiary; or (iv) transfer any of its property or assets to Borrower or any
other Subsidiary.
3.3 Investments; Joint Ventures. Borrower will not, and will
not permit any of the Loan Parties, directly or indirectly, to make or own any
Investment (defined below) in any Person, except:
(A) Parent may make and own Investments in Borrower;
(B) The Loan Parties may make and own Investments in Cash
Equivalents (defined below);
(C) Borrower and its Subsidiaries may make intercompany loans
(each to the other) to the extent (if any) permitted under subsection
3.1(B);
(D) Borrower and its Subsidiaries may make loans and advances
to employees for moving, entertainment, travel and other similar
expenses in the Ordinary Course of Business;
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(E) Borrower and its Subsidiaries may make Approved
Acquisitions (with the consent and approval of all Lenders);
(F) Parent, Borrower and any Subsidiaries of Borrower may
make Investments in Subsidiaries of Borrower in existence on the date
hereof or which are permitted to be created, established or acquired
pursuant to Section 3.13 hereof; and
(G) The Loan Parties may continue to hold Investments (if
any) made on or before the Closing Date and disclosed on SCHEDULE 3.3.
(H) Borrower may enter into Interest Rate Protection
Products, to the extent required in Section 2.9, but otherwise only in
the Ordinary Course of Business and for the management of its
liabilities, and not for speculative purposes.
"Investment" means (i) any direct or indirect purchase or other
acquisition by any Loan Party of any beneficial interest in, including stock,
partnership interest or other equity securities of, any other Person,
including, but not limited to, pursuant to any Acquisition; and (ii) any direct
or indirect loan, advance or capital contribution by Borrower or any of its
Subsidiaries to any other Person. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Cash Equivalents" means: (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard
& Poor's (a division of The McGraw-Hill Companies, Inc.) or at least P-1 from
Moody's Investors Service, Inc.; (iii) certificates of deposit or bankers'
acceptances maturing within one (1) year from the date of issuance thereof
issued by, or overnight reverse repurchase agreements with, any commercial bank
organized under the laws of the United States of America or any State thereof
or the District of Columbia having combined capital and surplus of not less
than Five Hundred Million Dollars ($500,000,000); (iv) demand deposits, "money
market" accounts and time deposits maturing no more than thirty (30) days from
the date of creation thereof with commercial banks having membership in the
Federal Deposit Insurance Corporation in amounts not exceeding the lesser of
One Hundred Thousand Dollars ($100,000) or the maximum amount of insurance
applicable to the aggregate amount of Borrower's deposits at such institution;
or (v) investments in "money market" funds within the meaning of Rule 2a-7
under the Investment Company Act of 1940.
3.4 Contingent Obligations. Borrower will not, and will not
permit any of the Loan Parties, directly or indirectly, to create or become or
be liable with respect to any Contingent Obligation (defined below), except
those:
(A) resulting from endorsement of negotiable instruments for
collection in the Ordinary Course of Business;
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(B) existing on the Closing Date and described in SCHEDULE
3.4 annexed hereto;
(C) arising under indemnity agreements to a Title Company to
cause such title insurers to issue to Agent mortgagee title insurance
policies;
(D) arising with respect to customary indemnification
obligations incurred in connection with Asset Dispositions;
(E) incurred in the Ordinary Course of Business with respect
to surety and appeal bonds, performance and return-of-money bonds and
other, similar obligations;
(F) incurred with respect to Indebtedness permitted by
subsection 3.1;
(G) incurred in the Ordinary Course of Business in connection
with any Interest Rate Protection Products;
(H) incurred in the Ordinary Course of Business in respect of
letters of credit, surety bonds or similar obligations; or
(I) arising hereunder or under any Loan Documents.
"Contingent Obligation," as applied to any Person, means any
direct or indirect liability of that Person: (i) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings; or (iii) under any foreign exchange contract, currency swap
agreement, interest rate swap agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates. Contingent Obligations shall
also include (a) the direct or indirect guaranty, endorsement (other than for
collection or deposit in the Ordinary Course of Business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, and (c) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
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3.5 Restricted Junior Payments. Borrower will not, and will
not permit any of its Subsidiaries, directly or indirectly, to declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that
(i) Subsidiaries of Borrower may make Restricted Junior Payments to Borrower or
other Subsidiaries of Borrower; (ii) from and after the second anniversary of
the Closing Date, provided no Default or Event of Default has occurred at the
time such payment is made or otherwise would result therefrom, Borrower may
make cash distributions to Parent from time to time to permit Parent, in turn,
to pay dividends to Stratford in accordance with the terms of the Stratford
Agreements as in effect on the Closing Date and the Stratford Intercreditor
Agreement; (iii) provided that no Default or Event of Default has occurred at
the time such payment is made or otherwise would result therefrom, Borrower may
(or may make cash distributions to Parent from time to time to permit Parent,
in turn, to) make payments of principal and interest to the holders of the
Seller Debts (excepting therefrom the Escrowed Seller Debts) in accordance with
the terms of the Seller Subordination Agreements; (iv) Borrower may make
payments to ACS in respect of the ACS Investment in accordance with the terms
of the ACS Subordination Agreement; and (v) from and after the second
anniversary of the Closing Date, provided no Default or Event of Default has
occurred at the time such payment is made or otherwise would result therefrom,
Borrower may make cash distributions to Parent from time to time to permit
Parent, in turn, to pay dividends to the Preferred Shareholders in respect of
the Preferred Investment in accordance with the terms of the Preferred
Investment Documents and, with respect to each party thereto, the Affiliate
Subordination Agreement. Without limitation of the foregoing, in determining
whether a Default or Event of Default exists in respect of Borrower's
continuing compliance with the financial covenants set forth in Section 4.2
hereof, the above-described payments shall be deemed made on a pro forma basis
as of the most recently completed fiscal quarter of Borrower for which
financial reports are then available.
"Restricted Junior Payment" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any Equity
Interests of Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend or distribution payable solely in additional Equity
Interests; (ii) any redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of Equity Interests of Borrower or any of
its Subsidiaries now or hereafter outstanding; (iii) any payment or prepayment
of interest on, principal of, premium, if any, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Indebtedness; and (iv) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of Equity Interests of Borrower or
any of its Subsidiaries now or hereafter outstanding.
3.6 Restriction on Fundamental Changes. Borrower will not,
and will not permit any of the Loan Parties, directly or indirectly, to: (a)
amend, modify or waive any term or provision of its articles of incorporation
or articles of organization, certificates of designations pertaining to
preferred stock or by-laws or any operating agreement, unless and except to the
extent required by law or to the extent such amendment, modification or waiver
does not have, and would not reasonably be expected to have, a Material Adverse
Effect; (b) enter into any transaction of merger or consolidation except: (i)
pursuant to the Capitalization/Acquisition Documents on the Closing Date, (ii)
in connection with an Approved Acquisition, (iii) that any Subsidiary of
Borrower may be merged with or into Borrower (provided that Borrower is the
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surviving entity) or with or into any other Subsidiary of Borrower which is
then or immediately thereafter becomes an Affiliate Guarantor, and (iv) that
Borrower or any of its Subsidiaries may effect a merger solely for the purpose
of changing its jurisdiction of incorporation or formation; (c) liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) unless
(i) the entity in question is not Parent or Borrower and (ii) all, or
substantially all, assets of the entity in question are distributed to Borrower
or one of the Borrower's Subsidiaries which is then an Affiliate Guarantor; or
(d) make any Acquisition, except an Approved Acquisition.
3.7 Disposal of Assets or Subsidiary Stock. Borrower will
not, and will not permit any of the Loan Parties, directly or indirectly, to:
convey, sell, lease, sublease, transfer or otherwise dispose of, or grant any
Person an option to acquire, in one transaction or a series of transactions,
any of its property, business or assets, or the capital stock of or any other
Equity Interests in any of the Loan Parties, whether now owned or hereafter
acquired, except for: (a) bona fide sales of inventory to customers in the
Ordinary Course of Business; (b) transfers of assets by, between or among
Borrower and the Affiliate Guarantors in the Ordinary Course of Business; and
(c) Asset Dispositions, if, but only if, all of the following conditions are
met: (i) the aggregate value of total assets sold or otherwise disposed of in
any fiscal year of Borrower and its Subsidiaries, based on the sales price
received therefor, does not exceed Five Hundred Thousand Dollars ($500,000);
(ii) the sale or other disposition is made to a Person which is other than an
Affiliate of Borrower; (iii) the sole consideration received is cash or
property in which Agent, for its benefit and the ratable benefit of Lenders,
has a first priority security interest (subject to Permitted Encumbrances);
(iv) the Net Proceeds of such Asset Disposition are applied in repayment of any
Loans then outstanding until fully paid in the manner prescribed in Section
1.3; (v) after giving effect to the sale or other disposition of the assets
included within the Asset Disposition and the repayment of Indebtedness with
the proceeds thereof, Borrower is in compliance with the covenants set forth in
Section 4.2 recomputed on a pro forma basis using financial data for the most
recently ended month for which information is available and is in compliance
with all other terms and conditions contained in this Agreement; and (vi) no
Default or Event of Default then exists or shall result from such sale or other
disposition.
3.8 Transactions with Affiliates. Borrower will not, and will
not permit any of the Loan Parties, directly or indirectly, to enter into or
permit to occur any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate or
with any director, officer or employee of any Loan Party, except for (i)
transactions in the Ordinary Course of Business and upon fair and reasonable
terms which are no less favorable to Borrower or such Loan Party than would be
obtained in a comparable arm's length transaction with a Person that is not an
Affiliate, and which, at Agent's request, are fully disclosed to such Person,
(ii) asset transfers permitted under Section 3.7; (iii) transactions pursuant
to agreements entered into or in effect on the Closing Date and listed on
SCHEDULE 3.8 hereof; (iv) compensation arrangements entered into in the
Ordinary Course of Business with employees, officers, directors and independent
contractors who are not otherwise Affiliates; and (v) the issuance to employees
of Parent of stock options (and the issuance of shares of capital stock upon
the exercise of such stock options) and similar rights pursuant to bona fide
employee benefit plans approved by its Board of Directors.
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3.9 Management Fees and Compensation. Borrower will not, and
will not permit any of the Loan Parties, directly or indirectly, to pay any
management, consulting or similar fees to any Affiliate, except for services
actually performed in the Ordinary Course of Business, and subject to
compliance with Section 3.8.
3.10 Conduct of Business. Borrower will not and will not
permit any of the Loan Parties, directly or indirectly to engage in any
business other than Permitted Business. Subsequent to the Closing Date, Parent
will not (i) engage in any business, (ii) create, incur or assume any
obligations other than in the Ordinary Course of Business or (iii) own or
acquire any assets other than (A) Equity Interests in Borrower and (B) cash and
Cash Equivalents, in amounts sufficient to meet its obligations in the Ordinary
Course of Business.
3.11 Changes Relating to Subordinated Indebtedness. Borrower
will not, and will not permit any of its Subsidiaries, directly or indirectly,
to change or amend the terms of any Subordinated Indebtedness if the effect of
any such amendment is to: (a) increase the interest rate on such Indebtedness;
(b) change the dates upon which payments of principal or interest are due on
such Indebtedness; (c) change any event of default or add or change any
covenant with respect to such Indebtedness; (d) change the prepayment
provisions of such Indebtedness; (e) change the subordination provisions
thereof (or the subordination terms of any guaranty thereof); or (f) cause, or
have the effect of permitting, an increase in the amount, frequency or maturity
of payment, in cash or other property (excepting therefrom payments in
additional Subordinated Indebtedness, equity securities or payments in kind),
of any Subordinated Indebtedness at any time or from time to time during the
period of subordination.
3.12 Fiscal Year. Borrower will not, and will not permit any
of the Loan Parties to, change its fiscal year from December 31.
3.13 Subsidiaries. Borrower will not, and will not permit any
of its Subsidiaries, directly or indirectly, to establish, create or acquire
any new Subsidiary, except pursuant to Approved Acquisitions; provided,
however, that any Subsidiary which is established, created or acquired
hereafter either pursuant to an Approved Acquisition or otherwise with the
prior written consent of the Requisite Lenders, shall, upon its establishment,
creation or acquisition, become an Affiliate Guarantor hereunder by its
execution and delivery to Agent of a Joinder Agreement in substantially the
same form of EXHIBIT B hereto, and Borrower shall (or shall cause its
applicable subsidiary) to comply with Section 2.6 in regard thereto. Except as
expressly permitted by this Agreement, no Loan Party shall sell, transfer or
otherwise dispose of any Equity Interests in any Subsidiary owned by it, nor
permit any Subsidiary to issue any shares of stock of any class whatsoever to
any Person other than to a Loan Party. The Loan Parties will take such action
from time to time as shall be necessary to ensure that the percentage of the
Equity Interests of any class or character owned by it in any Subsidiary on the
Closing Date hereof (or, in the case of any newly formed or newly acquired
Subsidiary, on the date of formation or acquisition) is not any time decreased,
other than by reason of transfers to another Loan Party. In the event that any
additional Equity Interests shall be issued by Borrower or any Subsidiary, the
respective holder of such Equity Interests shall forthwith deliver to Agent
pursuant to a Pledge Agreement any certificates evidencing such Equity
Interests, accompanied
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by undated stock powers executed in blank and to take such other action as
Agent shall request to perfect the security interest created therein pursuant
to such Pledge Agreement.
SECTION 4
FINANCIAL REPORTING/COVENANTS
Borrower covenants and agrees that so long as any Commitment
is in effect and until payment in full of all Obligations, unless the Requisite
Lenders shall otherwise give their prior written consent, Borrower shall
perform and comply with, and shall cause each of the other Loan Parties to
perform and comply with, all covenants in this Section 4 applicable to such
Person.
4.1 Financial Statements and Other Reports. Borrower will
maintain, and cause each of the Loan Parties to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP
(it being understood that monthly financial statements are not required to have
footnote disclosures). Borrower will deliver each of the financial statements
and other reports described below to Agent and each Lender:
(A) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each fiscal month of Borrower,
Borrower will deliver the consolidated balance sheets of Parent, Borrower and
Borrower's Consolidated Subsidiaries, as at the end of such month, and the
related consolidated statements of income, stockholders' equity and cash flow
for such month and for the period from the beginning of the then current fiscal
year of Borrower to the end of such month, together with (i) a monthly
comparative budget analysis, by division, reconciling actual and projected
revenue, income, expenses, assets and liabilities, and (ii) consolidating
statements of the foregoing, in summary form.
(B) Year-End Financials. As soon as available and in any
event within one hundred twenty (120) days after the end of each fiscal year of
Borrower, Borrower will deliver (1) the consolidated and consolidating balance
sheets of Parent, Borrower and Borrower's Consolidated Subsidiaries, as at the
end of such year, and the related consolidated statements of income,
stockholders' equity and cash flow for such fiscal year, and (2) a report with
respect to the consolidated financial statements from a firm of certified
public accountants selected by Borrower and reasonably acceptable to Agent,
which report shall be prepared in accordance with Statement of Auditing
Standards No. 58 (the "Statement") entitled "Reports on Audited Financial
Statements" and such report shall be "Unqualified" (as such term is defined in
such Statement).
(C) Compliance Certificate. On a monthly basis, within thirty
(30) days after the end of each fiscal month of Borrower, Borrower will deliver
a fully and properly completed compliance certificate (in substantially the
same form as EXHIBIT C) (the "Compliance Certificate") signed by an Executive
Officer.
(D) Business Backlog Report. On a monthly basis, within
thirty (30) days after the end of each fiscal month of Borrower, Borrower will
deliver a fully and properly
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completed business backlog report detailing all key projects in which a
purchase order has been executed and the probability of Borrower (or a
Subsidiary) being mandated on other key projects, segregated by division, on
30, 60, 90 and over 90 day (to 12 months) terms, and otherwise to be in such
form and substance as shall be reasonably acceptable to Agent, signed by an
Executive Officer.
(E) Accountants' Reports. Promptly upon receipt thereof,
Borrower will deliver copies of all significant reports submitted by Borrower's
firm of certified public accountants in connection with each annual, interim or
special audit or review of any type of the financial statements or related
internal control systems of Borrower made by such accountants, including any
comment letter submitted by such accountants to management in connection with
their services.
(F) Collateral Reporting. On a monthly basis within twenty
(20) days following the end of each calendar month, or more frequently if
requested by Agent, an accounts receivable aging summary, which summary shall
be in form reasonably satisfactory to Agent, and which summary shall be
accompanied by such further details concerning the Accounts as Agent may
reasonably request from time to time.
(G) Projections. As soon as available after approval by its
Board of Directors, and in any event no later than ten (10) days before the end
of each of Borrower's fiscal years, Borrower will deliver Projections of
Borrower and its Subsidiaries for the forthcoming twelve (12) fiscal months,
month-by-month, and for the forthcoming five (5) fiscal years, year-by-year.
(H) SEC Filings and Press Releases. Promptly upon their
becoming available, Borrower will deliver copies of (1) all financial
statements, reports, notices and proxy statements sent or made available by
Parent, Borrower or any of its Subsidiaries to their respective security
holders, if Parent or Borrower has a class of securities registered with the
SEC, and (2) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Parent, Borrower or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority.
(I) Events of Default, Etc. Promptly upon any Executive
Officer of Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver copies of all notices given or received by
Borrower with respect to any such event or condition and a certificate of an
Executive Officer specifying the nature and period of existence of such event
or condition and what action Borrower has taken, is taking and proposes to take
with respect thereto: (1) any condition or event that constitutes an Event of
Default or Default; (2) any notice that any Person has given to Borrower or any
of their respective Subsidiaries or any other action taken with respect to a
claimed default or event or condition; or (3) any event or condition that could
reasonably be expected to result in any Material Adverse Effect.
(J) Litigation. Promptly upon any Executive Officer of
Borrower obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent or (2) any material development in any action, suit,
proceeding,
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governmental investigation or arbitration at any time pending against or
affecting any Loan Party or any property of any Loan Party which, in the case
of (1) or (2) above, could reasonably be expected to have a Material Adverse
Effect, Borrower will promptly give notice thereof to Agent and provide such
other information as may be reasonably available to them to enable Agent and
its counsel to evaluate such matter.
(K) Other Information. With reasonable promptness, Borrower
will deliver such other information and data with respect to Borrower or any
Subsidiary of Borrower as from time to time may be reasonably requested by
Agent or the Requisite Lenders.
4.2 Financial Covenants. Borrower will maintain, and cause
each of the Loan Parties to assist Borrower in maintaining, the financial
covenants described below:
(A) Fixed Charge Coverage. Borrower shall not permit Fixed
Charge Coverage (defined below), measured monthly, at the end of each fiscal
month of Borrower, for each Test Period, beginning with the Initial Test Month,
to be less than: (i) 1.00:1, through December 31, 2001, and (ii) 1.10:1, from
and after January 1, 2002; where:
"Fixed Charge Coverage" shall mean the ratio of (i) EBITDA for the
Test Period, minus unfinanced Capital Expenditures made in such period, to the
extent then permitted to be made hereunder (as applicable), minus income taxes
paid in cash during such period, plus any portion of the ACS Investment drawn
by Borrower during such period (excluding therefrom, however, that portion of
the ACS Investment drawn by Borrower on the Closing Date), to (ii) the sum
(without duplication) of Interest Expense for such period, plus payments
(including prepayments) of principal on Total Debt made in such period
(excluding therefrom any Escrowed Seller Debt, as provided in Section 7.1(Z)
hereof), plus any Restricted Junior Payments made in such period; all
determined for Borrower and its Subsidiaries with respect to such period on a
Consolidated basis, in accordance with GAAP. In making the foregoing
calculations during the Annualization Period, EBITDA, Capital Expenditures,
income taxes and Interest Expense shall all be Annualized.
(B) Senior Fixed Charge Coverage. Borrower shall not permit
Senior Fixed Charge Coverage (defined below), measured monthly, at the end of
each fiscal month of Borrower, for each Test Period, beginning with the Initial
Test Month, to be less than (i) 1.20:1, through December 31, 1999; (ii) 1.25:1,
from and after January 1, 2000, through December 31, 2002; and (iii) 1.50:1,
from and after January 1, 2003; where:
"Senior Fixed Charge Coverage" shall mean the ratio of: (i) EBITDA for the Test
Period, minus unfinanced Capital Expenditures made in such period, to the
extent then permitted to be made hereunder, minus income taxes paid in cash in
such period, to (ii) the sum (without duplication) of Interest Expense for such
period, plus payments (including prepayments) of principal on all Senior Debt
be made in such period, plus any Restricted Junior Payments (other than in
respect of Subordinated Indebtedness) made in such period; all determined for
Borrower and its Subsidiaries with respect to such period on a Consolidated
basis, in accordance with GAAP. In making the foregoing calculations during the
Annualization Period, EBITDA, Capital Expenditures, income taxes and Interest
Expense shall all be Annualized.
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(C) Total Debt Coverage. Borrower shall not permit its Total
Debt Coverage, measured monthly, at the end of each fiscal month of Borrower,
for each Test Period, beginning with the Initial Test Month, to be greater
than: (i) 4.00:1, through December 31, 1999; (ii) 3.75:1, from and after
January 1, 2000, through December 31, 2000; (iii) 3.50:1, from and after
January 1, 2001, through December 31, 2001; (iv) 3.25:1, from and after January
1, 2002, through December 31, 2002; and (v) 3.00:1, from and after January 1,
2003; where:
"Total Debt Coverage" shall mean, for each fiscal month of Borrower described
above, the ratio of (i) Total Debt as of the end of such fiscal month, to (ii)
EBITDA for the Test Period then ended (computed, during the Annualization
Period, on an Annualized basis); all determined for Borrower and its
Subsidiaries on a Consolidated basis, in accordance with GAAP.
(D) Senior Debt Coverage. Borrower shall not permit its
Senior Debt Coverage measured monthly, at the end of each fiscal month of
Borrower, beginning with the Initial Test Month, to be greater than 2.50:1;
where:
"Senior Debt Coverage" shall mean, as of the last day of the fiscal month of
Borrower in question, the ratio of (i) Senior Debt determined as of the end of
such fiscal month, to (ii) EBITDA for the Test Period then ended (computed,
during the Annualization Period, on an Annualized basis); all determined on a
Consolidated basis for Borrower and its Subsidiaries in accordance with GAAP.
(E) Capital Expenditures. Borrower will not permit Capital
Expenditures in any fiscal year of Borrower to exceed One Million Five Hundred
Thousand Dollars ($1,500,000).
"Capital Expenditures" means expenditures made or liabilities incurred for the
acquisition of fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life or more than one year, including the
total principal portion of any Indebtedness represented by Capital Leases,
determined for Borrower and its Subsidiaries on a Consolidated basis in
accordance with GAAP.
(F) Interest Coverage. Borrower shall not permit Interest
Coverage (defined below), measured monthly at the end of each fiscal month of
Borrower, for each Test Period beginning with the Initial Test Month, to be
less than: (i) 2.75:1, through December 31, 2000, (ii) 3.00:1, from and after
January 1, 2001, through December 31, 2001; (iii) 3.25:1, from and after
January 1, 2002, through December 31, 2002; and (iv) 3.50:1, from and after
January 1, 2003; where:
"Interest Coverage" shall mean for each such fiscal month of Borrower,
the ratio of: (i) EBITDA for the Test Period then ended (computed, during the
Annualization Period, on an Annualized basis), to (ii) total Interest Expense
for the Test Period then ended (likewise computed, during the Annualization
Period, on an Annualized basis); all determined for Borrower and its
Subsidiaries with respect to such period on a Consolidated basis, in accordance
with GAAP.
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(G) Excess Working Capital. Borrower shall not permit Excess
Working Capital (defined below), at any time, to be less than One Dollar
($1.00); where:
"Excess Working Capital" shall mean, for each fiscal month of
Borrower, beginning with the Initial Test Month, the positive difference,
determined for Borrower and its Subsidiaries on a Consolidated basis in
accordance with GAAP, between (A) the sum of cash plus accounts receivable plus
costs in excess of billings, and (B) the sum of accounts payable plus billings
in excess of costs plus accruals, plus total Revolving Loans outstanding, plus
total LC Exposure; plus Two Million Dollars ($2,000,000).
4.3 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent pursuant to Section 4.1 shall be prepared in accordance with
GAAP as in effect at the time of such preparation. No "Accounting Changes" (as
defined below) shall affect financial covenants, standards or terms in this
Agreement; provided that Borrower shall prepare footnotes to each Compliance
Certificate and the financial statements required to be delivered hereunder
that show the differences between the financial statements delivered (which
reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes). "Accounting
Changes" means: (a) changes in accounting principles required by GAAP and
implemented by Borrower; and (b) changes in accounting principles recommended
by Borrower's certified public accountants and implemented by Borrower.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce Agent and Lenders to enter into this
Agreement and make Loans, Borrower represents and warrants to Agent and each
Lender that the following statements are (and, after giving effect to the
Related Transactions, shall be) true, correct and complete:
5.1 Disclosure. No representation or warranty of any Loan
Party contained in this Agreement, the other Loan Documents, the financial
statements referred to in subsection 5.5, or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents contained on the date such
statement was made any untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which they were made.
5.2 No Material Adverse Effect. During the period between
December 31, 1998 and the Closing Date, there have been no events or changes in
facts or circumstances affecting any Loan Party which individually or in the
aggregate have had or would reasonably be expected to have a Material Adverse
Effect and that have not been disclosed herein or in the attached Schedules.
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5.3 No Default. The consummation of the Related Transactions
does not and will not violate, conflict with, result in a breach of, or
constitute a default (with due notice or lapse of time or both) under any
contract of any Loan Party, except if such violations, conflicts, breaches or
defaults have either been waived on or before the Closing Date or have not had,
and would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
5.4 Organization, Powers, Capitalization and Good Standing.
(A) Organization and Powers. Each of the Loan Parties is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization (which jurisdictions, as of the
Closing Date, are set forth on SCHEDULE 5.4(A)). Each of the Loan Parties has
all requisite corporate or organizational power and authority to own and
operate its properties, to carry on its business as now conducted, to enter
into each Loan Document to which it is a party and to carry out the Related
Transactions.
(B) Capitalization. As of the Closing Date, the authorized
Equity Interests issued by each of Parent, Borrower and each of Borrower's
Subsidiaries are as set forth on SCHEDULE 5.4(B). All such issued and
outstanding Equity Interests are duly authorized and validly issued, fully
paid, nonassessable, free and clear of all Liens other than, in the case of
Equity Interests owned in Borrower or any such Subsidiary of Borrower, those in
favor of Agent, for the benefit of Agent and Lenders, and such shares or
interests were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. As of the Closing Date, the Equity
Interests issued by each of the Parent, Borrower and each of its Subsidiaries
are owned by its stockholders and in the amounts set forth on SCHEDULE 5.4(B).
As of the Closing Date, no shares of the Equity Interests of Parent, Borrower
or any of its Subsidiaries, other than those described above, are issued and
outstanding. As of the Closing Date, except as may be specified on SCHEDULE
5.4(B), there are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from Parent, Borrower or any of its Subsidiaries, of any shares of
capital stock, membership interests or other securities of any such entity.
(C) Binding Obligation. This Agreement is, and the other Loan
Documents when executed and delivered will be, the legally valid and binding
obligations of those Loan Parties which are parties hereto or thereto, as the
case may be, each enforceable against each of such parties, as applicable, in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(D) Qualification. Each of the Loan Parties is duly qualified
and in good standing wherever necessary to carry on its business and
operations, except in jurisdictions in which the failure to be qualified and in
good standing has not had, and would not reasonably be expected to have, a
Material Adverse Effect. All jurisdictions in which each Loan Party is
qualified to do business are set forth on SCHEDULE 5.4(D).
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<PAGE> 45
5.5 Financial Statements. All financial statements concerning
Parent, Borrower and its Subsidiaries which have been or will hereafter be
furnished to Agent pursuant to this Agreement, including those listed below,
have been or will be prepared in accordance with GAAP as in effect at the time
of such preparation, and do or will present fairly the financial condition of
the corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended:
(A) The audited financial statements of Parent, Borrower and
its Consolidated Subsidiaries then existing at December 31, 1998, for
the fiscal year then ended, certified by Borrower's certified public
accountants;
(B) The unaudited, consolidated financial statements of
Parent, Borrower and its Consolidated Subsidiaries then existing at
September 30, 1999 and the related statements of income and cash flow
for the nine (9) months then ended and the fiscal year to date;
(C) The pro forma balance sheet of Borrower and its
Consolidated Subsidiaries, based on the unaudited historical balance
sheet of Borrower and its Consolidated Subsidiaries at September 30,
1999, but giving effect to (i) the Acquisition/Capitalization
Transactions and (ii) the Loans being disbursed on the Closing Date
(the "Pro Forma").
5.6 Intellectual Property. Each of Borrower and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use, all
material patents, trademarks, trade names, copyrights, technology, know-how and
processes used in and necessary for the conduct of its business, or that are
otherwise material to its condition (financial or other), business or
operations (such intellectual property hereinafter collectively called
"Intellectual Property"), and all such Intellectual Property, as of the Closing
Date, is identified on SCHEDULE 5.6 and, except as may be set forth on said
SCHEDULE 5.6, is fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such registrations,
filings or issuances. Except as disclosed in SCHEDULE 5.6, to Borrower's
knowledge, the use of such Intellectual Property by Borrower or its
Subsidiaries did not, does not and has not been alleged by any Person to
infringe on the rights of any Person.
5.7 Investigations, Audits, Etc. As of the Closing Date,
except as set forth on SCHEDULE 5.7, neither Parent, Borrower nor any of
Borrower's Subsidiaries is the subject of any review or audit by the Internal
Revenue Service or any governmental investigation concerning the violation or
possible violation of any law or the defendant in any pending litigation or
administrative proceeding.
5.8 Employee Matters. As of the Closing Date, except as set
forth on SCHEDULE 5.8, (a) neither Borrower nor any of its Subsidiaries, nor
any of its employees, is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to the
employees of Borrower or any of its Subsidiaries, and no union or collective
bargaining unit has sought such certification or recognition with respect to
the employees of Borrower or any of its Subsidiaries, and (c) there are no
strikes, slowdowns, work
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stoppages or controversies pending or, to the best knowledge of Borrower after
due inquiry, threatened between Borrower or any of its Subsidiaries and its
employees, other than employee grievances arising in the Ordinary Course of
Business which could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect. As of the Closing Date, except as
set forth on SCHEDULE 5.8, neither Borrower nor any of its Subsidiaries is
party to an employment contract.
5.9 Financial Condition and Solvency. Each of Parent,
Borrower and each of its Subsidiaries: (a) owns and will own assets the
aggregate fair saleable value of which is (i) greater than the total amount of
liabilities (including contingent liabilities) of Parent, Borrower or such
Subsidiary, as applicable, and (ii) greater than the amount that will be
required to pay Parent's, Borrower's or such Subsidiary's, as applicable, then
existing debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to Parent, Borrower
or such Subsidiary; (b) has capital that is not unreasonably small in relation
to its business as presently conducted or after giving effect to any
contemplated transaction; and (c) does not intend to incur, and does not
believe that it will incur, debts beyond its ability to pay such debts as they
become due. This Agreement, the Notes, the Security Documents and the other
Loan Documents were executed and delivered by the Loan Parties in good faith,
and the Obligations incurred hereunder and the Liens granted hereunder and
thereunder were incurred and granted in exchange for fair equivalent value
received by the Loan Parties. The Borrower does not intend, in consummating the
transactions contemplated hereby, to disturb, delay, hinder or defraud either
present or future creditors or other Persons to which the Parent, Borrower or
any Subsidiary is or will become, on or after the date hereof, indebted. The
Borrower does not contemplate filing a petition in bankruptcy or for
reorganization under the Bankruptcy Code, nor are there any bankruptcy or
insolvency proceedings threatened against Borrower or any Affiliate Guarantor.
The Borrower intends to use all proceeds of the Loans in accordance with the
terms of this Agreement relevant thereto, and for no other purposes.
5.10 Subsidiaries. As of the Closing Date, (i) Parent has no
Subsidiaries, except Borrower, and (ii) Borrower has no Subsidiaries except as
ascribed to Borrower in the initial recitals to this Agreement.
5.11 Capitalization/Acquisition Transactions. The
Capitalization/Acquisition Transactions were consummated on the Closing Date
substantially in accordance with the respective terms of the Junior Capital
Infusion Documents and the Current Acquisition Documents; and, as a result
thereof, respectively: (i) Borrower has received the Junior Capital Infusion
(less the $4,500,000 portion of the ACS Investment committed to Borrower for
future draw); and (ii) Borrower has consummated the Current Acquisitions.
5.12 Compliance with Laws and Agreements. Each of the Loan
Parties is in compliance with all laws, regulations, policies and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. Without limitation of the
foregoing, each of the Loan parties holds all licenses, permits and other
certificates, including all FCC Licenses and other Franchises, required for the
operation of its business as presently
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conducted by it. Each of the Loan Parties is in compliance with all applicable
regulations of the FCC and the FAA, including all regulations governing equal
employment opportunity and all filing requirements under the Communications
Act, and all applicable state, county, municipal and other regulations
applicable to its business, including all zoning, siting, permitting and other
land use regulations applicable thereto. All Franchises held by the Loan
Parties are described in SCHEDULE 5.12 attached hereto. The Loan Parties are
the registered holders of all licenses duly issued by the FCC and the FAA in
respect of their respective businesses. There is no threat of any
investigation, notice of violation, order, complaint or proceeding before the
FCC against the Loan Parties and no Loan Party has any reason to believe that
any of such licenses will not be renewed in the ordinary course. The FCC
Licenses and other Franchises listed on SCHEDULE 5.12 constitute the only
material Franchises required or advisable in connection with the conduct by the
Loan Parties of their businesses as conducted by them on the Closing Date.
5.13 Litigation and Environmental Matters.
(A) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the knowledge
of any of the Loan Parties, threatened against or affecting the Loan Parties
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect (other than the
Disclosed Matters) or (ii) that involve any of the Loan Documents or the
Transactions.
(B) Except as otherwise described on SCHEDULE 5.13, and
expect with respect to any other matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, none of the Loan Parties (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with
respect to any Environmental Liability or any inquiry or allegation in respect
thereof.
SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 Event of Default. "Event of Default" shall mean the
occurrence or existence of any one or more of the following:
(A) Payment. Failure of Borrower to pay any installment of
principal of any Loan when due; or to repay Revolving Loans to reduce their
outstanding balance to the Maximum Revolving Loan Balance when due; or failure
to pay, within three (3) Business Days after the due date, any interest on any
Loan or any other amount due under this Agreement or any of the other Loan
Documents or any other Obligations; or
(B) Default in Other Agreements. (1) Failure of Borrower or
any of the Loan Parties to pay when due or within any applicable grace period
any principal or interest on any Indebtedness (other than the Loans) or any
Contingent Obligations, in either case having an
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individual principal amount in excess of the Materiality Threshold or having an
aggregate principal amount in excess of the Materiality Threshold or (2) breach
or default of any Borrower or any of the Loan Parties with respect to any
Indebtedness (other than the Loans) or any Contingent Obligations, if the
effect of such breach or default is to cause or to permit the holder or holders
then to cause, Indebtedness and/or Contingent Obligations having an individual
principal amount in excess of the Materiality Threshold or having an aggregate
principal amount in excess of the Materiality Threshold to become or be
declared due prior to their stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower to
perform or comply with any term or condition contained in that portion of
subsection 2.2, relating to Borrower's obligation to maintain insurance,
subsection 2.3, any subsection of Section 3, or any subsection of Section 4; or
(D) Breach of Warranty. Any representation, warranty,
certification or other statement made by any Loan Party in any Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document as to any material fact is
false in any material respect on the date made; or
(E) Other Defaults Under Loan Documents. Borrower or any
other Loan Party defaults in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is not
remedied or waived within twenty (20) days after receipt by Borrower of notice
from Agent or Requisite Lenders of such default (other than occurrences
described in other provisions of this subsection 6.1 for which no or a
different grace or cure period is specified or which constitute immediate
Events of Default); or
(F) Involuntary Bankruptcy; Appointment of Receiver, Etc. (1)
A court enters a decree or order for relief with respect to Borrower or any
other Loan Party in an involuntary case under the Bankruptcy Code, which decree
or order is not stayed or other similar relief is not granted under any
applicable federal or state law within sixty (60) days; or (2) the continuance
of any of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against Borrower or any of the
Loan Parties under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Borrower or any of the Loan Parties,
or over all or a substantial part of its property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the consent
of Borrower or any of the Loan Parties, for all or a substantial part of the
property of Borrower or any of the Loan Parties; or
(G) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1)
An order for relief is entered with respect to Borrower or any of the Loan
Parties or Borrower or any of the Loan Parties commences a voluntary case under
the Bankruptcy Code, or consents to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a substantial part of its
property; or (2) Borrower or any of the Loan Parties makes any assignment for
the benefit of creditors; or (3) the Board of
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Directors of Borrower or any of the Loan Parties adopts any resolution or
otherwise authorizes action to approve any of the actions referred to in this
subsection 6.1(G); or
(H) Judgment and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving (1) an amount in any
individual case in excess of the Materiality Threshold or (2) an amount in the
aggregate at any time in excess of the Materiality Threshold, in either case
not adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against Borrower or any of the Loan
Parties or any of their respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days; or
(I) Dissolution. Any order, judgment or decree is entered
against Borrower or any of the Loan Parties decreeing the dissolution or split
up of Borrower or any of the Loan Parties and such order remains undischarged
or unstayed for a period in excess of thirty (30) days; or
(J) Admissions of Insolvency. Borrower or any of the Loan
Parties admits in writing its present or prospective inability to pay its debts
as they become due; or
(K) Injunction. Borrower or any of the Loan Parties is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) consecutive
days; or
(L) ERISA; Pension Plans. (1) Borrower or any of the Loan
Parties fails to make full payment when due of all amounts which, under the
provisions of any employee pension benefit plan within the meaning of Section
3(2) of ERISA (a "Pension Plan") or any applicable provisions of the IRC, any
such Person is required to pay as contributions thereto and such failure
results in or is likely to result in a Material Adverse Effect; or (2) an
accumulated funding deficiency (within the meaning of Section 412 of the IRC)
in excess of the Materiality Threshold occurs or exists, whether or not waived,
with respect to any such Pension Plan; or (3) any Pension Plan intended to be a
qualified plan within the meaning of Section 401(a) of the IRC is determined by
the Internal Revenue Service not to be a qualified plan and such determination
results in or could reasonably be expected to result in a Material Adverse
Effect; or
(M) Challenge to Loan Documents. Borrower or any of the Loan
Parties shall challenge or contest in any action, suit or proceeding the
validity or enforceability of this Agreement or any of the other Loan
Documents, the legality or enforceability of any of the Obligations or the
perfection or priority of any Lien granted to Agent, or any of the Loan
Documents for any reason, other than a partial or full release in accordance
with the terms thereof, ceases to be in full force and effect or is declared to
be null and void, or any Loan Party incorrectly denies that it has any further
liability under any Loan Documents to which it is party, or gives notice to
such effect; or
(N) Failure of Security. Agent, for the benefit of Agent and
Lenders, does not have or ceases to have a valid and perfected first priority
security interest in any substantial part
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of the Collateral (subject to Permitted Encumbrances), in each case, for any
reason other than the failure of Agent to take any action within its control;
or
(O) Change in Control. Either (i) Stratford, DFW, Clear
Investors, and Stephen F. Johnston, Sr. shall cease (A) to collectively own,
beneficially and of record, either directly or indirectly through Parent, at
least a majority of the total Equity Interests of Borrower, or (B) to control
either directly or indirectly through Parent at least (1) a majority of the
voting rights in the Borrower or (2) at least such percentage of the aggregate
voting Equity Interests of the Borrower as is sufficient at all times to elect
a majority of the Board of Directors of the Borrower, in each case assuming
that (a) all shares of non-voting capital stock (which, pursuant to their
terms, are or may be convertible into voting stock) are converted into voting
stock and (b) all options to purchase or otherwise acquire capital stock,
whether or not vested, have been exercised; or (ii) a majority of the seats
(other than vacant seats) on the board of directors of the Borrower shall be
occupied by Persons who were neither (x) nominated by the board of directors of
the Borrower nor (y) appointed by directors so nominated; or (iii) either
Stephen F. Johnston, Sr. or Michael Riley, for any reason, shall cease to hold
the office or position (or any substantially similar office or position) held
by each of them on the Closing Date and no successor thereto acceptable to the
Requisite Lenders (such acceptance not to be unreasonably withheld) having
experience, knowledge and industry relationships reasonably necessary to the
position, shall have been engaged and shall have commenced to perform the
duties currently performed by such two officers, within ninety (90) days after
such cessation (the name of any such duties within such period shall be deemed
to have been inserted in place of such officers in this subsection);
(P) Governmental Regulations. The Loan Parties shall have
failed to comply with any applicable provision of the Communications Act, any
FCC regulation or any regulation of any other Governmental Authority, the
non-compliance with which would have a Material Adverse Effect, or any material
FCC License or Franchise held by the Loan Parties shall be terminated,
cancelled or not renewed, or the Loan Parties shall be enjoined, restrained or
prevented in any way by the order of any Governmental Authority to conduct
their business;
(Q) Environmental Regulations. A reasonable basis shall exist
for the assertion against any Loan Party (or there shall have been asserted
against any Loan Party) claims or liabilities, whether accrued, absolute or
contingent, based on or arising from the generation, storage, transport,
handling or disposal of Hazardous Materials by any Loan Party, or relating to
any site or facility owned, operated or leased by any Loan Party, which claims
or liabilities (insofar as they are payable by any Loan Party after deducting
any portion thereof which is reasonably expected to be paid by other
creditworthy Persons jointly and severally liable therefor), in the judgment of
the Requisite Lenders are reasonably likely to be determined adversely to any
Loan Party, and the amount thereof is, singly or in the aggregate, is
reasonably likely to have a Material Adverse Effect;
(R) Subordinated Indebtedness. Any default occurs in respect
of any Subordinated Indebtedness and such default continues beyond any grace or
cure period prescribed in regard thereto; or any Loan Party or any Person
(other than Agent or Lenders) party to a subordination agreement favoring Agent
or Lenders in respect thereof (including any as to
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which Agent or Lenders are third party beneficiaries) fails to observe or
perform any term, covenant or condition of such subordination; or
(S) Escrowed Seller Debt. Any Escrowed Seller Debt is not
fully paid and satisfied by January 7, 2000.
6.2 Suspension of Commitments. Upon the occurrence of any
Event of Default, each Lender, at the direction of Agent or Requisite Lenders,
without notice or demand, may immediately cease making additional Loans and
cause its obligation to lend its Pro Rata Share of the Commitments to be
suspended, in whole or in part, as so directed; provided, however, that, in the
case of any such Event of Default, if the subject condition or event is
thereafter waived or otherwise removed by Requisite Lenders, any suspended
portion of the Commitments shall be reinstated.
6.3 Acceleration. Upon the occurrence of any Event of Default
described in the foregoing subsections 6.1(F) or 6.1(G), the unpaid principal
amount of and accrued interest and fees on the Loans and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
other requirements of any kind, all of which are hereby expressly waived by
Borrower, and the Commitments shall thereupon terminate. Upon the occurrence
and during the continuance of any other Event of Default, Agent may, and upon
written demand by Requisite Lenders shall, by written notice to Borrower
declare all or any portion of the Loans and all or some of the other
Obligations to be, and the same shall forthwith become, immediately due and
payable together with accrued interest thereon, and the Commitments shall
thereupon terminate.
6.4 Performance by Agent. If Borrower shall fail to perform
any covenant, duty or agreement contained in any of the Loan Documents, Agent
may perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower after the expiration of any cure or grace periods set forth herein if
such failure constitutes an Event of Default. In such event, Borrower shall, at
the request of Agent, promptly pay any reasonable amount expended by Agent, in
good faith, in such performance or attempted performance to Agent, together
with interest thereon at the highest rate of interest in effect upon the
occurrence of an Event of Default as specified in subsection 1.2(G) from the
date of such expenditure until paid. Notwithstanding the foregoing, it is
expressly agreed that Agent shall not have any liability or responsibility for
the performance of any obligation of Borrower under this Agreement or any other
Loan Document, and that Borrower shall have no obligation to reimburse Agent
for expenses incurred as a result of, or in connection with, Agent's gross
negligence or willful misconduct.
SECTION 7
CONDITIONS TO LOANS
The obligations of Lenders to make Loans are subject to
satisfaction of all of the applicable conditions set forth below.
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7.1 Conditions to Initial Loans. The obligations of the
Lenders to make the initial Loans, and of the Issuing Lender to issue any
Letters of Credit hereunder shall not become effective until the date on which
each of the following conditions is satisfied (or waived in writing by the
Requisite Lenders):
(A) Counterparts of this Agreement. The Agent shall have
received from each party hereto either (i) a counterpart hereof signed on
behalf of such party or (ii) written evidence satisfactory to the Agent (which
may include telecopy transmission of a signed signature page hereof) that such
party has signed a counterpart hereof.
(B) Notes. The Agent shall have received duly completed and
executed Notes for each of the Lenders in respect of its Commitments
(C) Corporate Structure. The Agent shall have received
satisfactory evidence that the corporate organizational structure, capital
structure and ownership of the Loan Parties shall be as set forth in Section
5.4.
(D) Corporate Matters. The Agent shall have received such
documents and certificates as the Agent may reasonably request relating to the
organization, existence and good standing of each Loan Party, the authorization
of the Related Transactions and any other legal matters relating to the Loan
Parties, this Agreement, the other Loan Documents or the Related Transactions,
all in form and substance reasonably satisfactory to the Agent.
(E) Security Interests. The Agent shall have received
evidence satisfactory to it that the Loan Parties shall have taken or caused to
be taken all such actions, executed and delivered or caused to be executed and
delivered all such agreements, documents and instruments, made or caused to be
made all such filings and recordings (other than the filing or recording of
items described in clauses (iii) and (iv) below) that may be necessary or, in
the opinion of the Agent, desirable in order to create in favor of the Agent,
for the benefit of the Lenders, a valid and (upon such filing and recording)
perfected first priority security interest in the Collateral. Such actions
shall include, without limitation the following:
(i) Collateral Documents. Delivery to the Agent of all the
Security Documents, duly executed by the applicable party thereto,
together with accurate and complete schedules to all such Security
Documents;
(ii) Stock Certificates and Instruments. Delivery to the
Agent of (A) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to the Agent) representing all
Equity Interests pledged pursuant to the Pledge Agreement and (B) all
promissory notes or other instruments (duly endorsed, where
appropriate, in a manner satisfactory to the Agent) evidencing any
Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery
to the Agent of (A) the results of a recent search, by a Person
satisfactory to the Agent, of all effective UCC financing statements
and fixture filings and all judgment and tax lien filing which
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may have been made with respect to any personal or mixed property of
any Loan Party, together with copies of all such filings disclosed by
search, and (B) UCC termination statements duly executed by all
applicable Persons for filing in all applicable jurisdictions as may
be necessary to terminate any effective UCC financing statements or
fixture filings disclosed in such search (other than any such
financing statements or fixture filings in respect of Liens permitted
to remain outstanding pursuant to the terms hereof);
(iv) UCC Financing Statements and Fixture Filings. Delivery
to the Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with
respect to all personal and mixed property Collateral of such Loan
Party, for filing in all jurisdictions as may be necessary or, in the
opinion of Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Security Documents;
(F) Closing Date Mortgages. The Agent shall have received
from each Loan Party:
(i) Closing Date Mortgages. Fully executed and notarized
Mortgages (each a "Closing Date Mortgage" and, collectively, the
"Closing Date Mortgages"), in proper form for recording in all
appropriate places in all applicable jurisdictions, encumbering each
Real Property Asset specified by the Agent on SCHEDULE 7.1 annexed
hereto (each a "Closing Date Mortgaged Property" and, collectively,
the "Closing Date Mortgaged Properties");
(ii) Leasehold Interests. In the case of each Real Property
Asset listed in SCHEDULE 7.1 annexed hereto, copies of all leases
between any Loan Party and any landlord or tenant;
(iii) Landlord's Agreement. In the case of each Real Property
Asset specified by the Agent, a Landlord's Agreement with respect
thereto and where required by the terms of any lease, the consent of
the mortgagee, ground lessor or other party;
(iv) Matters Relating to Flood Hazard Properties. With
respect to each Closing Date Mortgaged Property, (A) Evidence
reasonably acceptable to the Agent as to whether any Closing Date
Mortgaged Property is a Flood Hazard Property and (B) if there are any
such Flood Hazard Properties, evidence that the applicable Loan Party
has obtained flood insurance with respect to each Flood Hazard
Property in amounts approved by Agent, or evidence acceptable to Agent
that such insurance is not available;
(v) Environmental Indemnity. With respect to each Closing
Date Mortgaged Property, an environmental indemnity agreement,
substantially in the form of EXHIBIT M annexed hereto, with respect to
the indemnification of the Agent and the Lenders for any liabilities
that may be imposed on or incurred by any of them as a result of any
Hazardous Materials;
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(vi) Title Reports. With respect to each Closing Date
Mortgaged Property specified by the Agent, a title report issued by a
Title Company with respect thereto, dated not more than thirty (30)
days prior to the Closing Date and satisfactory in form and substance
to Agent.
(G) Environmental Reports. Agent shall have received reports
and other information, in form, scope and substance satisfactory to the Agent,
regarding environmental matters relating to Closing Date Mortgaged Properties,
which reports shall include a Phase I environmental assessment for each of the
Closing Date Mortgaged Properties. Such reports shall be conducted by one or
more environmental consulting firms reasonably satisfactory to the Agent.
(H) Evidence of Insurance. Agent shall have received a
certificate from the Loan Parties' insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to
Section 2.2 is in full force and effect and that Agent on behalf of the Lenders
has been named as additional insured and loss payee thereunder to the extent
required under Section 2.2.
(I) Management; Employment Contracts. The management
structure of the Loan Parties shall be as set forth on SCHEDULE 5.8, and Agent
shall have received copies of, and shall be satisfied with the form and
substance of (i) any and all employment contracts with any senior management of
the Loan Parties, (ii) any and all shareholders agreement among any of the
shareholders of the Loan Parties, and (iii) any stock option plans, stock
incentive programs and similar arrangements provided by the Loan Parties to any
Person.
(J) Necessary Governmental Authorizations and Consents, Etc..
The Loan Parties shall have obtained all permits, licenses, authorizations or
consents from all Governmental Authorities and all consents of other Persons,
in each case that are necessary or advisable in connection with the
transactions contemplated by the Loan Documents, and the continued operation of
the business conducted by the Loan Parties in substantially the same manner as
conducted prior to the consummation of the financing contemplated hereunder and
each of the foregoing shall be in full force and effect, in each case other
than those the failure to obtain or maintain which, either individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. No action, request for stay, petition for review or rehearing,
reconsideration or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable Governmental Authority to take action
to set aside its consent on its own motion shall have expired.
(K) Existing Credit Agreement. The Agent shall have received
evidence that the principal of and interest on, and all other amounts owing in
respect of, the Existing Credit Agreement shall have been, or shall
simultaneously be, repaid in full, that all commitments thereunder shall have
been terminated and that all guaranties in respect of, and all Liens securing,
any such obligations shall have been released (or arrangements for such release
satisfactory to Agent shall have been made).
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(L) Financial Statements; Projections. The Agent shall have
received from the Loan Parties the Pro Forma and the initial Projections.
(M) Solvency Assurances. The Agent shall have received a
certificate from an Executive Officer to the effect that, as of the Closing
Date and after giving effect to the initial Loans hereunder and to the other
Related Transactions, the Loan Parties are in compliance with Section 5.9. Such
certificate shall include a statement to the effect that the financial
projections and underlying assumptions contained in such analysis are, fair and
reasonable and accurately computed.
(N) Notice of Borrowing. With respect to the initial
borrowing hereunder, Agent shall have received a Notice of Borrowing signed by
an Executive Officer.
(O) Current Acquisitions. The Agent shall have received
copies of all duly executed Current Acquisition Documents, and be satisfied
therewith in all respects; and the Current Acquisitions shall have been
consummated substantially in accordance with the terms and conditions thereof.
(P) Junior Capital Infusion Documents. The Agent shall have
received copies of all duly executed Junior Capital Infusion Documents, and be
satisfied therewith; and the Junior Capital Infusion shall have been
consummated substantially in accordance therewith.
(Q) No Material Adverse Effect. There shall have occurred no
Material Adverse Effect (in the reasonable opinion of the Agent) since December
31, 1998 with respect to any of the Loan Parties.
(R) Opinion of Counsel to the Loan Parties. Agent shall have
received a favorable written opinion (addressed to the Agent and the Lenders
and dated the Closing Date) of Smith, Gambrell & Russell, LLP, counsel to the
Loan Parties, covering such matters relating to the Loan Parties, this
Agreement, the other Loan Documents and the Related Transactions as the
Requisite Lenders shall request (and each Loan Party hereby requests such
counsel to deliver such opinion).
(S) Fees and Expenses. Agent shall have received all fees and
other amounts due and payable on or prior to the Closing Date, including, to
the extent invoiced, reimbursement or payment of all fees and expenses required
to be reimbursed or paid by the Loan Parties hereunder.
(T) Seller Subordination Agreements. The Agent shall have
received fully executed originals of the Seller Subordination Agreements
required to be delivered on the Closing Date.
(U) Affiliate Subordination Agreement. The Agent shall have
received fully executed originals of the Affiliate Subordination Agreement.
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(V) ACS Subordination Agreement. The Agent shall have
received fully executed originals of the ACS Subordination Agreement.
(W) Stratford Subordination Agreement. The Agent shall have
received fully executed originals of the Stratford Subordination Agreement.
(X) Other Documents. The Agent shall have received such other
documents as the Agent or any Lender shall have reasonably requested.
(Y) Excess Borrowing Availability. After giving effect to all
transactions contemplated to occur on the Closing Date under the
Acquisition/Capitalization Documents, and the making of all Loans being made on
the Closing Date, Excess Borrowing Availability shall be at least Six Million
Dollars ($6,000,000).
(Z) Existing Seller Debts. Unless and except to such extent
as otherwise may be expressly provided in SCHEDULE 10.1, all Seller Debts
existing on the Closing Date (exclusive of any arising in connection with the
Current Acquisitions) shall either: (i) be fully paid and satisfied on the
Closing Date; (ii) be made the subject of a Seller Subordination Agreement on
the Closing Date; or (iii) be the subject of an escrow arrangement, the form
and substance of which shall be subject to Agent's approval, but which, in any
event, shall provide as follows: (A) an amount sufficient to pay in full each
Seller Debt made subject thereto (herein, each "Escrowed Seller Debt"),
including principal, accrued interest thereon through at least January 7, 2000
and any prepayment premium, shall be withdrawn on the Closing Date from the ACS
Investment and deposited in an escrow account (the "Escrow Account"), to be
established on or prior to the Closing Date with SouthTrust Bank, Atlanta or
another financial institution not a Lender but otherwise mutually acceptable to
Borrower and Agent (the "Escrow Agent"); (B) no funds on deposit in the Escrow
Account shall be withdrawn therefrom except to pay Escrowed Seller Debt or as
set forth below; (C) each Escrowed Seller Debt shall be paid in full from funds
on deposit in the Escrow Account not later than January 7, 2000; (D) to the
extent that at such time as all Escrowed Seller Debt has been paid in full
there exists any funds in the Escrow Account, then such remainder shall be
applied by Borrower against Revolving Loans then outstanding and, thereafter,
the amount of such payment shall be reserved against borrowing availability in
respect of Revolving Loans, to be made available for Borrower to pay other
Seller Debts as then or thereafter may become due and payable; and (E) neither
the Agent, nor any Lender, nor ACS, nor the Escrow Agent, nor any other Person
shall at any time have any Lien on any funds on deposit in the Escrow Account,
or in the Escrow Account itself.
7.2 Conditions to All Loans. The obligations of Lenders to
make Loans and of the Issuing Lender to issue Letters of Credit on any date
("Funding Date") are subject to the further conditions precedent set forth
below.
(A) Agent shall have received a Notice of Borrowing
requesting an advance of a Loan or, as appropriate, the Issuing Lender shall
have received a notice requesting such Letter of Credit.
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(B) The representations and warranties contained in Section 5
of this Agreement and elsewhere herein and in the Loan Documents shall be (and
each request by Borrower for a Loan or a Letter of Credit shall constitute a
representation and warranty by Borrower that such representations and
warranties are) true, correct and complete in all material respects on and as
of that Funding Date to the same extent as though made on and as of that date,
except for any representation or warranty limited by its terms to a specific
date.
(C) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated that would
constitute an Event of Default or a Default.
(D) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making any Loan or the Issuing Lender from issuing any Letter of Credit.
SECTION 8
ASSIGNMENT AND PARTICIPATION
8.1 Assignments and Participations in Loans and Notes. Each
Lender may assign, subject to the terms of a Lender Addition Agreement, its
rights and delegate its obligations under this Agreement to another Person,
provided that, unless the assignment is to an Affiliate of the assigning Lender
or to another Lender, such Lender shall first obtain the written consent (not
to be unreasonably withheld, conditioned or delayed) of Agent, and, provided no
Default or Event of Default has occurred which is then continuing, Borrower;
(b) the Commitments (and Loans) being assigned must include all types of
Commitments and Loans and equal Pro Rata Shares of each type of Commitment and
Loans; (c) the principal amount of the Commitments and Loans being assigned
shall in no event be less than the lesser of (i) Five Million Dollars
($5,000,000) and (ii) the entire amount of such Lender's Pro Rata Shares of
such Commitments and Loans; (d) any assignee that is a foreign bank shall have
complied with Section 1.7(A) hereof; and (e) upon the consummation of each such
assignment, the assigning Lender shall pay Agent an administrative fee of Three
Thousand Five Hundred Dollars ($3,500) and any expenses reasonably incurred by
Agent (or its legal counsel) in giving effect to such assignment. The
administrative fee referred to in clause (e) of the preceding sentence shall
not apply to an assignment from a Lender to an Affiliate of such Lender. Upon
the valid effectuation of an assignment authorized under this subsection 8.1,
the assignee shall become a Lender and shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were an
initial Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Pro Rata Share of the Commitments and
Loans, or portion thereof, validly assigned.
Each Lender (including Wachovia) may also sell participations
in all or any part of its Commitments and Loans to another Person, provided
that all amounts payable by Borrower hereunder shall be determined as if that
Lender had not sold such participation and the holder of any such participation
shall not be entitled to require such Lender to take or omit to take any action
hereunder.
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Except as otherwise provided in this subsection 8.1, no
Lender shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of a participation in, all or any part of the
Loans, the Notes or other Obligations owed to such Lender. Each Lender may
furnish any information concerning Borrower and its Subsidiaries in the
possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants approved by Borrower),
subject to the provisions of Section 9.13 concerning confidentiality.
Borrower agrees that it will assist and cooperate with Agent
and any Lender in any manner reasonably requested by Agent or such Lender to
effect the sale of a participation or an assignment described above.
Agent shall provide Borrower with written notice of the name
and address of any new Lender after the date hereof.
Notwithstanding anything contained in this Agreement to the
contrary, so long as the Requisite Lenders shall remain capable of making LIBOR
Loans, no Person shall become a "Lender" hereunder unless such Person shall
also be capable of making LIBOR Loans.
8.2 Agent.
(A) Appointment. Each Lender hereby designates and appoints
Wachovia as its Agent under this Agreement and the other Loan Documents, and
each Lender hereby irrevocably authorizes Agent to take such action or to
refrain from taking such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably
incidental thereto. Agent is authorized and empowered to amend, modify, or
waive any provisions of this Agreement or the other Loan Documents on behalf of
Lenders subject to the requirement that the consent of certain Lenders be
obtained in certain instances as provided in subsections 8.3 and 9.2. Agent
agrees to act as such on the express conditions contained in this subsection
8.2 (other than subsections (G) and (H) below). The provisions of this
subsection 8.2 are solely for the benefit of Agent and Lenders and neither
Borrower nor any other Loan Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward
or relationship of agency or trust with or for Borrower or any other Loan
Party. Agent may perform any of its duties hereunder, or under the Loan
Documents, by or through its agents or employees.
(B) Nature of Duties. The duties of Agent shall be mechanical
and administrative in nature. Agent shall not have by reason of this Agreement
a fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Loan Documents, express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the financial condition
and
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affairs of Borrower in connection with the extension of credit hereunder
and shall make its own appraisal of the creditworthiness of Borrower, and 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 (other than as expressly required herein). If Agent seeks the consent
or approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender. Agent shall
promptly notify each Lender any time that the Requisite Lenders have instructed
Agent to act or refrain from acting pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents,
or in connection herewith or therewith, except that Agent shall be liable with
respect to its own gross negligence or willful misconduct. Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any Lender to whom payment was
due but not made, shall be to recover from other Lenders any payment in excess
of the amount to which they are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments
received by them). In performing its functions and duties hereunder, Agent
shall exercise the same care which it would in dealing with loans for its own
account, but Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the Loan Documents or the transactions
contemplated thereby, or for the financial condition of any Loan Party. Agent
shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any of the Loan Documents or the financial condition of any Loan Party, or the
existence or possible existence of any Default or Event of Default. Agent may
at any time request instructions from Lenders with respect to any actions or
approvals which by the terms of this Agreement or of any of the Loan Documents
Agent is permitted or required to take or to grant, and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders or all of the Lenders, as
applicable. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting under this Agreement, the Notes, or any of the other Loan Documents in
accordance with the instructions of Requisite Lenders.
(D) Reliance. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, telecopy or telegram) believed by
it in good faith to be genuine and correct and to have been signed, sent or
made by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or thereunder,
upon advice of counsel selected by it. Agent shall be entitled to rely upon the
advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.
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(E) Indemnification. Lenders will reimburse and indemnify
Agent for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, attorneys' fees and expenses), advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the Loan Documents or any action taken or omitted by Agent under this Agreement
or any of the Loan Documents, in proportion to each Lender's Pro Rata Share;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements resulting from Agent's gross
negligence or willful misconduct. If any indemnity furnished to Agent for any
purpose shall, in the opinion of Agent, be insufficient or become impaired,
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
obligations of Lenders under this subsection shall survive the payment in full
of the Obligations and the termination of this Agreement.
(F) Agent Individually. With respect to its obligations under
the Commitments, the Loans made by it, and the Notes issued to it, the Agent
shall have and may exercise the same rights and powers hereunder and is subject
to the same obligations and liabilities as and to the extent set forth herein
for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
in its individual capacity as a Lender or one of the Requisite Lenders. The
Agent may lend money to, and generally engage in any kind of banking, trust or
other business with, any Loan Party as if it were not acting as Agent pursuant
hereto.
(G) Successor Agent.
(1) Resignation. Agent may resign from the performance of all
its agency functions and duties hereunder at any time by giving at least thirty
(30) Business Days' prior written notice to Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) Appointment of Successor. Upon any such notice of
resignation pursuant to clause (1) above, the Requisite Lenders shall appoint a
successor Agent. If a successor Agent shall not have been so appointed within
thirty (30) days, the retiring Agent shall then appoint a successor Agent from
among the Lenders who shall serve as Agent until such time, if any, as
Requisite Lenders appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any appointment
as Agent under the Loan Documents by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under the Loan Documents. After any
retiring Agent's resignation as Agent under the Loan Documents, the provisions
of this subsection shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under the Loan Documents.
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(H) Collateral Matters.
(1) Release of Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent upon any property covered by the Security Documents
(i) upon termination of the Revolving Loan Commitment and payment and
satisfaction of all Obligations (other than contingent indemnification
Obligations not then due and payable); (ii) constituting property being sold or
disposed of if Borrower certifies to Agent that the sale or disposition is made
in compliance with the provisions of this Agreement, and Agent may rely in good
faith conclusively on any such certificate, without further inquiry (it being
understood that no release by Agent on any Inventory shall be necessary if such
Inventory is sold in the Ordinary Course of Business); or (iii) constituting
property leased to Borrower under a lease which has expired or been terminated
in a transaction permitted under this Agreement or is about to expire and which
has not been, and is not intended by Borrower to be, renewed or extended.
(2) Confirmation of Authority; Execution of Releases. Without
in any manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders, each Lender agrees to confirm in writing,
upon request by Agent or Borrower, the authority to release any property
covered by the Security Documents conferred upon Agent under clauses (i)
through (iii) of subsection 8.2(H)(1). Upon receipt by Agent of confirmation
from the requisite percentage of Lenders required by subsection 8.2(H)(1), if
any, of its authority to release or compromise any particular item or types of
property covered by the Security Documents, and upon at least ten (10) Business
Days prior written request by Borrower, Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to
evidence the release or compromise of the Liens granted to Agent, for the
benefit of Agent and Lenders, upon such Collateral, provided that (i) Agent
shall not be required to execute any such document on terms which, in Agent's
reasonable opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release or compromise of such Liens
without recourse or warranty, and (ii) such release or compromise shall not in
any manner discharge, affect or impair the Obligations or any Liens upon (or
obligations of any Loan Party, in respect of), all interests retained by any
Loan Party, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the property covered by the Security
Documents.
(3) Absence of Duty. Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property
covered by the Security Documents exists or is owned by Borrower or is cared
for, protected or insured or has been encumbered or that the Liens granted to
Agent have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this subsection 8.2(H)
or in any of the Loan Documents, it being understood and agreed that in respect
of the property covered by the Security Documents or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent's own interest in property covered by the Security
Documents as one of the Lenders and that Agent shall have no duty or
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liability whatsoever to any of the other Lenders, provided that Agent shall
exercise the same care which it would in dealing with loans for its own
account.
(I) Agency for Perfection. Agent and each Lender hereby
appoint each other Lender as agent for the purpose of perfecting Agent's
security interest in assets which, in accordance with Article 9 of the Uniform
Commercial Code in any applicable jurisdiction, can be perfected only by
possession. Should any Lender (other than Agent) obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor, shall deliver such Collateral to Agent or in accordance with
Agent's instructions. Each Lender agrees that it will not have any right
individually to enforce or seek to enforce any Security Document or to realize
upon any collateral security for the Loans, it being understood and agreed that
such rights and remedies may be exercised only by Agent.
(J) Dissemination of Information. Agent will use its best
efforts to provide Lenders with any information received by Agent from Borrower
or any other Loan Party which is required to be provided to a Lender hereunder,
provided that Agent shall not be liable to Lenders for any failure to do so,
except to the extent that such failure is attributable to Agent's gross
negligence or willful misconduct.
8.3 Amendments, Consents and Waivers for Certain Actions. In
the event Agent requests the consent of a Lender and does not receive a written
consent or denial thereof within ten (10) Business Days after such Lender's
receipt of such request, then such Lender will be deemed to have given such
consent.
8.4 Set Off and Sharing of Payments. In addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized by Borrower at any
time or from time to time, with concurrent or reasonably prompt subsequent
notice to Borrower (any prior notice being hereby expressly waived) to set off
and to appropriate and to apply any and all (A) balances held by such Lender at
any of its offices for the account of Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to Borrower or its
Subsidiaries), and (B) other property at any time held or owing by such Lender
to or for the credit or for the account of Borrower or any of its Subsidiaries,
against and on account of any of the Obligations; except that no Lender shall
exercise any such right without the prior written consent of Agent. Any Lender
exercising a right to set off shall, to the extent the amount of any such set
off exceeds its Pro Rata Share of the amount set off, purchase for cash (and
the other Lenders shall sell) interests in each such other Lender's Pro Rata
Share of the Obligations as would be necessary to cause such Lender to share
such excess with each other Lender in accordance with their respective Pro Rata
Shares. Borrower agrees, to the fullest extent permitted by law, that any
Lender may exercise its right to set off with respect to amounts in excess of
its Pro Rata Share of the Obligations and upon doing so shall deliver such
excess to the Agent for the benefit of all Lenders in accordance with their Pro
Rata Shares.
8.5 Disbursement of Funds. Agent shall, at all times subject
to the terms and conditions hereof, on behalf of Lenders, disburse funds to
Borrower for Loans requested. Each Lender shall reimburse Agent on demand for
all funds disbursed on its behalf by Agent, or if
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Agent so requests, each Lender will remit to Agent its Pro Rata Share of any
Loan before Agent disburses same to Borrower. If Agent elects to require that
each Lender make funds available to Agent, prior to a disbursement by Agent to
Borrower, Agent shall advise each Lender by telephone or telecopy of the amount
of such Lender's Pro Rata Share of the Loan requested by Borrower no later than
noon (Atlanta time) on the Funding Date applicable thereto, and each such
Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in
same day funds, by wire transfer to Agent's account on such Funding Date. If
any Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
demand, Agent shall promptly notify Borrower, and Borrower shall promptly, but
in any event within five (5) Business Days after receipt of such notice, repay
such amount to Agent. Any repayment required pursuant to this subsection 8.5
shall be without premium or penalty. Nothing in this subsection 8.5 or
elsewhere in this Agreement or the other Loan Documents, including without
limitation the provisions of subsection 8.6, shall be deemed to require Agent
to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that
Agent or Borrower may have against any Lender as a result of any default by
such Lender hereunder.
8.6 Disbursements of Advances; Payment.
(A) Settlement.
(1) The outstanding principal balance of each of the
Revolving Loans may fluctuate from day to day through Agent's disbursement of
funds to, and receipt of funds from, Borrower. In order to minimize the
frequency of transfers of funds between Agent and each Lender, notwithstanding
terms to the contrary set forth in Section 1 or Section 8.5, advances and
payments of Revolving Loans will be settled among Agent and Lenders according
to the procedures described in this subsection 8.6. Notwithstanding these
procedures, each Lender's obligation to fund its portion of any Revolving Loans
made by Agent to Borrower will commence on the date such Loans are made by
Agent. Such payments will be made by such Lender without set-off, counterclaim
or reduction of any kind.
(2) On the first (1st) Business Day of each week, or more
frequently (including daily), if Agent so elects (each such day being a
"Settlement Date"), Agent will advise each Lender by telephone or telecopy of
the amount of each such Lender's Pro Rata Share of each Revolving Loan balance
as of the close of business of the (2nd) second Business Day immediately
preceding the Settlement Date. In the event that payments are necessary to
adjust the amount of such Lender's required Pro Rata Share of each Loan balance
to such Lender's actual Pro Rata Share of each Revolving Loan balance as of any
Settlement Date, the party from which such payment is due will pay the other,
in same day funds, by wire transfer to the other's account not later than 1:00
p.m. (Atlanta time) on the Business Day following the Settlement Date.
(3) For purposes of this subsection 8.6(A)(3), the following
terms and conditions will have the meanings indicated:
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(1) "Daily Loan Balance" means an amount calculated as of the
end of each calendar day by subtracting (i) the cumulative principal
amount paid by Agent to a Lender on each Loan from the Closing Date
through and including such calendar day, from (ii) the cumulative
principal amount on each Loan advanced by such Lender to Agent on that
Loan from the Closing Date through and including such calendar day.
(2) "Daily Interest Rate" means an amount calculated by
dividing the per annum interest rate payable to a Lender on each
Revolving Loan by three hundred sixty (360).
(3) "Daily Interest Amount" means an amount calculated by
multiplying the Daily Loan Balance of each Revolving Loan by the
associated Daily Interest Rate on that Loan.
(4) "Interest Ratio" means a number calculated by dividing
the total amount of the interest on a Loan received by Agent with
respect to the immediately preceding month by the total amount of
interest on that Loan due from Borrower during the immediately
preceding month.
On the first (1st) Business Day of each month ("Interest Settlement Date"),
Agent will advise each Lender by telephone, telex, or telecopy of the amount of
such Lender's Pro Rata Share of interest and fees on each of the Loans as of
the end of the last day of the immediately preceding month. Provided that such
Lender has made all payments required to be made by it under this Agreement,
Agent will pay to such Lender, by wire transfer to such Lender's account (as
specified by such Lender on the signature page of this Agreement or the
applicable Lender Addition Agreement, as amended by such Lender from time to
time after the date hereof pursuant to the notice provisions contained herein
or in the applicable Lender Addition Agreement) not later than 3:00 p.m.
(Atlanta time) on the Interest Settlement Date, such Lender's Pro Rata Share of
interest and fees on each of the Loans. Such Lender's Pro Rata Share of
interest on each Loan will be calculated for that Loan by adding together the
Daily Interest Amounts for each calendar day of the prior month for that Loan
and multiplying the total thereof by the Interest Ratio for that Loan. Such
Lender's Pro Rata Share of each of the fees described in subsection 1.2(B) to
which it is entitled shall be paid and calculated in a manner consistent with
the payment and calculation of interest as described in this subsection 8.6(A).
(B) Related Fee Payments. Payments of all other interest,
fees and expenses not otherwise described in subsection 8.6(A) will be settled
on the first Business Day of each week following receipt of such payment by
Agent in accordance with the provisions of Section 1.
(C) Availability of Lender's Pro Rata Share.
(1) Unless Agent has been notified by a Lender prior to a
Funding Date of such Lender's intention not to fund its Pro Rata Share of the
Loan amount requested by Borrower, Agent may assume that such Lender will make
such amount available to Agent on the
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Business Day following the next Settlement Date. If such amount is not, in
fact, made available to Agent by such Lender when due, Agent will be entitled
to recover such amount on demand from such Lender without set-off, counterclaim
or deduction of any kind plus interest thereon, until fully paid, at the
Federal Funds Effective Date, and pending such full payment, such Lender's
voting rights hereunder shall be suspended.
(2) Nothing contained in this subsection 8.6(C) will be
deemed to relieve a Lender of its obligation to fulfill its Commitments or to
prejudice any rights Agent or Borrower may have against such Lender as a result
of any default by such Lender under this Agreement.
(D) Return of Payments.
(1) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be
received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any other
person pursuant to any solvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement, Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without set-off, counterclaim
or deduction of any kind.
(E) The determination of whether Borrower has paid any amount
due hereunder shall not be affected by the provisions of subsections (A)
through (D) of this Section 8.6.
8.7 Documentation Agent and Syndication Agent. Agent may, at
any time or from time to time, appoint one or more Lenders as "Documentation
Agent" or "Syndication Agent" hereunder, and such Lender(s) may publicize such
fact. Any such designation shall not confer upon such designee any rights,
privileges, powers, duties, immunities, indemnities or other benefits granted
to, or assumed by, Agent hereunder, but shall be honorary only.
SECTION 9
MISCELLANEOUS
9.1 Indemnities. Borrower agrees to indemnify, save, and hold
Agent, each Lender and their respective officers, directors, employees, agents,
and attorneys (the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and claims of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Indemnitee in any action, claim, suit, proceeding
or investigation (whether or not the Indemnitee is a party thereto) as a result
of its being a party to this Agreement or any other Loan Document, or its
exercise of any rights or remedies
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hereunder, thereunder or under applicable law, including, without limitation,
by reason of any defense, setoff, claim, counterclaim, recoupment or reduction
of liability asserted by any Person obligated to Borrower or any Affiliate
Guarantor (or to whom Borrower or any Affiliate Guarantor is otherwise
obligated) in respect of any Collateral; provided that Borrower shall have no
obligation to an Indemnitee hereunder with respect to liabilities arising from
either (i) the gross negligence or willful misconduct of that Indemnitee or
(ii) the breach by any Indemnitee of any term of this Agreement or any Loan
Document binding on it. This subsection and other indemnification provisions
contained within the Loan Documents shall survive the termination of this
Agreement.
9.2 Amendments and Waivers. Except as otherwise provided
herein, no amendment, modification, termination or waiver of any provision of
this Agreement, the Notes or any of the other Loan Documents, or consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Requisite Lenders (or Agent, if
expressly set forth herein, in any Note or in any other Loan Document) and the
applicable Loan Party; provided, that except to the extent permitted by the
applicable Lender Addition Agreement, no amendment, modification, termination
or waiver shall, unless in writing and signed by all Lenders, do any of the
following: (a) increase any Lender's Commitment; (b) reduce the principal of,
rate of interest on or fees payable with respect to any Loan; (c) extend the
Expiry Date, or change any date fixed for any payment of principal, interest or
fees; (d) change the aggregate unpaid principal amount of the Loans; (e) change
the percentage of Lenders which shall be required for Lenders or any of them to
take any action hereunder; (f) release Collateral (except if the sale or
disposition of such Collateral is permitted under subsection 8.2 or any other
Loan Document); (g) amend or waive this Section 9.2 or any of the definitions
of the terms used in this Section 9.2 insofar as the definitions affect the
substance of this Section 9.2; (h) change the requirement that all Lenders must
consent to any proposed Acquisition before it can be an Approved Acquisition;
or (i) change the form or manner in which interest is required to be paid; and
provided, further, that no amendment, modification, termination or waiver
affecting the rights or duties of Agent under any Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to
Lenders required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
for the ratable benefit of the Lenders pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on Borrower or any other Loan Party in any case shall
entitle Borrower or any other Loan Party to any other or further notice or
demand in similar or other circumstances unless and except to the extent (if
any) such notice or demand otherwise is required pursuant hereto or pursuant to
any other Loan Document. Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 9.2 shall be binding upon each
holder of the Notes at the time outstanding, each future holder of the Notes,
and, if signed by a Loan Party, on such Loan Party.
9.3 Notices. Any notice or other communication required shall
be in writing addressed to the respective party as set forth below and may be
delivered by hand, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been received: (a) if
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delivered by hand, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 5:00 p.m. (Atlanta time);
(c) if delivered by overnight courier, two (2) Business Days after delivery to
the courier properly addressed; or (d) if delivered by U.S. mail, seven (7)
Business Days after deposit with postage prepaid and properly addressed.
Notices shall be addressed as follows:
<TABLE>
<S> <C>
If to Borrower Clear Communications Group, Inc.
or any Affiliate 440 Interstate North Parkway
Guarantor: Atlanta, Georgia 30339
ATTN: Chief Financial Officer
Telecopy: (770) 763-5635
With a copy to: Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
ATTN: L. Brett Lockwood, Esq.
Telecopy: (404) 815-3509
If to Agent or
Wachovia: Wachovia Bank, N.A.
191 Peachtree Street
Atlanta, Georgia 30303
ATTN: Laurie Galliano, V.P. (MC212)
Telecopy: (404) 332-6920
With a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
ATTN: Gerald T. Woods, Esq.
Telecopy: (404) 572-5149
If to any Other Lender: To the address set forth beneath such Lender's name
on the signature page hereto, or in the applicable
Lender Addition Agreement
</TABLE>
9.4 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of Agent or any Lender to exercise, nor any
partial exercise of, any power, right or privilege hereunder or under any other
Loan Documents shall impair such power, right, or privilege or be construed to
be a waiver of any Default or Event of Default. All rights and remedies
existing hereunder or under any other Loan Document are cumulative to and not
exclusive of any rights or remedies otherwise available.
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9.5 Marshalling; Payments Set Aside. Neither Agent nor any
Lender shall be under any obligation to marshall any assets in payment of any
or all of the Obligations. To the extent that Borrower makes payment(s) or
Agent enforces its Liens or Agent or any Lender exercises its right of set-off,
and such payment(s) or the proceeds of such enforcement or set-off are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
or required to be repaid by anyone, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or set-off had
not occurred.
9.6 Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under the Loan Documents
shall not affect or impair the remaining provisions in the Loan Documents.
9.7 Lenders' Obligations Several; Independent Nature of
Lenders' Rights. The obligation of each Lender hereunder is several and not
joint and no Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. In the event that any Lender at any time should
fail to make a Loan as herein provided, the Lenders, or any of them, at their
sole option, may make the Loan that was to have been made by the Lender so
failing to make such Loan. Nothing contained in any Loan Document and no action
taken by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt.
9.8 Headings. Section and subsection headings are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purposes or be given substantive effect.
9.9 Applicable Law. THIS AGREEMENT AND, UNLESS EXPRESSLY
PROVIDED THEREIN, THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
GEORGIA.
9.10 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Borrower may not assign its rights or
obligations hereunder without the written consent of all Lenders.
9.11 No Fiduciary Relationship. No provision in the Loan
Documents and no course of dealing between the parties shall be deemed to
create any fiduciary duty owing to Borrower by Agent or any Lender.
9.12 Construction. Agent, each Lender and Borrower
acknowledge that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review the Loan Documents with
its legal counsel and that the Loan Documents shall be construed as if jointly
drafted by Agent, each Lender and Borrower.
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9.13 Confidentiality. Each party hereto agrees to exercise
its best efforts to keep any non-public information contained in or delivered
pursuant to the Loan Documents confidential from Persons other than those
employed by or engaged by such party and, in the case of Lenders, and those
employed by or engaged by each such Lender's assignees or participants, or
potential assignees or participants who, in each instance, need to know such
information to evaluate or administer the Loan Documents. This subsection shall
not apply to disclosures required to be made by any party to any regulatory or
governmental agency or pursuant to legal process.
9.14 Consent to Jurisdiction and Service of Process.
(1) EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT SITTING
IN ATLANTA, GEORGIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENTS AND EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM.
(2) EACH PARTY HERETO DESIGNATES AND APPOINTS CSC THE UNITED
STATES CORPORATION COMPANY AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED
BY SUCH PARTY WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH PARTY TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO EACH PARTY AT ITS ADDRESS PROVIDED
IN SUBSECTION 9.3 EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, SUCH PARTY HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.
9.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES
ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
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INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN ITS RELATED
FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR THE LENDER LETTERS OF CREDIT
OR RISK PARTICIPATION AGREEMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. EACH PARTY HERETO
ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF ANY OTHER PARTY HERETO.
9.16 Survival of Warranties and Certain Agreements. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the making of the Loans and the
execution and delivery of the Notes. Notwithstanding anything in this Agreement
or implied by law to the contrary, the agreements of Borrower set forth in
Sections 1.2(J), 1.7, 9.1 and 9.20 shall survive the payment of the Loans and
the termination of this Agreement.
9.17 Entire Agreement. This Agreement, the Notes and the
other Loan Documents referred to herein embody the final, entire agreement
among the parties hereto and supersede any and all prior commitments,
agreements, representations, understandings, whether oral or written, relating
to the subject matter hereof and may not be contradicted or varied by evidence
of prior, contemporaneous or subsequent oral agreements or discussions of the
parties hereto.
9.18 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one and the same instrument.
This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto.
9.19 Press Release; Public Offering Materials. Borrower will
not and will not permit any of its Subsidiaries to disclose the name of Agent
or any Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public
offering of the capital stock of any Loan Party, except as required by
applicable law or with such Person's consent.
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9.20 Expenses and Attorneys Fees. Borrower shall promptly pay
all reasonable fees, costs and expenses (including reasonable attorneys' fees
and disbursements) incurred by Agent in connection with any matters
contemplated by or arising out of the Loan Documents, in connection with the
examination, review, due diligence investigation, documentation, negotiation
and closing of the transactions contemplated herein and in connection with the
continued administration of the Loan Documents (including any amendments,
modifications and waivers). The foregoing shall include, but not be limited to,
audit and appraisal costs, costs of lien searches, filings and filing fees and
taxes, and costs, fees or expenses (including wire charges) which Agent incurs
to any bank in connection with the forwarding of any proceeds of Loans, the
receipt or depositing for collection of any item of payment, and the
administration of any Dominion Account, as hereinafter defined in Section 10.1.
The foregoing shall not include, however, costs, fees or expenses associated
with assignments made under Section 8.1, unless such assignment was initiated
by Borrower pursuant to Section 1.8. Borrower further agrees to promptly pay
all reasonable fees, costs and expenses incurred by Agent and Lenders in
connection with any action to enforce any Loan Document, to collect any
payments due from Borrower or any other Loan Party or to enforce any rights in
Collateral, including, without limitation, any costs, fees or expenses incurred
by Agent in protecting, preserving, assembling, refurbishing, repossessing,
preparing for sale and selling any Collateral. All fees, costs and expenses for
which Borrower is responsible under this subsection shall be deemed part of the
Obligations when incurred, payable in accordance with the terms of Section 1.4
and secured by the Collateral.
SECTION 10
DEFINITIONS
10.1 Certain Defined Terms. The terms defined below are used
in this Agreement as so defined. Terms defined in the preamble and recitals to
this Agreement are used in this Agreement as so defined. Capitalized terms used
in this Agreement, but not defined herein, shall have the meanings given to
such terms in the Security Agreement.
"Accounts" has the meaning given to such term in the Security
Agreement.
"Acquisition" means the acquisition by a Person (by purchase,
exchange, merger, consolidation or otherwise) of (i) all, or
substantially all, Equity Interests of another Person, or (ii) all, or
substantially all, of the operating assets or property of another
Person, or assets or property which constitute all, or substantially
all, of the assets of a division or a separate (or separable) line of
business of another Person.
"Acquisition Loan Commitments" has the meaning given to such
term in Section 1.1(C).
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"Acquisition Loan Balance" has the meaning given to such term
in Section 1.1(C).
"Acquisition Loan Expiry Date" means the earlier of (i)
November 1, 2001 or (ii) that date on which the Acquisition Loan
Commitments are fully disbursed.
"Acquisition Target" has the meaning set forth in the
definition of "Approved Acquisition."
"ACS" means American Capital Strategies, Ltd.
"ACS Agreements" means the Note and Equity Purchase
Agreement, dated on or about the Closing Date, between the Loan
Parties and ACS, pertaining to the ACS Investment and all documents,
instruments, certificates and agreement executed and delivered between
such parties in connection therewith.
"ACS Subordination Agreement" means the Subordination and
Intercreditor Agreement, dated on or about the Closing Date, between
ACS and Agent, pertaining to the subordination of the ACS Investment
and security therefor, as it may be amended or modified hereafter. The
ACS Intercreditor Agreement shall be substantially in the form of
EXHIBIT D annexed hereto.
"ACS Investment" means not less than Seventeen Million Five
Hundred Thousand Dollars ($17,500,000) in Subordinated Indebtedness of
Borrower purchased, at par, to the extent of Thirteen Million Dollars
($13,000,000), by ACS on the Closing Date, and being made available to
ACS by Borrower for purchase, at par, at any time within one (1) year
after the Closing Date, to the extent of the remainder, in accordance
with the terms of the ACS Agreements. The term "ACS Investment" shall
also include, without limitation, any promissory note issued pursuant
to the ACS Agreements to evidence the Loan Parties' Indebtedness
arising in payment of any purchase price upon the exercise of any put
option by the holder of any warrants issued by Parent pursuant to the
ACS Agreements in consideration of the cash investment by ACS
referenced hereinabove.
"Additional Mortgage" has the meaning ascribed to such term
in Section 2.8.
"Additional Mortgage Policies" has the meaning ascribed to
such term in Section 2.8.
"Additional Mortgaged Property" has the meaning ascribed to
such term in Section 2.8.
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"Adjusted Net Earnings," with respect to any fiscal period of
any Person, means the net earnings (or loss) for such fiscal period of
such Person, and its Consolidated Subsidiaries, all as reflected on
the financial statements of such Person and its Consolidated
Subsidiaries supplied to Agent pursuant to subsection 4.1 or in
furtherance of making any Approved Acquisition, but excluding: (i) any
gain or loss arising from the sale of capital assets; (ii) any
non-cash gain or loss arising from any write-up or write-down of
assets during such period; (iii) earnings of any Subsidiary of each
Person accrued prior to the date it became a Subsidiary; (iv) earnings
of any Person, substantially all the assets of which have been
acquired in any manner by such Person or any Consolidated Subsidiary,
realized by such Person prior to the date of such acquisition; (v) net
earnings of any entity (other than a Subsidiary of such Person) in
which such Person has an ownership interest unless such net earnings
have actually been received by such Person or any Consolidated
Subsidiary in the form of cash Restricted Junior Payments; (vi) any
portion of the net earnings of any Subsidiary of such Person which for
any reason is unavailable for payment of Restricted Junior Payments to
such Person; (vii) the earnings of any Person to which any assets of
such Person or any Consolidated Subsidiary shall have been sold,
transferred or disposed of, or into which such Person shall have
merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; (viii) any gain
arising from the acquisition of any Equity Interests in such Person or
any Consolidated Subsidiary; and (ix) any gain or loss arising from
extraordinary or non-recurring items; all as determined on a
Consolidated basis in accordance with GAAP.
"Affiliate" means any Person: (a) directly or indirectly
controlling, controlled by, or under common control with, Borrower;
(b) directly or indirectly owning or holding ten percent (10%) or more
of any Equity Interest in Borrower; or (c) ten percent (10%) or more
of whose Equity Interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and
"under common control with") means the possession directly or
indirectly of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Equity Interests, by contract or otherwise. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of
his or her being a director, officer or employee of any Loan Party and
(b) none of the Loan Parties shall themselves be deemed to be
Affiliates.
"Affiliate Subordination Agreement" means the Affiliate
Subordination Agreement dated as of the Closing Date, among Agent, the
Loan Parties, Stephen F. Johnston, Sr., Clear Investors and DFW, as
such agreement may thereafter be amended, supplemented or otherwise
modified from time to time. The Affiliate Subordination Agreement
shall be substantially in the form of EXHIBIT E annexed hereto.
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"Affiliate Guarantors" has the meaning set forth in the
preamble to this Agreement.
"Agent" means Wachovia in its capacity as agent for the
Lenders under this Agreement and each of the other Loan Documents and
any successor in such capacity appointed pursuant to subsection 8.2.
"Agreement" means this Credit Agreement (including all
schedules and exhibits hereto).
"Annualization Period" means the period from the Initial Test
Month through the fiscal month of Borrower ending March 31, 2000.
"Annualized" means, in respect of any revenue, income,
expenditure or expense item used in the financial covenants set forth
in Section 4.2, a method of calculation whereby, during the
Annualization Period, such item is computed by adding together the
month-to-month components of such item, beginning with the fiscal
month of Borrower ending April 30, 1999 and ending with the fiscal
month then most recently completed, dividing the sum resulting by the
number of fiscal months completed since April 1, 1999 (inclusive of
the fiscal month of Borrower then most recently completed), and
multiplying the quotient resulting by the number twelve (12);
provided, however, that, in the case of Interest Expense in relation
to the ACS Investment, "Annualized" shall mean, instead, the amount
thereof determined from month-to-month, beginning with the Initial
Test Month and ending with the fiscal month then most recently
completed, dividing the sum resulting by the number of fiscal months
completed since the Initial Test Month (inclusive of the fiscal month
then most recently completed), and multiplying the quotient resulting
by the number twelve (12).
"Applicable Margin" means: (i) for the period from the
Closing Date through, but not including, the fiscal month ending March
31, 2000 (the "Adjustment Start Date") the per annum rates set forth
at Level IV in the rate table set forth below; and (ii) beginning with
the Adjustment Start Date, the "Applicable Margin" shall be subject to
adjustment (up or down), based upon the then effective Total Debt
Coverage, in accordance with the rate table set forth below:
<TABLE>
<CAPTION>
Applicable
Applicable Margin Applicable Margin Applicable Margin Margin for
If Total Debt for Revolving Loans for Term Loan shall for Acquisition Unused Loan
Level Coverage is: shall be: be: Loans shall be: Fees shall be:
- --------------------------------------------------------------------------------------------------------------------
Base Base Base
LIBOR Rate LIBOR Rate LIBOR Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
I
2.75% 1.25% 2.75% 1.25% 2.75% 1.25% .375%
<2.00:1
II
<2.50:1, >2.00:1 3.00% 1.50% 3.00% 1.50% 3.00% 1.50% .375%
-
</TABLE>
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<TABLE>
<CAPTION>
Applicable
Applicable Margin Applicable Margin Applicable Margin Margin for
If Total Debt for Revolving Loans for Term Loan shall for Acquisition Unused Loan
Level Coverage is: shall be: be: Loans shall be: Fees shall be:
-------------------------------------------------------------------------------------------------------------------
Base Base Base
LIBOR Rate LIBOR Rate LIBOR Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
III
<3.00:1,>2.50:1 3.25% 1.75% 3.25% 1.75% 3.25% 1.75% .50%
-
IV
<3.50:1,>3.00:1 3.50% 2.00% 3.50% 2.00% 3.50% 2.00% .50%
-
V
>3.50:1 3.75% 2.25% 3.75% 2.25% 3.75% 2.25% .50%
-
</TABLE>
That is to say, the Applicable Margin shall be subject to reduction or
increase, as applicable and as set forth in the table above, on a
quarterly basis according to the performance of Borrower as measured
by the Total Debt Coverage for the Test Period ending March 31, 2000;
i.e., the first such determination (and any resulting increase or
reduction) shall be made from Borrower's financial statements as of
and for the fiscal year of Borrower ending December 31, 1999. Any such
increase or reduction in the Applicable Margin provided for herein
shall be effective on the first day of the next month following
receipt by Agent of the applicable financial statements and
corresponding Compliance Certificate. If the financial statements and
the Compliance Certificate of Borrower setting forth Total Debt
Coverage are not received by Agent by the date required pursuant to
Section 4.1 of this Agreement, the Applicable Margin shall be
determined at Level V of the rate table set forth above, commencing on
the date when any cure period in respect of Borrower's failure to
deliver such financial statements and Compliance Certificate shall
have expired and continuing until such time as such financial
statements and Compliance Certificate are received and any Event of
Default resulting from a failure timely to deliver such financial
statements or Compliance Certificate has been waived in writing by the
Requisite Lenders.
"Approved Acquisition" shall mean any Acquisition made
subsequent to the Closing Date which meets each of the following
conditions, to the sole satisfaction of all Lenders: (i) each Lender
shall have received at least thirty (30) days prior to the intended
date of consummation of the Acquisition a report (the "Acquisition
Report") in substantially the form of EXHIBIT G, (ii) at or prior to
the closing of the Acquisition, the Acquisition shall have been
approved by the board of directors or other comparable governing body
of the Acquisition Target (as hereinafter defined); (iii) the Person,
operating assets or line of business acquired (herein, the
"Acquisition Target") shall be in a Permitted Business; (iv) no Event
of Default or Default shall exist at the time of such Acquisition or
would result from, or be caused by, its consummation; (v) any change
in the organizational structure of Borrower and its Subsidiaries
resulting from the Acquisition; e.g., any merger or consolidation,
shall be made in accordance with the terms of Section 3.6; (vi) prior
to or upon consummation of each such Acquisition, Agent shall have
received (A) copies of all material documents, instruments,
certificates and
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agreements executed by, between or among Borrower or any of its
Subsidiaries and the Acquisition Target (or the Person or Persons
selling the Acquisition Target) evidencing, governing or relating to
such Acquisition; and (B) such documents and instruments as Agent
shall determine may be necessary or advisable to grant or confirm to
Agent a Lien on or security interest in the Equity Interests,
operating assets or line of business so acquired subject to no other
Liens, except Permitted Encumbrances, and (C) if the Acquisition
Target is acquired by, and not merged into, Borrower or any existing
Affiliate Guarantor, a Pledge Agreement in respect of such Person's
Equity Interests in accordance with Section 2.6 and a joinder
agreement in respect of such Person as an Affiliate Guarantor
hereunder in accordance with Section 3.13; (vii) at the time of the
closing of such Acquisition, Borrower must demonstrate to the sole
satisfaction of the Lenders its compliance with all financial
covenants set forth in Section 4.2 hereof, on a pro forma basis,
giving effect to such Acquisition as of the end of the then most
recently concluded fiscal quarter of Borrower for which financial
reports are then available, on an historical basis, for the respective
twelve (12) fiscal months period then ended, as reflected on restated
financial statements (including income statements, balance sheets and
cash flow summaries) for such fiscal period for Borrower, its
Consolidated Subsidiaries and the Acquisition Target on a Consolidated
basis (except that during the Annualization Period, such financial
statements shall be, as appropriate, Annualized); (viii) at the time
of closing of such Acquisition, Borrower must also demonstrate to the
sole satisfaction of the Lenders that, on a pro forma basis, over the
twelve (12) fiscal months ending as of the most recently concluded
fiscal month of the Acquisition Target prior to the Acquisition for
which financial statements are available (the "test ending fiscal
month"), the Acquisition Target, on a stand alone basis, had a
positive EBITDA; (ix) to the extent that payment of any portion of the
cost of any Acquisition is deferred, all purchase money Indebtedness
arising therefrom must be Subordinated Indebtedness; (x) if any
Acquisition Loan is to be used to finance, in whole or in part, such
Acquisition, the total amount thereof shall not exceed one hundred
percent (100%) of the purchase price of such Acquisition (including
all expenses associated therewith); (xi) the Acquisition Target must
be domiciled in, and have a majority of its business operations in,
the continental United States; (xii) the Acquisition Target must be
Y2K Compliant at time of Acquisition or, for any Acquisition occurring
before November 30, 1999, must be capable of being Y2K Compliant by
November 30, 1999; (xiii) the Acquisition shall be closed
substantially in accordance with the terms thereof, as reflected in
the Acquisition Report, unless otherwise approved by the Lenders; and
(xiv) on the date of closing of such Acquisition, Agent shall have
received from an Executive Officer, a certificate, in substantially
the form of EXHIBIT H, confirming to Agent compliance with all the
foregoing conditions (including, where appropriate, calculations of
covenant compliance).
"Arranger" means Wachovia Securities, Inc., its successor and
assigns.
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"Asset Disposition" means the disposition, whether by sale,
lease, transfer, loss, damage, destruction, condemnation or otherwise,
of any of the following: (a) any of the stock of any of Borrower's
Subsidiaries or (b) any or all of the assets of Borrower or any of its
Subsidiaries, other than dispositions permitted by subsection 3.7(a).
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect
and all rules and regulations promulgated thereunder.
"Base Rate Loans" has the meaning set forth in Section
1.2(A)(1).
"Borrower" has the meaning ascribed to that term in the
preamble of this Agreement.
"Business Day" means (a) for all purposes other than as
covered by clause (b) below, any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of
Georgia, or is a day on which banking institutions located in such
state are closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with LIBOR Loans, any day that is
a Business Day described in clause (a) above and that is also a day
for trading by and between banks in Dollar deposits in the applicable
interbank LIBOR market.
"Capital Lease" means any lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalization/Acquisition Documents" means, collectively,
the Junior Capital Infusion Documents and the Current Acquisitions
Documents.
"CDS" has the meaning ascribed to such term in the preamble
to this Agreement.
"Clear Investors" means Clear Investors, LLC, a Georgia
limited liability company.
"Closing Date" means the date first inscribed hereinabove on
the cover page to this Agreement.
"Closing Date Mortgage" has the meaning ascribed to such term
in Section 7.1.
"Closing Date Mortgage Policies" has the meaning ascribed to
such term in Section 7.1.
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"Closing Date Mortgaged Property" has the meaning ascribed to
such term in Section 7.1.
"Collateral" means, collectively: (a) all of the real,
personal and mixed property (including capital stock) in which Liens
are purported to be granted pursuant to the Security Documents as
security for all obligations of the Loan Parties hereunder and (b) any
property or interest provided in addition to or in substitution for
any of the foregoing.
"Collateral Location" means: (i) the principal place of
business and chief executive office of Parent, Borrower and each
Affiliate Guarantor; and (ii) each other location on which, from time
to time, any of the Collateral (including books and records respecting
intangible assets constituting Collateral) is or may be located.
Without limitation of the foregoing, the term "Collateral Location"
shall include public warehouses where Collateral may be warehoused
from time to time.
"Commitments" means, for each Lender or all Lenders, as the
case may be, its or their respective Term Loan Commitments, Revolving
Loan Commitments and/or Acquisition Loan Commitments. The term
"Commitments" shall also include, as to the Issuing Lender, its LC
Commitment.
"Communications Act" means the Communications Act of 1934, as
amended (including the Telecommunications Act of 1996), and the rules
and regulations issued thereunder, as from time to time in effect.
"Conforming Leasehold Interest" means any Recorded Leasehold
Interest as to which the lessor has agreed in writing for the benefit
of Agent (which writing has been delivered to Agent), whether under
terms of the applicable lease, under the terms of landlord's
agreement, or otherwise, to the matters described in the definition of
"Landlord's Agreement," which interest, if a subleasehold interest or
sub-subleasehold interest, is not subject to any contrary restrictions
contained in a superior lease or sublease.
"Consolidated," for financial, accounting and reporting
purposes, means the consolidated financial status, performance or
condition of Borrower and its Subsidiaries, determined in accordance
with GAAP.
"CPM" has the meaning ascribed to such term in the initial
recitals to this Agreement.
"CTI" has the meaning ascribed to such term in the preamble
to this Agreement.
"Current Acquisitions" means, collectively, the Acquisition
by Borrower of all Equity Interests in, and/or the business and assets
of, each of TWR, TLI,
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RTC, MTG and SDI pursuant to the Current Acquisitions Documents on the
Closing Date.
"Current Acquisitions Closing Costs" means, collectively, the
total cash consideration payable by Borrower to consummate the Current
Acquisitions plus all closing costs related thereto.
"Current Acquisitions Documents" means, collectively, (i) the
Stock Purchase Agreement, dated on or about the Closing Date, by and
among Borrower, TWR and SDI (among others) pertaining to the
Acquisition by Borrower of TWR, TLI, RTC and SDI; and (ii) the Asset
Purchase Agreement, dated on or about the Closing Date, by and between
CPM (as assignee of Borrower) and MTG (among others) pertaining to the
Acquisition by CPM of the assets of MTG; together with all schedules
and exhibits thereto, and all documents, instruments, certificates or
agreements executed or exchanged in connection therewith, including
any documents, instructions or agreements pertaining to any Seller
Debts.
"Default" means a condition or event that, after notice or
lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable
grace or cure period.
"DFW" means DFW Capital Partners, L.P., a Delaware limited
partnership affiliated with DeMuth, Folger & Wetherill.
"Dominion Account" has the meaning given to such term in the
Security Agreement.
"EBITDA," with respect to any Person, for any fiscal period
of such Person, means Adjusted Net Earnings of such Person for such
period, plus, to the extent deducted in computing such Adjusted Net
Earnings, (a) Interest Expense, (b) any provision for income taxes,
(c) depreciation expense, and (d) amortization expense; all determined
on a Consolidated basis for such Person and its Consolidated
Subsidiaries in accordance with GAAP; provided, however, that, in
computing EBITDA of Borrower, (i) for the purpose of determining
whether any proposed Acquisition will be an Approved Acquisition, and
(ii) for the twelve (12) fiscal months of Borrower ending subsequent
to each Approved Acquisition, EBITDA shall be based, in part, on the
historical EBITDA of the Acquisition Target prior to its Acquisition
(for the applicable number of fiscal months), after giving effect,
however, to such pro forma adjustments therein for any owner
compensation at the Acquisition Target, net savings related to any
duplicate customer service related positions, facilities closures and
other immediately realizable adjustments, all as proposed by Borrower,
and reviewed and approved by all Lenders (it being understood that, in
each Acquisition, the Lenders must underwrite the proposed amounts and
permanency of all such adjustments) prior to their being permitted
hereunder.
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"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or
binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, the management,
release or threatened release of any Hazardous Material or to health
and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Loan Party
directly or indirectly resulting from or based upon (a) violation of
any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or
(e) any contract, agreement or other consensual arrangement pursuant
to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means the interest of a shareholder in a
corporation, a partner (whether general or limited) in a partnership
(whether general, limited or limited liability), a member in a limited
liability company, or any other Person having any other form of equity
security.
"Escrowed Seller Debt" has the meaning given to such term in
Section 7.1(Z).
"Excess Borrowing Availability" means the amount (if any) by
which, on any date of determination, (A) the Maximum Revolving Loan
Balance exceeds (B) the higher of (1) the sum of all Revolving Loans
and LC Exposure outstanding on the determination date, or (2) the
daily average amount of outstanding Revolving Loans and LC Exposure
over the consecutive thirty (30) days period preceding the
determination date (or, if less, the number of days following the
Closing Date; or, as applicable, for any determination made on the
Closing Date, the Closing Date itself).
"Excess Revolving Loans" has the meaning set forth in Section
1.1(A).
"Effective Officer" means any of the following officers of
the Borrowers regardless of title; its chief executive officer, its
chief operating officer and its chief financial officer.
"Existing Credit Agreement" means the Credit Agreement, dated
as of May 19, 1998, made by and between the Borrower and Fleet
National Bank, individually and as administrative agent, among others,
as modified or amended through the Closing Date.
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"Expiry Date" means that date which constitutes the fifth
(5th) anniversary of the Closing Date; namely, November 1, 2004.
"Facilities" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now or
hereafter or heretofore owned, leased, operated or used by any Loan
Party or any of their respective predecessors.
"FAA" means The Federal Aviation Administration or any
governmental authority succeeding to any of its functions.
"FCC" means The Federal Communications Commission or any
governmental authority succeeding to any of its functions.
"FCC Licenses" means any telephone, microwave, personal
communications, paging or other license, authorization, certificate of
compliance, franchise, approval or permit, granted or issued by the
FCC and held by any of the Loan Parties which enables such Loan Party
to engage in its business.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of
1%) 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
that is a Business Day, the average (rounded upwards, if necessary,
tot he next 1/100 of 1%) of the quotations for such day for such
transactions received by Agent from three (3) federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain fee letter, dated on or prior
to the Closing Date, among Arranger, Wachovia and Borrower, respecting
certain fees to be paid by Borrower to Agent and Arranger in
conjunction with the transactions contemplated hereby.
"Flood Hazard Property" means a Mortgaged Property located in
an area designated by the Federal Emergency Management Agency (FEMA)
as having special flood or mud slide hazards.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is
located. For purposes of this definition, the United States of
America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.
"Franchise" means any franchise, right of way, permit,
license or other authorization granted by any Governmental Authority,
including all laws, regulations and ordinance relating thereto, for
the construction, operation and maintenance of a telecommunications
system, or for the provision of purchase of
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telecommunications services, and shall include all FCC Licenses and
certificates of compliance or other documents which are required to be
issued by or filed with the FCC.
"Funded Debt" means, collectively, all interest-bearing
(including imputed interest) Indebtedness, including, without
limitation, all Loans, all purchase money Indebtedness, all capital
lease obligations, all Seller Debts, the ACS Investment and any
Subordinated Indebtedness. For purposes hereof, the term "Funded Debt"
shall also include, but without limitation, all LC Exposure.
"Funding Date" has the meaning set forth in Section 7.2.
"GAAP" means generally accepted accounting principles as set
forth in statements from Auditing Standards No. 69 entitled "The
Meaning of `Present Fairly in Conformance with Generally Accepted
Accounting Principles in the Independent Auditors Reports'" issued by
the Auditing Standards Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board that are applicable to the circumstances as
of the date of determination.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision
thereof, whether state or local, and any agency, authority,
commission, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to
government. Without limiting the foregoing, "Governmental Authority"
shall include the FCC and the FAA.
"Guaranteed Obligations" has the meaning set forth in Section
1.9.
"Hazardous Materials means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or
other pollutants, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls,
radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"Indebtedness", as applied to any Person, means: (a) all
indebtedness for borrowed money; (b) that portion of obligations with
respect to Capital Leases that is properly classified as a liability
on a balance sheet in conformity with GAAP; (c) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation owed
for all or any part of the deferred purchase price of property or
services if the purchase price is due more than six (6) months from
the date the obligation is incurred or is evidenced by a note or
similar written instrument (other than trade accounts payable arising
in the Ordinary Course of Business); provided, that the amount of any
such obligation based on the revenues or profits of an acquired
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business or entity shall equal only the amount that has become fixed
or determinable pursuant to the terms of such obligation; (e) payments
owing in connection with existing or future Acquisitions under
noncompete agreements, earn-out guaranties and similar arrangements;
and (f) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"Initial Test Month" means the fiscal month of Borrower
ending October 31, 1999.
"Interest Expense" means, for any period, the sum, for the
Loan Parties (determined on a consolidated basis without duplication
in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period
(whether or not actually paid during such period) plus (b) the net
amounts payable (or minus the net amounts receivable) under Interest
Rate Protection Products accrued during such period (whether or not
actually paid or received during such period) including fees, but
excluding reimbursement of legal fees and other similar transaction
costs and excluding payments required by reason of the early
termination of Interest Rate Protection Products in effect on the date
hereof plus (c) all fees, including letter of credit fees and
expenses, incurred hereunder during such period.
"Interest Rate Protection Products" means any interest rate
cap agreements, interest rate swap agreements, interest rate collar
agreements, interest rate insurance and other agreements or
arrangements designed to provide protection against fluctuations in
interest rates.
"IRC" means the Internal Revenue Code of 1986, as amended
from time to time and all rules and regulations promulgated
thereunder.
"ISD" has the meaning ascribed to such term in the preamble
to this Agreement."
"Issuing Lender" means Wachovia, in its capacity as issuer of
Letters of Credit.
"Junior Capital Infusion" means the infusion of not less than
Twenty-Five Million Dollars ($25,000,000) in cash capital into
Borrower, effective on the Closing Date, pursuant to the Junior
Capital Infusion Documents (of which a portion, equal to not more than
Four Million Five Hundred Thousand Dollars ($4,500,000) may be
committed, but not disbursed).
"Junior Capital Infusion Documents" means, collectively, (i)
the Stratford Agreements and (ii) the ACS Agreements.
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"Landlord's Agreement" means an agreement between a lessor
(and any sublessor) of a Collateral Location (which for purposes
hereof, shall include the owner/operator of any public warehouse which
is a Collateral Location) and Agent in the form of EXHIBIT I, with
such variations as Agent and Borrower may mutually agree from time to
time.
"LC Commitment" means the commitment of the Issuing Lender to
issue Letters of Credit for the account of the Borrower, as the amount
of such commitment may be increased or reduced from time to time by
the written agreement of the Borrower, the Issuing Lender, the
Requisite Lenders and Agent. The initial amount of the LC Commitment
shall be Two Million Dollars ($2,000,000).
"LC Disbursement" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such
time plus (b) the aggregate amount of all LC Disbursements that have
not yet been reimbursed by or on behalf of the Borrower at such time.
The LC Exposure of any Lender at any time shall be its Pro Rata Share
of the total LC Exposure at such time.
"Leasehold Property" means any leasehold interest of any Loan
Party as lessee under any lease of real property, other than any such
leasehold interest designated from time to time by Agent in its sole
discretion as not being required to be included in the Collateral.
"Lender" or "Lenders" means Wachovia and First Union National
Bank, initially, together with and including each of their respective
successors and permitted assigns pursuant to subsection 8.1. The term
"Lender" shall include the Issuing Lender, unless otherwise expressly
provided.
"Lender Addition Agreement" means an agreement, to be
substantially in the form of EXHIBIT J, among Agent, a Lender and such
Lender's assignee regarding their respective rights and obligations
with respect to assignments of the Loans, the Commitments and other
interests under this Agreement and the other Loan Documents.
"Lending Office" means, for Wachovia, the address set forth
in Section 9.3, and for each other Lender, the address set forth for
such Lender on the signature page to this Agreement or in the
applicable Lender Addition Agreement.
"Letter of Credit" means a commercial or standby letter of
credit issued to a third party beneficiary for the account of any Loan
Party in the Ordinary Course of Business of such Loan Party.
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"LIBOR" has the meaning set forth in Section 1.2(A).
"LIBOR Breakage Fee" has the meaning set forth in Section
1.2(J).
"LIBOR Loans" has the meaning set forth in Section 1.2(A)(2).
"Lien" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind, whether voluntary or involuntary
(including any conditional sale or other title retention agreement and
any lease in the nature thereof), and any agreement to give any lien,
mortgage, pledge, security interest, charge or encumbrance.
"Loans" means the Term Loan, the Revolving Loans and the
Acquisition Loans, or any of them, as the case may be.
"Loan Documents" means this Agreement, the Notes, the
Security Documents and all other instruments, documents and agreements
executed by or on behalf of any Loan Party and delivered concurrently
herewith or at any time hereafter to or for the benefit of Agent or
any Lender (or, in the case of Interest Rate Products, an Affiliate of
a Lender) in connection with the Loans, any Letters of Credit, any
Interest Rate Products and any other transactions contemplated by this
Agreement, all as amended, supplemented or modified from time to time.
"Loan Party" means, collectively, Borrower, each Affiliate
Guarantor and any other Person (other than Agent and each Lender)
which is or becomes a party to any Loan Document.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets or condition
(financial or otherwise) of Borrower and its Subsidiaries (taken as a
whole) or (b) the material impairment of the ability of Borrower and
the other Loan Parties (taken as a whole) to perform its obligations
under this Agreement, any Note or the Security Agreement to which it
is a party or of Agent or any Lender to enforce this Agreement, any
Note or the Security Agreement or collect any of the Obligations. In
determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself
have such effect, a Material Adverse Effect shall be deemed to have
occurred if the cumulative effect of such event and all other then
existing events would result in a Material Adverse Effect.
"Material Leasehold Property" means a Leasehold Property
reasonably determined by Agent to be of material value as Collateral
or of material importance to the operations of the Loan Parties.
"Materiality Threshold" means One Hundred Thousand Dollars
($100,000).
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"Maximum Revolving Loan Balance" has the meaning ascribed to
such term in Section 1.1(B).
"Mortgage" means (i) a security instrument (whether
designated as a deed of trust or a mortgage, leasehold mortgage,
collateral assignment of leases and rents or by any similar title)
executed and delivered by any Loan Party in such form as may be
approved by the Agent in its sole discretion, in each case with such
changes thereto as may be recommended by Agent's local counsel based
on local laws or customary local practices, (ii) or at Agent's option,
in the case of an Additional Mortgaged Property, an amendment to an
existing Mortgage, in form satisfactory to Agent, adding such
Additional Mortgaged Property to the Real Property Assets encumbered
by such existing Mortgage, in either case as such security instrument
or amendment may be amended, supplemented or otherwise modified from
time to time. "Mortgages" means all such instruments, including
Closing Date Mortgages and any Additional Mortgages, collectively.
"Mortgaged Property" means Closing Date Mortgaged Property
and Additional Mortgaged Property (if any).
"MTG" means McKenzie Telecommunications Group, Inc., an
Arizona corporation.
"Net Proceeds" means cash proceeds received by Borrower or
any of its Subsidiaries from any Asset Disposition (including
insurance proceeds, awards of condemnation, and payments under notes
or other debt securities received in connection with any Asset
Disposition), net of (a) the costs of such sale, lease, transfer or
other disposition (including taxes attributable to such sale, lease,
transfer or other disposition) and (b) amounts applied to repayment of
Indebtedness (other than the Obligations) secured by a Lien on the
asset or property which was the subject of such disposition.
"Note" or "Notes" means one or more of the promissory notes
of Borrower evidencing at any time the Loans, or any combination
thereof. Each Note shall be substantially in the form of EXHIBIT O
annexed hereto.
"Obligations" means all obligations, liabilities and
indebtedness of every nature of each Loan Party from time to time owed
to Agent or any Lender (or, in the case of Interest Rate Products, any
Affiliate of a Lender) under the Loan Documents, including all Loans,
all reimbursement obligations owing under Letters of Credit, the
principal amount of all other debts, claims and indebtedness,
including indebtedness under Interest Rate Protection Products,
indebtedness arising in respect of foreign exchange, cash management,
corporate credit card or similar financial services offered in
furtherance of the transactions contemplated hereby, accrued and
unpaid interest, and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable under the
Loan Documents
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whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any Loan Party. In the case of the
Affiliate Guarantors, "Obligations" also includes the Guaranteed
Obligations.
"Ordinary Course of Business" refers to an action taken by a
Person if: (a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; (b) such action is not required
to be authorized by the board of directors of such Person (or by any
Person or group of Persons exercising similar authority) and is not
required to be specifically authorized by the parent company (if any)
of such Person; and (c) such action is similar in nature and magnitude
to actions customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"Parent" has the meaning assigned to such term in the initial
recitals to this Agreement.
"Pension Plan" has the meaning ascribed to such term in
Section 6.1(L).
"Permitted Business" means (i) the business conducted by
Borrower and its Subsidiaries on the Closing Date; namely, the
provision of broad-based telecommunications, engineering and
construction services to the wireless, wireline, cable (CATV) and
fiber communication industries, including radio/network engineering,
RF compliance, site acquisition, site planning, construction and
project management, equipment installation and optimization,
structural and architectural design and engineering, ad site
maintenance; and (ii) such other business as Borrower or any of its
Subsidiaries may engage hereafter, subject to the prior written
approval of the Requisite Lenders. The term "Permitted Business" shall
not include, however, any "build-to-suit" businesses.
"Permitted Encumbrance" has the meaning ascribed to such term
in Section 3.2(A).
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, limited liability
partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies,
land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political
subdivisions thereof and their respective permitted successors and
assigns (or in the case of a governmental person, the successor
functional equivalent of such Person).
"Pledge Agreement" means a pledge agreement, made in favor of
Agent to secure payment of the Obligations, in respect of certain
Equity Interests of
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Borrower and/or any Subsidiaries, in substantially the form of EXHIBIT
K; as it may be modified or amended from time to time.
"Pledgor" means any Person (other than Agent) party to a
Pledge Agreement.
"Preferred Investment" shall mean the equity investment of
the Preferred Shareholders in Parent made pursuant to the Preferred
Investment Documents.
"Preferred Investment Documents" shall mean all those
documents, instruments and agreements, including provisions in
Parent's articles (or certificate) of incorporation and by-laws,
existing on the Closing Date, evidencing, concerning or pertaining to
Parent's Class A Convertible Preferred Stock and Parent's Series C
Convertible Preferred Stock, as constituted on the Closing Date.
"Preferred Shareholders" shall mean Clear Investors, DFW and
any other holders from time to time of all or portions of the
Preferred Investment.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Wachovia, as its prime rate in effect
at its principal office in Atlanta, Georgia; each change in the Prime
Rate shall be effective from and including the date such change is
publicly announced as being effective. The Prime Rate is but one of
several interest rate basis used by Wachovia. Wachovia lends at
interest rates at, above and below the Prime Rate.
"Pro Forma" shall have the meaning given to such term in
Section 5.5(A).
"Pro Rata Share" means, for each Lender: (i) in the case of
the Term Loan and matters pertinent thereto, the percentage obtained
by dividing such Lender's Term Loan Commitment by all Lenders'
aggregate Term Loan Commitments; (ii) in the case of Revolving Loans
and matters pertinent thereto, including Letters of Credit, the
percentage obtained by dividing such Lender's Revolving Loan
Commitment by all Lenders' aggregate Revolving Loan Commitments; (iii)
in the case of Acquisition Loans and matters pertinent thereto, the
percentage obtained by dividing such Lender's aggregate Acquisition
Loan Commitment by all Lenders' Acquisition Loan Commitments; and
(iii) in all other matters, the percentage obtained by dividing such
Lender's total Commitments by all Lenders' total Commitments.
"Projections" means Borrower's forecasted consolidated: (a)
balance sheets; (b) profit and loss statements; and (c) cash flow
statements; each prepared on a division by division and Subsidiary by
Subsidiary basis on a consistent basis with Borrower's historical
financial statements, subject to permitted changes in
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accounting principles; together with appropriate supporting details
and a statement of underlying assumptions.
"Real Property Asset" means, at the time of determination,
any fee ownership or leasehold interest then owned by any Loan Party
in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with
respect to which a Recorded Document (as hereinafter defined) has been
recorded in all places necessary or desirable, in Agent's reasonable
judgment, to give constructive notice of such Leasehold Property to
third-party purchasers and encumbrances of the affected real property.
For purposes of this definition, the term "Recorded Document" means,
with respect to any Leasehold Property, (a) the lease evidencing such
Leasehold Property or a memorandum thereof, executed and acknowledged
by the owner of the affected real property, as lessor, or (b) if such
Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the applicable assignment or sublease
document, executed and acknowledged by such holder, in each case in
form sufficient to give such constructive notice upon recordation and
otherwise in form reasonably satisfactory to Agent.
"Replacement Lender" has the meaning set forth in Section 1.9.
"Related Transactions" means, collectively, (i) the
Capitalization/Acquisition Transactions, and (ii) the financial
transactions contemplated hereunder.
"Requisite Lenders" means Lenders having (a) sixty-six and
two-thirds percent (66 2/3%) or more of the sum of the total
Commitments or, (b) if the Commitments have been terminated, sixty-six
and two-thirds percent (66 2/3%) or more of the aggregate outstanding
principal balance of the Loans; provided, however, that whenever the
number of Lenders is two (2) or less, then, "Requisite Lenders" shall
mean, instead, all such Lenders.
"Revolving Loan Commitments" has the meaning given to such
term in Section 1.1(A).
"Restricted Junior Payment" has the meaning given to such
term in Section 3.5.
"RTC" has the meaning given to such term in the initial
recitals to this Agreement.
"SDI" has the meaning ascribed to such term in the preamble
to this Agreement.
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"Security Agreement" means the Security Agreement, dated as
of the Closing Date, made by Borrower in favor of Agent, for the
benefit of Lenders, in substantially the form of EXHIBIT L; as it may
be modified or amended from time to time.
"Security Documents" means all instruments, documents and
agreements executed by or on behalf of any Loan Party to guaranty or
provide collateral security with respect to the Obligations including,
without limitation, the Security Agreement, each Pledge Agreement, any
guaranty of the Obligations, each Mortgage, and all instruments,
documents and agreements executed pursuant to the terms of the
foregoing.
"Sellers" means, collectively, (i) those Persons identified
as such on SCHEDULE 10.1 annexed hereto; and (ii) such other Persons
as from time to time hereafter are party to any Approved Acquisitions
as sellers.
"Seller DP Obligations" means, collectively, (i) all
Indebtedness owing by Borrower to Sellers (or their shareholders) on
the Closing Date in respect of Acquisitions, including the Current
Acquisitions, consisting of deferred payments (excluding those
constituting Seller Purchase Debts), in the nature of earn-out
guaranties, non-compete payments or other like arrangements, whether
or not evidenced by one or more promissory notes, all as more
particularly described in SCHEDULE 10.1; and (ii) all similar such
Indebtedness arising to Sellers (or their shareholders) hereafter in
connection with Approved Acquisitions, as and to the extent then
approved by all Lenders.
"Seller Debts" means, collectively, (i) Seller DP Obligations
and (ii) Seller Purchase Debts.
"Seller Purchase Debts" means, collectively, (i) all purchase
money Indebtedness owing by Borrower to Sellers (or their
shareholders) on the Closing Date in respect of Acquisitions,
including the Current Acquisitions, whether or not evidenced by one or
more Promissory Notes, all as more particularly described in SCHEDULE
10.1 (excluding, however, therefrom any being paid in full on the
Closing Date); and (ii) all similar such Indebtedness arising
hereafter to Sellers (or their shareholders) in connection with
Approved Acquisitions, if and to the extent then approved by all
Lenders.
"Seller Subordination Agreement" means (i) a Subordination
Agreement, among a Seller, the Agent and the Borrower, to be
substantially in the form annexed hereto as EXHIBIT M; or (iii) such
other agreement (which may be incorporated into the document(s)
evidencing the Seller Debt in question), between or among a Seller,
the Borrower and the Agent (or to which the Agent or Lenders are
express third party beneficiaries) pursuant to which such Seller shall
agree to subordinate its rights and claims against the Loan Party and
any Collateral on terms and conditions satisfactory to the Agent and
all Lenders.
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"Senior Debt" shall mean Funded Debt, less any portion
thereof constituting Subordinated Indebtedness, determined on a
Consolidated basis for Borrower and its Consolidated Subsidiaries, in
accordance with GAAP. Without limitation, all Loans outstanding and LC
Exposure shall be included within the foregoing definition, and the
amount thereof shall equal the higher of (i) total Loans and LC
Exposure outstanding on the determination date, or (ii) the average
daily amount of Loans and LC exposure outstanding over the thirty (30)
days immediately preceding the determination date.
"Stratford" means, individually and collectively, Stratford
Capital Partners, L.P. and Stratford Equity Partners, L.P.
"Stratford Agreements" means the Securities Purchase
Agreement, dated on or about the Closing Date, between Parent and
Stratford, pertaining to the Stratford Investment, and all documents,
instruments, certificates and agreements executed and delivered
between such parties in connection therewith.
"Stratford Investment" means not less than Seven Million Five
Hundred Thousand Dollars ($7,500,000) in redeemable preferred stock of
Parent purchased, at par, by Stratford on the Closing Date pursuant to
the Stratford Agreements.
"Stratford Subordination Agreement" means the Stratford
Subordination Agreement, dated as of the Closing Date, among Agent,
the Loan Parties and Stratford, as such agreement may thereafter be
amended, supplemented or otherwise modified from time to time. The
Stratford Subordination Agreement shall be substantially in the form
of EXHIBIT F annexed hereto.
"Subordinated Indebtedness" means (i) the ACS Investment, to
the extent that payment thereof is the subject of a then effective ACS
Subordination Agreement; (ii) the Seller Debts, to the extent that the
payment thereof is the subject of a then effective Seller
Subordination Agreement; and (iii) other unsecured Indebtedness of
Borrower or any of its Subsidiaries at any time outstanding which is
subordinated, in a form, substance and manner satisfactory to Agent
and the Requisite Lenders, in right of payment and claim, to the
Obligations and the Collateral, and which is otherwise acceptable, in
terms of amount, amortization and interest rate, to the Agent and the
Requisite Lenders.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of
which more than fifty percent (50%) of the total voting power of
shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination
thereof. As used herein, the
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term "Subsidiary" shall, unless the context requires otherwise, mean
Subsidiaries of Borrower.
"Test Period," for purposes of determining financial covenant
compliance, means each period of twelve (12) trailing fiscal months of
Borrower ending with the fiscal month in question; provided, however,
that, during the Annualization Period, the "Test Period" shall be
deemed to begin, instead, on April 1, 1999 and end with the fiscal
month in question, and the relevant accounting items shall be
Annualized.
"Title Company" means, collectively, Lawyer's Title Insurance
Corporation, and one or more other title insurance companies
reasonably satisfactory to Agent.
"TLI" has the meaning given to such term in the initial
recitals to this Agreement.
"Total Debt Coverage" has the meaning ascribed to such term
in Section 4.2(D).
"Total Debt" shall mean Funded Debt outstanding at the end of
each fiscal month, determined on a Consolidated basis for Borrower and
its Consolidated Subsidiaries, in accordance with GAAP. Without
limitation, all Loans outstanding on the date of determination shall
be included within the foregoing definition; and "Funded Debt
outstanding" in respect of Loans shall mean the higher of (i) total
Loans outstanding on the determination date, or (ii) the average daily
amount of Loans outstanding over the thirty (30) consecutive days
immediately preceding the date of determination.
"Tower" has the meaning ascribed to such term in the preamble
to this Agreement.
"TWR" has the meaning ascribed to such term in the preamble
to this Agreement.
"Y2K Compliant" has the meaning given to such term in Section
2.5(A).
10.2 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 10.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, "hereof," "herein," "hereto," "hereunder"
and the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "including," "includes" and "include"
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shall be deemed to be followed by the words "without
limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the
extent such amendments, assignments and other modifications
are not prohibited by the terms of this Agreement or any
other Loan Document; references to Persons include their
respective permitted successors and assigns or, in the case
of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and
related regulations shall include any amendments of same and
any successor statutes and regulations.
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IN WITNESS WHEREOF, the undersigned have caused their duly
authorized officers to execute this Agreement under seal as of the date first
above written.
<TABLE>
<S> <C> <C> <C>
"BORROWER"
CLEAR COMMUNICATIONS GROUP, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
"AFFILIATE GUARANTORS"
CLEAR HOLDINGS, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
</TABLE>
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<PAGE> 95
<TABLE>
<S> <C> <C> <C>
TWR TELECOM, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
TWR LIGHTING, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
ROOKER TOWER COMPANY (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
CLEAR PROGRAM MANAGEMENT, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
SPECIALTY DRILLING, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
CELLULAR TECHNOLOGY
INTERNATIONAL, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
</TABLE>
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<TABLE>
<S> <C> <C> <C>
COMMUNICATIONS DEVELOPMENT
SYSTEMS, INC. (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
CLEAR TOWER CORPORATION
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
ISDC, INC (SEAL)
Attest: /s/ William J. Loughman By: /s/ Stephen F. Johnston, Sr.
----------------------- ----------------------------
William J. Loughman, Stephen F. Johnston, Sr.,
Secretary Chief Executive Officer
</TABLE>
-91-
<PAGE> 97
<TABLE>
<S> <C> <C>
Total Commitments $15,000,000 "LENDERS"
Revolving Loan Commitment: $6,900,000
Term Loan Commitment: $6,300,000 WACHOVIA BANK, N.A., as
Acquisition Loan Commitment: $1,800,000 Agent and Lender
By: /s/ Laura Galliano
-------------------
Laurie Galliano,
Vice President
Address for Notices:
Specialized Finance Division
191 Peachtree Street
30th Floor
Atlanta, GA 30303
Attn: Laurie Galliano,
Vice President
</TABLE>
-92-
<PAGE> 98
<TABLE>
<S> <C> <C>
Total Commitments $10,000,000
Revolving Loan Commitment: $4,600,000
Term Loan Commitment: $4,200,000 FIRST UNION NATIONAL BANK
Acquisition Loan Commitment: $1,200,000
By: /s/ Irene Barton
-----------------
Irene Barton
Vice President
Address for Notices:
999 Peachtree Street
6th Floor GA 9071
Atlanta, GA 30309
Attn: Irene Barton, V.P.
Telecopy (404) 225-4066
</TABLE>
-93-
<PAGE> 99
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C> <C>
Exhibit A - Notice of Borrowing
Exhibit B - Joinder Agreement
Exhibit C - Compliance Certificate
Exhibit D - ACS Subordination Agreement
Exhibit E - Affiliate Subordination Agreement
Exhibit F - Stratford Subordination Agreement
Exhibit G - Acquisition Report
Exhibit H - Acquisition Compliance Certificate
Exhibit I - Landlord's Agreement
Exhibit J - Lender Addition Agreement
Exhibit K - Pledge Agreement
Exhibit L - Security Agreement
Exhibit M - Seller Subordination Agreement
Exhibit N - Environmental Indemnity Agreement
Exhibit O - Notes
Schedules
- ---------
Schedule 3.1 - Indebtedness
Schedule 3.2 - Liens
Schedule 3.3 - Investments
Schedule 3.4 - Contingent Obligations
Schedule 3.8 - Transactions with Affiliates
Schedule 5.4(A) - Jurisdictions of Organization
Schedule 5.4(B) - Capitalization
Schedule 5.4(D) - Foreign Qualifications
Schedule 5.6 - Intellectual Property
Schedule 5.7 - Investigations and Audits
Schedule 5.8 - Employee Matters
Schedule 5.13 - Environmental Matters
Schedule 7.1 - Closing Date Mortgaged Properties
Schedule 10.1 - Existing Sellers and Seller Debts
</TABLE>
<PAGE> 1
EXHIBIT 4.4
REVOLVING LOAN NOTE
Atlanta, Georgia
$4,600,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), hereby promises to pay to the
order of FIRST UNION NATIONAL BANK ("Lender"; Lender, together with any other
permitted holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of FOUR MILLION SIX HUNDRED THOUSAND DOLLARS ($4,600,000), or
such lesser amount as may be outstanding under Lender's "Revolving Loan
Commitment" (as that term is defined in the "Credit Agreement," hereinafter
defined) at such time or times as are provided in the Credit Agreement and, in
any event, on the "Expiry Date" (as that term is defined in the Credit
Agreement), together with interest on the unpaid principal balance hereof from
the date hereof until the payment in full of this Note at the rate specified
with respect to the "Revolving Loans" in the Credit Agreement, payable at the
times and in the manner provided in the Credit Agreement.
It is contemplated that the principal sum evidenced hereby may be
reduced from time to time as a result of the repayment of Revolving Loans and
that additional Revolving Loans may be made from time to time but not to exceed
Lender's "Revolving Loan Commitment" (as that term is defined in the Credit
Agreement), as provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Revolving Loans made available by Lender to Borrower pursuant to
the Credit Agreement, dated of even date herewith (herein, it may be amended,
modified or supplemented from time to time, called the "Credit Agreement";
capitalized terms used herein and not defined herein have the meanings assigned
to them in the Credit Agreement), among Borrower, the Affiliate Guarantors, the
Lenders, and Fleet Capital Corporation, as a Lender and Agent, to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the loan evidenced hereby was made and is to be repaid, including,
but not limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby, to the interest rate payable hereunder and to
the maturity of the indebtedness represented hereby upon the termination of the
Credit Agreement. Payment of this Note is secured by the Collateral, and Holder
is entitled to the benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
-1-
<PAGE> 2
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC., a
Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
-----------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
-------------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
-2-
<PAGE> 1
EXHIBIT 4.5
ACQUISITION LOAN NOTE
Atlanta, Georgia
$1,200,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), hereby promises to pay to the
order of FIRST UNION NATIONAL BANK ("Lender"; Lender, together with any other
permitted holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000), or such
lesser amount as may be outstanding under Lender's "Acquisition Loan
Commitment" (as that term is defined in the "Credit Agreement," hereinafter
defined) at such time or times as are provided in the Credit Agreement and, in
any event, on the "Expiry Date" (as that term is defined in the Credit
Agreement), together with interest on the unpaid principal balance hereof from
the date hereof until the payment in full of this Note at the rate specified
with respect to the "Acquisition Loans" in the Credit Agreement, payable at the
times and in the manner provided in the Credit Agreement.
It is contemplated that the principal sum evidenced hereby may be
reduced from time to time as a result of the repayment of Acquisition Loans and
that additional Acquisition Loans may be made from time to time but not to
exceed Lender's "Acquisition Loan Commitment" (as that term is defined in the
Credit Agreement), as provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Acquisition Loans made available by Lender to Borrower pursuant to
the Credit Agreement, dated of even date herewith (herein, it may be amended,
modified or supplemented from time to time, called the "Credit Agreement";
capitalized terms used herein and not defined herein have the meanings assigned
to them in the Credit Agreement), among Borrower, the Affiliate Guarantors, the
Lenders, and Fleet Capital Corporation, as a Lender and Agent, to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the loan evidenced hereby was made and is to be repaid, including,
but not limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby, to the interest rate payable hereunder and to
the maturity of the indebtedness represented hereby upon the termination of the
Credit Agreement. Payment of this Note is secured by the Collateral, and Holder
is entitled to the benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
<PAGE> 2
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC.
a Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
---------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
-----------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 4.6
TERM LOAN NOTE
Atlanta, Georgia
$4,200,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), promises to pay to the order
of FIRST UNION NATIONAL BANK, a national bank ("Lender"; Lender, together with
any other holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of FOUR MILLION TWO HUNDRED THOUSAND DOLLARS ($4,200,000), at
such time or times as are provided in the Credit Agreement and, in any event,
on the "Expiry Date" (as that term is defined in the Credit Agreement),
together with interest on the unpaid principal balance hereof from the date
hereof until the payment in full of this Note at the rate specified with
respect to the "Term Loan" in the Credit Agreement, payable at the times and in
the manner provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Lender's Pro Rata Share of the Term Loan made this date to
Borrower pursuant to the Credit Agreement, dated of even date herewith (herein,
it may be amended, modified or supplemented from time to time, called the
"Credit Agreement"; capitalized terms used herein and not defined herein have
the meanings assigned to them in the Credit Agreement), among Borrower, the
Affiliate Guarantors, the Lenders, and Fleet Capital Corporation, as a Lender
and Agent, to which reference is hereby made for a statement of the terms,
conditions and covenants under which the loan evidenced hereby was made and is
to be repaid, including, but not limited to, those related to voluntary or
mandatory prepayment of the indebtedness represented hereby, to the interest
rate payable hereunder and to the maturity of the indebtedness represented
hereby upon the termination of the Credit Agreement. Payment of this Note is
secured by the Collateral, and Holder is entitled to the benefit of all of the
Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
<PAGE> 2
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED, UNDER SEAL, AS OF THE DATE FIRST ABOVE
WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC.,
a Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
-----------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
-------------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 4.7
REVOLVING LOAN NOTE
Atlanta, Georgia
$6,900,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), hereby promises to pay to the
order of WACHOVIA BANK, N.A. ("Lender"; Lender, together with any other
permitted holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of SIX MILLION NINE HUNDRED THOUSAND DOLLARS ($6,900,000), or
such lesser amount as may be outstanding under Lender's "Revolving Loan
Commitment" (as that term is defined in the "Credit Agreement," hereinafter
defined) at such time or times as are provided in the Credit Agreement and, in
any event, on the "Expiry Date" (as that term is defined in the Credit
Agreement), together with interest on the unpaid principal balance hereof from
the date hereof until the payment in full of this Note at the rate specified
with respect to the "Revolving Loans" in the Credit Agreement, payable at the
times and in the manner provided in the Credit Agreement.
It is contemplated that the principal sum evidenced hereby may be
reduced from time to time as a result of the repayment of Revolving Loans and
that additional Revolving Loans may be made from time to time but not to exceed
Lender's "Revolving Loan Commitment" (as that term is defined in the Credit
Agreement), as provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Revolving Loans made available by Lender to Borrower pursuant to
the Credit Agreement, dated of even date herewith (herein, it may be amended,
modified or supplemented from time to time, called the "Credit Agreement";
capitalized terms used herein and not defined herein have the meanings assigned
to them in the Credit Agreement), among Borrower, the Affiliate Guarantors, the
Lenders, and Fleet Capital Corporation, as a Lender and Agent, to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the loan evidenced hereby was made and is to be repaid, including,
but not limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby, to the interest rate payable hereunder and to
the maturity of the indebtedness represented hereby upon the termination of the
Credit Agreement. Payment of this Note is secured by the Collateral, and Holder
is entitled to the benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
<PAGE> 2
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC.,
a Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
-------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
---------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 4.8
ACQUISITION LOAN NOTE
Atlanta, Georgia
$1,800,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), hereby promises to pay to the
order of WACHOVIA BANK, N.A. ("Lender"; Lender, together with any other
permitted holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000), or
such lesser amount as may be outstanding under Lender's "Acquisition Loan
Commitment" (as that term is defined in the "Credit Agreement," hereinafter
defined) at such time or times as are provided in the Credit Agreement and, in
any event, on the "Expiry Date" (as that term is defined in the Credit
Agreement), together with interest on the unpaid principal balance hereof from
the date hereof until the payment in full of this Note at the rate specified
with respect to the "Acquisition Loans" in the Credit Agreement, payable at the
times and in the manner provided in the Credit Agreement.
It is contemplated that the principal sum evidenced hereby may be
reduced from time to time as a result of the repayment of Acquisition Loans and
that additional Acquisition Loans may be made from time to time but not to
exceed Lender's "Acquisition Loan Commitment" (as that term is defined in the
Credit Agreement), as provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Acquisition Loans made available by Lender to Borrower pursuant to
the Credit Agreement, dated of even date herewith (herein, it may be amended,
modified or supplemented from time to time, called the "Credit Agreement";
capitalized terms used herein and not defined herein have the meanings assigned
to them in the Credit Agreement), among Borrower, the Affiliate Guarantors, the
Lenders, and Fleet Capital Corporation, as a Lender and Agent, to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the loan evidenced hereby was made and is to be repaid, including,
but not limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby, to the interest rate payable hereunder and to
the maturity of the indebtedness represented hereby upon the termination of the
Credit Agreement. Payment of this Note is secured by the Collateral, and Holder
is entitled to the benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
<PAGE> 2
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC.
a Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
-----------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
-------------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 4.9
TERM LOAN NOTE
Atlanta, Georgia
$6,300,000 November 1, 1999
FOR VALUE RECEIVED, the undersigned, CLEAR COMMUNICATIONS
GROUP, INC., a Georgia corporation ("Borrower"), promises to pay to the order
of WACHOVIA BANK, N.A., a national bank ("Lender"; Lender, together with any
other holder hereof, sometimes referred to herein as the "Holder"), the
principal sum of SIX MILLION THREE HUNDRED THOUSAND DOLLARS ($6,300,000), at
such time or times as are provided in the Credit Agreement and, in any event,
on the "Expiry Date" (as that term is defined in the Credit Agreement),
together with interest on the unpaid principal balance hereof from the date
hereof until the payment in full of this Note at the rate specified with
respect to the "Term Loan" in the Credit Agreement, payable at the times and in
the manner provided in the Credit Agreement.
This Note is a "Note" issued under the Credit Agreement to
evidence the Lender's Pro Rata Share of the Term Loan made this date to
Borrower pursuant to the Credit Agreement, dated of even date herewith (herein,
it may be amended, modified or supplemented from time to time, called the
"Credit Agreement"; capitalized terms used herein and not defined herein have
the meanings assigned to them in the Credit Agreement), among Borrower, the
Affiliate Guarantors, the Lenders, and Fleet Capital Corporation, as a Lender
and Agent, to which reference is hereby made for a statement of the terms,
conditions and covenants under which the loan evidenced hereby was made and is
to be repaid, including, but not limited to, those related to voluntary or
mandatory prepayment of the indebtedness represented hereby, to the interest
rate payable hereunder and to the maturity of the indebtedness represented
hereby upon the termination of the Credit Agreement. Payment of this Note is
secured by the Collateral, and Holder is entitled to the benefit of all of the
Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
Borrower hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices not
otherwise required by the Loan Documents in connection with this Note.
<PAGE> 2
WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY
AUTHORIZED OFFICERS OF THE UNDERSIGNED, UNDER SEAL, AS OF THE DATE FIRST ABOVE
WRITTEN.
CLEAR COMMUNICATIONS GROUP, INC.,
a Georgia corporation
By: /s/ Stephen F. Johnston, Sr.
----------------------------------------
Stephen F. Johnston, Sr., President
Attest: /s/ William J. Loughman
------------------------------------
William J. Loughman, Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 4.10
NOTE AND EQUITY PURCHASE AGREEMENT
by and among
CLEAR COMMUNICATIONS GROUP, INC.,
CLEAR HOLDINGS, INC. AND
ITS SUBSIDIARIES' LISTED ON ANNEX B HERETO
AND
AMERICAN CAPITAL STRATEGIES, LTD.
NOVEMBER 1, 1999
<PAGE> 2
NOTE AND EQUITY PURCHASE AGREEMENT
$17,500,000 PRINCIPAL AMOUNT SENIOR SUBORDINATED NOTES
DUE 2005 OF CLEAR COMMUNICATIONS GROUP, INC.
WARRANTS TO PURCHASE SHARES
OF CLEAR HOLDINGS, INC. COMMON STOCK
THIS NOTE AND EQUITY PURCHASE AGREEMENT (this "Agreement"), dated as
of November 1, 1999, is by and among CLEAR COMMUNICATIONS GROUP, INC., a
Georgia corporation (the "Company"), CLEAR HOLDINGS, INC., a Georgia
corporation and sole shareholder of the Company ("Holdings"), its Subsidiaries
listed on Annex B hereto, and AMERICAN CAPITAL STRATEGIES, LTD., a Delaware
corporation ("ACS" or "Purchaser"). Capitalized terms used and not defined
elsewhere in this Agreement are defined in Article 1 hereof.
To induce the Purchaser to purchase the Notes from the Company, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows.
ARTICLE 1 DEFINITIONS
1.1 Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, the following words and terms have the
meanings set forth below (and such meanings shall be equally applicable to both
the singular and plural form of the terms defined, as the context may require):
"ACS" has the meaning assigned to such term in the preamble hereto.
"Acquisition" means the acquisition by a Person (by purchase,
exchange, merger, consolidation or otherwise) of (i) all, or substantially all,
Equity Interests of another Person, or (ii) all, or substantially all, of the
operating assets or property of another Person, or assets or property which
constitute all, or substantially all, of the assets of a division or a separate
(or separable) line of business of another Person.
"Acquisition Loan Expiry Date" means the earlier of (i) October 31,
2000 or (ii) that date on which the maximum amount of the Tranche B Notes have
been purchased.
"Acquisition Target" has the meaning set forth in the definition of
"Approved Acquisition."
"Adjusted Net Earnings," with respect to any fiscal period of any
Person, means the net earnings (or loss) for such fiscal period of such Person,
and its consolidated Subsidiaries, all as reflected on the financial statements
of such Person and its consolidated Subsidiaries supplied to Purchaser pursuant
to subsection 7.1(e) or in furtherance of making any Approved Acquisition, but
excluding: (i) any gain or loss arising from the sale of capital assets; (ii)
any non-cash gain
2
<PAGE> 3
or loss arising from any write-up or write-down of assets during such period;
(iii) earnings of any Subsidiary of each Person accrued prior to the date it
became a Subsidiary; (iv) earnings of any Person, substantially all the assets
of which have been acquired in any manner by such Person or any consolidated
Subsidiary, realized by such Person prior to the date of such acquisition; (v)
net earnings of any entity (other than a Subsidiary of such Person) in which
such Person has an ownership interest unless such net earnings have actually
been received by such Person or any consolidated Subsidiary in the form of cash
Restricted Junior Payments; (vi) any portion of the net earnings of any
Subsidiary of such Person which for any reason is unavailable for payment of
Restricted Junior Payments to such Person; (vii) the earnings of any Person to
which any assets of such Person or any consolidated Subsidiary shall have been
sold, transferred or disposed of, or into which such Person shall have merged,
or been a party to any consolidation or other form of reorganization, prior to
the date of such transaction; (viii) any gain arising from the acquisition of
any Equity Interests in such Person or any consolidated Subsidiary; and (ix)
any gain or loss arising from extraordinary or non-recurring items; all as
determined on a consolidated basis in accordance with GAAP.
"Affiliate" means any Person: (a) directly or indirectly controlling,
controlled by, or under common control with, the Company; (b) directly or
indirectly owning or holding ten percent (10%) or more of any Equity Interest
in the Company; or (c) ten percent (10%) or more of whose Equity Interest is
directly or indirectly owned or held by the Company. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
Equity Interests, by contract or otherwise. Notwithstanding the foregoing, (a)
no individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of any Loan Party and (b) the Purchaser and
Stratford shall not be deemed to be Affiliates.
"Affiliate Subordination Agreement" means, collectively, the Affiliate
Subordination Agreement dated as of the Closing Date, among the Loan Parties,
Clear Investors, LLC, DFW Capital Partners, L.P./ ("DFW") and Purchaser, and
the Affiliate Subordination Agreement dated as of the Closing Date, among the
Loan Parties, Stratford and Purchaser, as such agreements may hereafter be
amended, supplemented or otherwise modified from time to time.
"Affiliate Guarantors" means the Subsidiaries of the Company, Holdings
and any additional Subsidiaries executing a joinder agreement pursuant to
Section 7.2(m) hereof, and, with respect to the obligations of Holdings to the
Purchaser, shall include the Company.
"Agreement" means this Note and Equity Purchase Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
"Annualization Period" means the period from the Initial Test Month
through the fiscal month of the Company ending March 31, 2000.
"Annualized" means, in respect of any revenue, income, expenditure or
expense item used in the financial covenants set forth in Section 7.3, a method
of calculation whereby, during
3
<PAGE> 4
the Annualization Period, such item is computed by adding together the
month-to-month components of such item, beginning with the fiscal month of the
Company ending April 30, 1999 and ending with the fiscal month then most
recently completed, dividing the sum resulting by the number of fiscal months
completed since April 1, 1999 (inclusive of the fiscal month of the Company
then most recently completed), and multiplying the quotient resulting by the
number twelve (12); provided, however, that, in the case of Interest Expense in
relation to the Notes, "Annualized" shall mean, instead, the amount thereof
determined from month-to-month, beginning with the Initial Test Month and
ending with the fiscal month then most recently completed, dividing the sum
resulting by the number of fiscal months completed since the Initial Test Month
(inclusive of the fiscal month then most recently completed), and multiplying
the quotient resulting by the number twelve (12).
"Appraised Value" means the value of a security (i) as determined by
the Board of Directors of the Company and agreed to by the holders of a
majority of the Subject Securities to be affected by such determination, but if
there is no such agreement within twenty (20) days after the date as of which
such value is to be determined, (ii) as determined on a control premium basis
without discount for limitations on voting rights, minority interests,
illiquidity or restrictions on transfer, as determined by an appraisal
performed at the Loan Parties' expense by any of (x) Houlihan, Lokey, Howard &
Zukin, (y) Duff & Phelps or (z) Willamette Management Associates, or any
successor to such firms, as the Loan Parties shall elect; provided that such
appraiser shall be directed to determine fair market value of such security as
soon as practicable, but in no event later than thirty (30) days from the date
of its selection and for such purposes all rights, options and warrants to
subscribe for or purchase, and other securities convertible into or
exchangeable for Common Stock shall be deemed to be exercised, exchanged or
converted, and the underlying Common Stock shall be deemed outstanding.
"Approved Acquisition" shall mean any Acquisition made subsequent to
the Closing Date which meets each of the following conditions, to the sole
satisfaction of the Purchaser: (i) Purchaser shall have received not less than
thirty (30) days advance written notice of the execution of the definitive
acquisition agreement and been provided financial and other information it may
reasonably request; (ii) at or prior to the closing of the Acquisition, the
Acquisition shall have been approved by the board of directors or other
comparable governing body of the Acquisition Target (as hereinafter defined);
(iii) the Person, operating assets or line of business acquired (herein, the
"Acquisition Target") shall be in a Permitted Business; (iv) no Event of
Default or Default shall exist at the time of such Acquisition or would result
from, or be caused by, its consummation and all representations and warranties
shall be true and correct as of the closing date of the Acquisition; (v) any
change in the organizational structure of the Company and its Subsidiaries
resulting from the Acquisition; e.g., any merger or consolidation, shall be
made in accordance with the terms of Section 7.2(f) and (l); (vi) prior to or
upon consummation of each such Acquisition, the Purchaser shall have received
(A) copies of all material documents, instruments, certificates and agreements
executed by, between or among the Company or any of its Subsidiaries and the
Acquisition Target (or the Person or Persons selling the Acquisition Target)
evidencing, governing or relating to such Acquisition; and (B) such documents
and instruments as the Purchaser shall determine may be necessary or advisable
to grant or confirm to the Purchaser a Lien on or security interest in the
Equity Interests, operating assets or line of business so acquired subject to
no other Liens, except Permitted Liens, and (C) if
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the Acquisition Target is acquired by, and not merged into, the Company or any
existing Affiliate Guarantor, a Pledge Agreement in respect of such Person's
Equity Interests in accordance with Section 4.1(j) and a joinder agreement in
respect of such Person as an Affiliate Guarantor hereunder in accordance with
Section 7.2(m); (vii) at the time of the closing of such Acquisition, the
Company must demonstrate to the sole satisfaction of the Purchaser its
compliance with all financial covenants set forth in Section 7.3 hereof, on a
pro forma basis, giving effect to such Acquisition as of the end of the then
most recently concluded fiscal quarter of the Company for which financial
reports are then available, on an historical basis, for the respective twelve
(12) fiscal months period then ended, as reflected on restated financial
statements (including income statements, balance sheets and cash flow
summaries) for such fiscal period for the Loan Parties and the Acquisition
Target on a consolidated basis (except that during the Annualization Period (as
defined in the Credit Agreement), such financial statements shall be, as
appropriate, annualized) provided; however, the pro forma ratio of Total Debt
to EBITDA may not exceed 4.5 to 1.0 after giving effect to the funding of the
Tranche B Notes; (viii) at the time of closing of such Acquisition, the Company
must also demonstrate to the sole satisfaction of the Purchaser that, on a pro
forma basis, over the twelve (12) fiscal months ending as of the most recently
concluded fiscal month of the Acquisition Target prior to the Acquisition for
which financial statements are available (the "test ending fiscal month"), the
Acquisition Target, on a stand alone basis, had a positive EBITDA; (ix) to the
extent that payment of any portion of the cost of any Acquisition is deferred,
all purchase money Subordinated to the Indebtedness arising therefrom must be
Indebtedness to the Purchaser; (x) if the Tranche B Note proceeds are to be
used to finance, in whole or in part, such Acquisition, the total amount
thereof shall not exceed one hundred percent (100%) of the purchase price of
such Acquisition (including all expenses associated therewith); (xi) the
Acquisition Target must be domiciled in, and have a majority of its business
operations in, the continental United States; (xii) the Acquisition Target must
be Y2K Compliant at time of Acquisition; (xiii) the Acquisition shall be closed
substantially in accordance with the terms thereof, as reflected in the
information delivered to Purchaser, unless otherwise approved by the Purchaser;
(xiv) on the date of closing of such Acquisition, the Purchaser shall have
received from an Executive Officer, a certificate, in substantially the form of
Exhibit G, confirming to the Loan Parties compliance with all the foregoing
conditions (including, where appropriate, calculations of covenant compliance);
and (xv) the purchase price for any such Acquisition may not exceed five (5)
times EBITDA of the Acquisition Target on a stand alone basis.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any of the
following: (a) any of the stock of any of Company or any of its Subsidiaries or
(b) any or all of the assets of the Loan Parties, other than dispositions
permitted by subsection 7.2(m)(i).
"Board of Directors" means the board of directors, board of managers
or similar governing body of a Person.
"Business" means the business of the Loan Parties as such is planned
and intended to be conducted following the Acquisitions.
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"Business Day" means any day other than a Saturday, Sunday or other
day on which banking institutions in Maryland are authorized or required by law
to close. "Bylaws" means the bylaws, operating agreement or similar governing
instrument of a Person, including all amendments and supplements thereto.
"Capital Expenditures" means expenditures made or liabilities incurred
for the acquisition of fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of any Indebtedness represented by
Capitalized Leases, determined for the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Capitalized Leases" means, with respect to any Person, leases of (or
other agreements conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee that, in accordance with GAAP,
either would be required to be classified and accounted for as capital leases
on a balance sheet of such Person or otherwise be disclosed as such in a note
to such balance sheet.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9604, et seq.), as amended, and rules,
regulations, standards guidelines and publications issued thereunder.
"Change of Control" means the occurrence of any of the following:
(a) any transaction or series of related transactions resulting
in the sale or issuance of securities or any rights to securities of the
Company representing in the aggregate more than 50% of the issued and
outstanding equity securities on a fully diluted basis, or any transaction or
series of related transactions resulting in the sale, transfer, assignment or
other conveyance or disposition of any securities or any rights to securities
of the Company by any holder or holders thereof representing in the aggregate
more than 50% of the issued and outstanding equity securities on a fully
diluted basis and the receipt of any consideration in connection therewith;
(b) a merger, consolidation, reorganization, recapitalization or
share exchange in which the stockholders of the Company immediately prior to
such transaction receive, in exchange for securities of the Company owned by
them, cash, property or securities of the resulting or surviving entity and as
a result thereof Persons who were holders of equity securities and Underlying
Common Stock hold less than 50% of the voting securities, calculated on a fully
diluted basis, of the resulting Persons entitled to vote in the election of
directors, managers or similar functions;
(c) a sale, transfer or other disposition of all or substantially
all of the assets of the Loan Parties, on a consolidated basis;
(d) any sale or issuance or series of sales or issuances of
Common Stock or any other voting security (or security convertible into,
exchangeable for, or exercisable for any other voting security) of the Company
within a 12-month period that results in a transfer of more than
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<PAGE> 7
50% of the issued and outstanding Common Stock or a transfer of more than 50%
of the voting power of the Company;
(e) the initial public offer of securities by the Company other
than an offering of securities for an employee benefit plan on SEC Form S-8 or
a successor form; and
(f) any member of Key-Management shall, subject to the grace
periods provided in Section 7.2(r) hereof, cease to be employed by the Company
in the official capacity in which they serve as of the Closing Date or shall
cease to devote substantially all their time to the business of the Company.
"Charter Documents" means the limited liability certificate,
certificate or articles of incorporation, charter or similar instrument of a
Person, as applicable, including all amendments and supplements thereto.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to this Agreement.
"Closing Date" means the date and time for delivery and payment of the
Securities as finally determined pursuant to Section 2.4 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock of Holdings, $.01 par value.
"Company" has the meaning assigned to such term in the preamble
hereto.
"Condition" means any condition that results in or otherwise relates
to any Environmental Liabilities.
"Controlled Group" means the "controlled group of corporations" as
that term is defined in Section 1563 of the Internal Revenue Code of 1986, as
amended, of which the Loan Parties are a part from time to time.
"Credit Agreement" means (i) the Credit Agreement, dated the date
hereof, among the Loan Parties and Senior Lender (and any successors and
assigns), and (ii) the other Loan Documents (as defined in the Credit
Agreement) entered into in connection therewith, each as in effect on the
Closing Date, as the same may be amended from time to time in accordance with
the Subordination Agreement.
"Current Acquisitions" means, collectively, the Acquisition by the
Company of all Equity Interests in, and/or the business and assets of, each of
TWR, TLC, RTC, MTG and SDI pursuant to the Current Acquisitions Documents on
the Closing Date.
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"Current Acquisitions Closing Costs" means, collectively, the total
cash consideration payable by the Company to consummate the Current
Acquisitions plus all closing costs related thereto.
"Current Acquisitions Documents" means, collectively, (i) the Stock
Purchase Agreement, dated on or about the Closing Date, by and among the
Company, TWR and SDI (among others) pertaining to the Acquisition by the
Company of TWR, TLC, RTC and SDI; and (ii) the Asset Purchase Agreement, dated
on or about the Closing Date, by and between CPM (as assignee of the Company)
and MTG (among others) pertaining to the Acquisition by CPM of the assets of
MTG; together with all schedules and exhibits thereto, and all documents,
instruments, certificates or agreements executed or exchanged in connection
therewith.
"Default" means any event or condition that, but for the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"EBITDA," with respect to any Person, for any fiscal period of such
Person, means Adjusted Net Earnings of such Person for such period, plus, to
the extent deducted in computing such Adjusted Net Earnings, (a) Interest
Expense, (b) any provision for income taxes, (c) depreciation expense, and (d)
amortization expense; all determined on a consolidated basis for such Person
and its consolidated Subsidiaries in accordance with GAAP; provided, however,
that, in computing EBITDA of the Company, (i) for the purpose of determining
whether any proposed Acquisition will be an Approved Acquisition, and (ii) for
the twelve (12) fiscal months of the Company ending subsequent to each Approved
Acquisition, EBITDA shall be based, in part, on the historical EBITDA of the
Acquisition Target prior to its Acquisition (for the applicable number of
fiscal months), after giving effect, however, to such pro forma adjustments
therein for any owner compensation at the Acquisition Target, net savings
related to any duplicate customer service related positions, facilities
closures and other immediately realizable adjustments, all as proposed by the
Company, and reviewed and approved by the Purchaser prior to their being
permitted hereunder.
"Environmental Laws" means any Laws that address, are related to or
are otherwise concerned with environmental, health or safety issues, including
any Laws relating to any emissions, releases or discharges of Pollutants into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, handling, clean-up or control of Pollutants or any exposure or
impact on worker health and safety.
"Environmental Liabilities" means any obligations or liabilities
(including any claims, suits or other assertions of obligations or liabilities)
that are:
(a) related to environmental, health or safety issues (including
on-site or off-site contamination by Pollutants of surface or subsurface soil
or water, and occupational safety and health); and
(b) based upon or related to (i) any provision of past, present
or future United States or foreign Environmental Law (including CERCLA and
RCRA) or common law, or (ii) any
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<PAGE> 9
judgment, order, writ, decree, permit or injunction imposed by any court,
administrative agency, tribunal or otherwise.
The term "Environmental Liabilities" includes: (i) fines, penalties,
judgments, awards, settlements, losses, damages (including foreseeable and
unforeseeable consequential damages), costs, fees (including attorneys' and
consultants' fees), expenses and disbursements; (ii) defense and other
responses to any administrative or judicial action (including claims, notice
letters, complaints, and other assertions of liability); and (iii) financial
responsibility for (1) cleanup costs and injunctive relief, including any
Removal, Remedial or other Response actions, and natural resource damages, and
(2) any other compliance or remedial measures.
"EPA" means the United States Environmental Protection Agency and any
governmental body or agency succeeding to the functions thereof.
"Equity Interests" means the interest of a shareholder in a
corporation, a partner (whether general or limited) in a partnership (whether
general, limited or limited liability), a member in a limited liability
company, or any other Person having any other form of equity security.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended, and the rules and regulations of any
governmental agency or authority, as from time to time in effect, promulgated
thereunder.
"Escrowed Seller Debt" has the meaning assigned thereto in Section
4.1(x).
"Excess Working Capital" means for each fiscal month of the Company,
beginning with the Initial Test Month, the positive difference, determined for
the Company, Holdings and its Subsidiaries on a consolidated basis in
accordance with GAAP, between (A) the sum of cash plus accounts receivable plus
costs in excess of billings, and (B) the sum of accounts payable plus billings
in excess of costs plus accruals, plus revolving loans under the Credit
Agreement outstanding, plus total letter of credit exposure under the Credit
Agreement; plus Two Million Dollars ($2,000,000).
"Exempt Shares" means the Warrants and other shares issued or issuable
by Company and identified as Exempt Shares on the Corporate Schedule.
"Existing Credit Agreement" means the Credit Agreement, dated as of
May 19, 1998, made by and between the Company and Fleet National Bank,
individually and as administrative agent, among others, as modified or amended
through the Closing Date.
"Event of Default" means any of the events of default described in
Section 8.1 hereof.
"Fair Market Value" means (i) if computed in connection with a Change
of Control, the value realized by the holders of Common Stock as a result of
such transaction, (ii) otherwise, if available, the Market Price or (iii)
otherwise, the Appraised Value.
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"Financing Conveyance" means a pledge or collateral assignment of a
Note to a third party lender to or financing source for (including any agents
therefor) Purchaser, and any subsequent foreclosure, deed in lieu of
foreclosure or similar event or transaction whereby such Note is further sold,
assigned or conveyed and any subsequent sale, assignment or conveyance of such
Note by or to any Person thereafter.
"Financing Statements" has the meaning assigned to such term in
Section 4.1(e) hereof.
"Fiscal Year" or "fiscal year" means each twelve-month period ending
on December 31 of each year.
"Fixed Charge Coverage" (excluding therefrom any Escrowed Seller Debt,
as provided in Section 4.1(x)) shall mean the ratio of (i) EBITDA for the Test
Period, minus unfinanced Capital Expenditures made in such period, to the
extent then permitted to be made hereunder (as applicable), minus income taxes
paid in cash during such period, plus any Tranche B Notes issued to the Company
during such period (excluding therefrom, however, Notes issued on the Closing
Date), to (ii) the sum (without duplication) of Interest Expense for such
period, plus payments (including prepayments) of principal on Total Debt made
in such period (excluding therefrom any Escrowed Seller Debt, as provided in
Section 4.1(x) hereof), plus any Restricted Junior Payments made in such
period; all determined for the Company, Holdings and its Subsidiaries with
respect to such period on a consolidated basis, in accordance with GAAP. In
making the foregoing calculations during the Annualization Period, EBITDA,
Capital Expenditures, income taxes and Interest Expense shall all be
Annualized.
"Funded Debt" means, collectively, all interest-bearing (including
imputed interest) Indebtedness, including, without limitation, Indebtedness
evidenced by the Notes, all purchase money Indebtedness, all capital lease
obligations, all Indebtedness to the Sellers, the Senior Debt and any
Subordinated Indebtedness. For purposes hereof, the term "Funded Debt" shall
also include, without limitation, all LC Exposure (as defined in the Credit
Agreement).
"GAAP" has the meaning assigned to such term in Section 1.2 hereof.
"Governmental Authorities" means any federal, state or municipal court
or other governmental department, commission, board, bureau, agency or
instrumentality, governmental or quasi-governmental, domestic or foreign.
"Guaranty" means any guaranty of the payment or performance of any
Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of another Person, whether
that promise is expressed in terms of an obligation to pay the Indebtedness of
such obligor, or to purchase an obligation owed by such obligor, or to purchase
goods and services from such obligor pursuant to a take-or-pay contract, or to
maintain the capital, working capital, solvency or general financial condition
of such obligor, whether or not any such arrangement is reflected on the
balance sheet of such other Person, firm or corporation, or referred to in a
footnote thereto, but shall not include endorsements of items for collection in
the ordinary course of business. For the purpose of all computations made under
this Agreement, the amount of a Guaranty in respect of any obligation
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<PAGE> 11
shall be deemed to be equal to the maximum aggregate amount of such obligation
or, if the Guaranty is limited to less than the full amount of such obligation,
the maximum aggregate potential liability under the terms of the Guaranty.
"Holder" has the meaning assigned to such term in Section 9.1 hereof.
"Indebtedness", as applied to any Person, means: (a) all indebtedness
for borrowed money; (b) that portion of obligations with respect to Capitalized
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money; (d) any obligation owed for all or any part of the deferred purchase
price of property or services if the purchase price is due more than six (6)
months from the date the obligation is incurred or is evidenced by a note or
similar written instrument (other than trade accounts payable arising in the
Ordinary Course of Business); provided, that the amount of any such obligation
based on the revenues or profits of an acquired business or entity shall equal
only the amount that has become fixed or determinable pursuant to the terms of
such obligation; (e) payments owing in connection with existing or future
Acquisitions under noncompete agreements, earn-out guaranties and similar
arrangements; and (f) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Provided, however, for the purpose of Section 7.2(a),
Indebtedness shall additionally include (a) indebtedness in respect of which
such Person is liable, contingently or otherwise, as obligor or otherwise
(other than trade payables and other current liabilities incurred in the
ordinary course of business on terms customary in the trade), (b) all
obligations evidenced by notes, bonds, debentures, acceptances or instruments,
or arising out of letters of credit or bankers' acceptances issued for such
Person's account; and (c) all obligations for which such Person is obligated
pursuant to a Guaranty.
"Initial Test Month" means the fiscal month of the Company ending
October 31, 1999.
"Interest Coverage" means for each such fiscal month of the Company,
the ratio of: (i) EBITDA for the Test Period then ended (computed, during the
Annualization Period , on an Annualized basis), to (ii) total Interest Expense
for the Test Period then ended (likewise computed, during the Annualization
Period, on an Annualized basis); all determined for the Company and its
Subsidiaries with respect to such period on a consolidated basis, in accordance
with GAAP.
"Interest Expense" means, for any period, the sum, for the Loan
Parties (determined on a consolidated basis without duplication in accordance
with GAAP), of the following: (a) all interest in respect of Indebtedness
accrued or capitalized during such period (whether or not actually paid during
such period) plus (b) the net amounts payable (or minus the net amounts
receivable) under Interest Rate Protection Agreements accrued during such
period (whether or not actually paid or received during such period) including
fees, but excluding reimbursement of legal fees and other similar transaction
costs and excluding payments required by reason of the early termination of
Interest Rate Protection Agreements in effect on the date hereof plus (c) all
fees, including letter of credit fees and expenses, incurred hereunder during
such period.
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"Interest Rate Protection Agreement" means any interest rate swap,
interest rate cap, interest rate collar or other interest rate hedging
agreement or arrangement.
"Investment" as applied to any Person means the amount paid or agreed
to be paid or loaned, advanced or contributed to other Persons, and in any
event shall include (i) any direct or indirect purchase or other acquisition of
any notes, obligations, instruments, stock, securities or ownership interest
(including partnership interests and joint venture interests) and (ii) any
capital contribution to any other Person.
"IRS" means the Internal Revenue Service and any governmental body or
agency succeeding to the functions thereof.
"Key-Management" means, as of the Closing Date, Stephen F. Johnston,
Sr. and Michael Riley and any substitutions, additions or deletions permitted
by Section 7.2(r).
"Laws" means all U.S. and foreign federal, state or local statutes,
laws, rules, regulations, ordinances, codes, policies, rules of common law, and
the like, now or hereafter in effect, including any judicial or administrative
interpretations thereof, and any judicial or administrative orders, consents,
decrees or judgments.
"Lien" means any security interest, pledge, bailment, mortgage,
hypothecation, deed of trust, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or other
similar arrangement or interest in real or personal property, now owned or
hereafter acquired, whether such interest is based on common law, statute or
contract.
"Life Insurance" has the meaning assigned to such term in Section
4.1(k) hereof.
"Loan Parties" means, collectively, the Company, Holdings and the
Affiliate Guarantors.
"Loan Points" means, collectively, a term sheet processing fee equal
to $35,000 which fee has been received by ACS, and a closing processing fee
equal to $402,500.
"Manage" and "Management" means generation, production, handling,
distribution, processing, use, storage, treatment, operation, transportation,
recycling, reuse and/or disposal, as those terms are defined in CERCLA, RCRA
and other Environmental Laws (including as those terms are further defined,
construed, or otherwise used in rules, regulations, standards, guidelines and
publications issued pursuant to, or otherwise in implementation of, such
Environmental Laws).
"Market Price" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of each day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security
is not quoted in the NASDAQ
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System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of thirty (30) days consisting of the day as of which
"Market Price" is being determined and the 29 consecutive Business Days prior
to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall not be used hereunder.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, liabilities or condition (financial or otherwise)
of the Loan Parties, taken as a whole.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 3(37) of ERISA) that is maintained for the benefit of the employees of
the Loan Parties or any member of the Controlled Group.
"Notes" has the meaning set forth in Section 2.1 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any other governmental agency,
department or instrumentality succeeding to the functions thereof.
"Permitted Business" means (i) the business conducted by the Loan
Parties on the Closing Date; namely, the provision of broad-based
telecommunications, engineering and construction services to the wireless,
wireline, cable (CATV) and fiber communication industries, including
radio/network engineering, RF compliance, site acquisition, site planning,
construction and project management, equipment installation and optimization,
structural and architectural design and engineering, site maintenance, site
management and build-to-suit; and (ii) such other business as any of the Loan
Parties may engage hereafter, subject to the prior written approval of the
Purchaser. The term "Permitted Business" shall not include, however, the
purchase or building of any telecommunications tower for speculation, but a
tower built with a minimum of one anchor tenant shall not be considered
speculative.
"Permitted Liens" has the meanings assigned to such term Section
7.2(b) hereof.
"Person" means any individual, partnership, limited partnership,
corporation, limited liability company, association, joint stock company,
trust, joint venture, unincorporated organization or governmental entity or
department, agency or political subdivision thereof.
"Plan" means any employee benefit plan (within the meaning of Section
3(3) of ERISA), other than a Multiemployer Plan, established or maintained by
the Loan Parties or any member of the Controlled Group.
"Pledge Agreement" has the meaning assigned to such term in Section
4.1(f) hereof.
"Pollutant" shall include any "hazardous substance" and any "pollutant
or contaminant" as those terms are defined in CERCLA; any "hazardous waste" as
that term is defined in RCRA;
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and any "hazardous material" as that term is defined in the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.), as amended (including as those
terms are further defined, construed, or otherwise used in rules, regulations,
standards, guidelines and publications issued pursuant to, or otherwise in
implementation of, said Environmental Laws); and including without limitation
any petroleum product or byproduct, solvent, flammable or explosive material,
radioactive material, asbestos, polychlorinated biphenyls (PCBs), dioxins,
dibenzofurans, heavy metals, and radon gas; and including any other substance
or material that is reasonably determined to present a threat, hazard or risk
to human health or the environment.
"Preferred Stock" means, collectively, Holding's Class A Convertible
Preferred Stock, $.01 par value, Series C Convertible Preferred Stock, no par
value, and Series D Senior Redeemable Preferred Stock, $.01 par value,
outstanding as of the Closing Date.
"Prime Rate" means the rate of interest that under current practice is
listed as such under the heading "Money Rates" in the Eastern Edition of the
Wall Street Journal, and if a range of rates is listed, the highest such rate,
and should such practice change, such other indication of the prevailing prime
rate of interest as may reasonably be chosen by Purchaser.
"Properties and Facilities" has the meaning assigned to such term in
Section 5.1(r).
"Proprietary Rights" means all patents, patent applications,
trademarks, trade names, service marks, copyrights, inventions, production
methods, licenses, formulas, know-how and trade secrets.
"Purchase Documents" means this Agreement, the Notes, the Warrants and
the Security Documents and all other agreements, instruments and documents
delivered in connection therewith as any or all of the foregoing may be
supplemented or amended from time to time.
"Purchaser" has the meaning assigned to such term in the preamble
hereto and in Section 6.2 hereof.
"Put Option" has the meaning assigned to such term in Section 9.1
hereof.
"Put Option Closing" has the meaning assigned to such term in Section
9.5 hereof.
"Put Price" has the meaning assigned to such term in Section 9.2
hereof.
"Put Shares" has the meaning assigned to such term in Section 9.2
hereof.
"Qualified Initial Public Offering" means the consummation of an
underwritten public offering of common stock by the Company to the general
public under the Securities Act by the Company resulting in net cash proceeds
of at least $30,000,000 to the Company and a minimum market capitalization of
$80,000,000.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C. ss.
6901 et seq.), as amended, and all rules, regulations, standards, guidelines,
and publications issued thereunder.
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"Registrable Securities" means any Common Stock purchased upon the
exercise of any Warrant and any Common Stock or other securities purchased
pursuant to Article 10 hereof.
"Removal," "Remedial" and "Response" actions shall include the types
of activities covered by CERCLA, RCRA, and other comparable Environmental Laws,
and whether the activities are those which might be taken by a government
entity or those which a government entity or any other person might seek to
require of waste generators, handlers, distributors, processors, users,
storers, treaters, owners, operators, transporters, recyclers, reusers,
disposers, or other persons under "removal," "remedial," or other "response"
actions.
"Reportable Event" means any of the events that are reportable under
Section 4043 of ERISA and the regulations promulgated thereunder, other than an
occurrence for which the thirty (30) day notice contained in 29 C.F.R. ss.
2615.3(a) is waived.
"Restricted Junior Payment" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any Equity
Interests of the Company or any of its Subsidiaries now or hereafter
outstanding, except a dividend or distribution payable solely in additional
Equity Interests; (ii) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock or membership interests
of the Company or any of its Subsidiaries now or hereafter outstanding; (iii)
any payment or prepayment of interest on, principal of, premium, if any,
redemption, conversion, exchange, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any Subordinated Indebtedness and/or
the Indebtedness of the Loan Parties to Purchaser; and (iv) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of the Company or any of
its Subsidiaries now or hereafter outstanding.
"SEC" means the Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"Securities" has the meaning assigned to such term in Section 2.3
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Agreement" has the meaning assigned to such term in Section
4.1(e) hereof
"Security Documents" means the Security Agreement, the Pledge
Agreement, the Financing Statements, and all other documents, instruments and
other materials necessary to create or perfect the security interests created
pursuant to the Pledge Agreement and Security Agreement.
"Seller" means, collectively, (i) all persons who have been a party to
an Acquisition as a seller and to whom Indebtedness is owed as identified on
the Seller and Seller Debt Schedule
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<PAGE> 16
annexed hereto; and (ii) such other Persons as from time to time hereafter are
party to any Approved Acquisitions as sellers.
"Seller Subordination Agreement" means (i) a Subordination Agreement,
among a Seller, the Purchaser and the Company; or (iii) such other agreement
(which may be incorporated into the document(s) evidencing the Seller Debt in
question), between or among a Seller, the Company and the Purchaser (or to
which the Purchaser is an express third party beneficiary) pursuant to which
such Seller shall agree to subordinate its rights and claims against the Loan
Party and any collateral on terms and conditions satisfactory to the Purchaser.
"Senior Debt" means all amounts payable pursuant to the Credit
Agreement in an amount not to exceed $27,000,000; provided, however, if another
lender becomes a party to the Credit Agreement as a lender thereunder, within
thirty (30) days of the Closing Date, the maximum amount of the senior debt
shall increase by the amount of the additional principal lent or committed to
by such new lender, but is in no event to exceed $37,000,000 and shall not
include an increase of the term debt portion thereof.
"Senior Debt Coverage" shall mean, as of the last day of the fiscal
month of the Company in question, the ratio of (i) Senior Debt determined as of
the end of such fiscal month, to (ii) EBITDA for the Test Period then ended
(computed, during the Annualization Period, on an Annualized basis); all
determined on a consolidated basis for the Company and its Subsidiaries in
accordance with GAAP.
"Senior Default" means the occurrence and continuance (after the
giving of any requisite notice and the lapse of any applicable grace period) of
a default in payment of all or any part of the Senior Debt or of any other
default in the terms of the Senior Debt.
"Senior Fixed Charge Coverage" means the ratio of : (i) EBITDA for the
Test Period, minus unfinanced Capital Expenditures made in such period, to the
extent then permitted to be made hereunder, minus income taxes paid in cash in
such period, to (ii) the sum (without duplication) of Interest Expense for such
period, plus payments (including prepayments) of principal on all Senior Debt
be made in such period, plus any Restricted Junior Payments (other than in
respect of Subordinated Indebtedness and Indebtedness to the Purchaser) made in
such period; all determined for the Company and its Subsidiaries with respect
to such period on a consolidated basis, in accordance with GAAP. In making the
foregoing calculations during the Annualization Period, EBITDA, Capital
Expenditures, income taxes and Interest Expense shall all be Annualized.
"Senior Lender" means Wachovia Bank, N.A. as agent for itself and the
other lenders party to the Credit Agreement.
"Stratford" means, individually and collectively, Stratford Capital
Partners, L.P. and Stratford Equity Partners, L.P.
"Subject Securities" means the Warrants, the Underlying Common Stock
and any Common Stock purchased pursuant to Article 10.
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<PAGE> 17
"Subordination Agreements" means, collectively, the Subordination and
Intercreditor Agreement, dated on or about the Closing Date, between the
Purchaser and Senior Lender; each Seller Subordination Agreement; and the
Affiliate Subordination Agreement.
"Subordinated Indebtedness" means (i) the Indebtedness of the Sellers,
to the extent that the payment thereof is the subject of a then effective
Seller Subordination Agreement; and (ii) other unsecured Indebtedness of the
Company or any of its Subsidiaries at any time outstanding which is
subordinated, in a form, substance and manner satisfactory to the Purchasers,
in right of payment and claim, to the Obligations and the Collateral, and which
is otherwise acceptable, in terms of amount, amortization and interest rate, to
the Purchaser.
"Subsidiary" of any corporation or limited liability company means any
other corporation, limited liability company or partnership of which the
outstanding capital stock, stockholdership interests or other ownership
interests possessing a majority of voting power in the election of directors,
managers or similar functions (otherwise than as the result of a default) is
owned or controlled by such corporation or limited liability company, directly
or indirectly through Subsidiaries.
"Test Period," for purposes of determining financial covenant
compliance, means each period of twelve (12) trailing fiscal months of the
Company ending with the fiscal month in question; provided, however, that,
during the Annualization Period, the "Test Period" shall be deemed to begin,
instead, on April 1, 1999 and end with the fiscal month in question, and the
relevant accounting items shall be Annualized.
"Total Debt" shall mean Funded Debt outstanding at the end of each
fiscal month, determined on a consolidated basis for the Company and its
consolidated Subsidiaries, in accordance with GAAP. Without limitation, all
Senior Debt and Notes outstanding on the date of determination shall be
included within the foregoing definition; and "Funded Debt outstanding" in
respect of Senior Debt and Notes shall mean the higher of (i) total Senior Debt
and Notes outstanding on the determination date, or (ii) the average daily
amount of Loans outstanding over the thirty (30) consecutive days immediately
preceding the date of determination.
"Total Debt Coverage" shall mean, for each fiscal month of the Company
described above, the ratio of (i) Total Debt as of the end of such fiscal
month, to (ii) EBITDA for the Test Period then ended (computed, during the
Annualization Period, on an Annualized basis); all determined for the Company
and its Subsidiaries on a consolidated basis, in accordance with GAAP.
"Tranche A Notes" has the meaning set forth in Section 2.1 hereof.
"Tranche B Notes" has the meaning set forth in Section 2.1 hereof.
"Transaction Documents" has the meaning assigned to such term in
Section 5.1(f) hereof.
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<PAGE> 18
"Transactions" means the Current Acquisitions and the incurrence of
debt and the issuance of equity in connection therewith, as contemplated by
this Agreement, the Notes, the Acquisition Agreement, and all other agreements
contemplated hereby and thereby.
"Underlying Common Stock" means (i) the Common Stock issued or
issuable upon exercise of the Warrants and (ii) any equity securities issued or
issuable with respect to the securities referred to in clause (i) above by way
of dividend, distribution or split or in connection with a combination of
equity security, recapitalization, merger, consolidation or other
reorganization.
"UST" means an underground storage tank, including as that term is
defined, construed and otherwise used in RCRA and in rules, regulations,
standards, guidelines and publications issued pursuant to RCRA and comparable
state and local laws.
"Voting and Co-Sale Agreement" has the meaning assigned to such term
in Section 4.1(h) hereof.
"Voting Securities" means the outstanding equity securities of any
class or classes of the Company having power under ordinary circumstances to
vote for the election of the Company's Board of Directors.
"Warrants" has the meaning assigned to such term in Section 2.2
hereof.
"Y2K Compliant" has the meaning given to such term in Section 5.1(l)
hereof.
1.2 Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense to
be determined, and any consolidation or other accounting computation to be
made, and the construction of any definition containing a financial term,
pursuant to this Agreement shall be determined or made in accordance with
generally accepted accounting principles in the United States of America
consistently applied ("GAAP"), unless such principles are inconsistent with the
express requirements of this Agreement.
1.3 Other Definitional Provisions; Construction. Whenever the
context so requires, neuter gender includes the masculine and feminine, the
singular number includes the plural and vice versa. The words "hereof" "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not in any particular provision of this
agreement, and references to section, article, annex, schedule, exhibit and
like references are references to this Agreement unless otherwise specified. A
Default or Event of Default shall "continue" or be "continuing" until such
Default or Event of Default has been cured by the Company or waived by
Purchaser. References in this Agreement to any Persons shall include such
Persons, successors and permitted assigns. Other terms contained in this
Agreement (that are not otherwise specifically defined herein) shall have
meanings provided in Article 9 of the Maryland Uniform Commercial Code on the
date hereof to the extent the same are used or defined therein.
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<PAGE> 19
ARTICLE 2
ISSUE AND SALE OF SECURITIES
2.1 Authorization and Issuance of the Notes. The Company has duly
authorized the issuance and sale to Purchaser of $13,000,000 in aggregate
principal amount of the Company's Tranche A Notes Due October 31, 2005 (the
"Tranche A Notes") and $4,500,000 in aggregate principal amount of the
Company's Tranche B Notes Due October 31, 2005 (the "Tranche B Notes and
collectively with the Tranche A Notes, the "Notes," including any Notes issued
in substitution therefor pursuant to Sections 6.3 and 6.4 hereof and any Notes
issued in exchange for Put Shares pursuant to Section 9.4 or Section 9.5), to
be substantially in the form of the notes attached hereto as Exhibits A-1 and
A-2, respectively.
2.2 Authorization and Issuance of the Warrants. Holdings has duly
authorized the issuance and sale to Purchaser of Warrants substantially in the
form of the warrant attached hereto as Exhibit B (collectively, the "Warrants"
and individually, a "Warrant") evidencing Purchaser's right to acquire up to
thirteen and nine-tenths of one percent (13.9%) of the Common Stock outstanding
at the time of Closing on a fully diluted basis.
2.3 Sale and Purchase. Subject to the terms and conditions and in
reliance upon the representations, warranties and agreements set forth herein,
(a) the Company shall sell to Purchaser, and Purchaser shall purchase from the
Company, (i) the Tranche A Notes in the aggregate principal amount of
$13,000,000 at the Closing and (ii) at the Company's option, the Tranche B
Notes, subject to the funding conditions set forth in Section 2.5 below, in the
aggregate principal amount of $4,500,000, and (b) Holdings shall sell to
Purchaser and Purchaser shall purchase from Holdings, (i) Warrants to purchase
eleven and one-half of one percent (11.5%) of the Common Stock outstanding on
the Closing Date on a fully diluted basis and (ii) Warrants to purchase up to
two and four-tenths of one percent (2.4%) of the Common Stock outstanding, at
the time of issuance of each such respective Warrant, on a fully diluted basis,
subject to the conditions set forth in Section 2.6 below. (The Warrants and the
Notes are sometimes referred to herein collectively as the "Securities.").
2.4 The Closing. Delivery of and payment for the Securities,
other than the Tranche B Notes and the Warrants issued pursuant thereto to the
extent not issued at such time (the "Closing") shall be made at the offices of
Smith, Gambrell & Russell, LLP, commencing at 10:00 a.m., local time, on
November 1, 1999, or at such place or on such other date on or before October
31, 1999, as may be mutually agreeable to the Loan Parties and Purchaser. The
date and time of the Closing as finally determined pursuant to this Section 2.4
are , referred to herein as the "Closing Date." Delivery of the Securities
shall be made to Purchaser against payment of the purchase price therefor, less
any unpaid Loan Points and any other amounts payable pursuant to Section
4.1(r)(ii) hereof, in federal funds by check or draft payable to or upon the
order of the Loan Parties, or by wire transfer of immediately available funds
in the manner agreed to by the Loan Parties and Purchaser. The Securities shall
be issued in such name or names and in such permitted denomination or
denominations as set forth in Annex A or as Purchaser may request in writing
not less than two (2) Business Days before the Closing Date.
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<PAGE> 20
2.5 Acquisition Loans. Purchaser agrees to purchase Tranche B
Notes from the Company during the period from the Closing Date to (but
excluding) the Acquisition Loan Expiry Date, up to an aggregate maximum amount
of Four Million Five Hundred Thousand Dollars ($4,500,000). Each loan made
pursuant to the purchase of a Tranche B Note is sometimes called herein an
"Acquisition Loan." Effective on the Acquisition Loan Expiry Date, the
commitment of Purchaser to purchase Tranche B Notes shall cease to be effective
and no Acquisition Loans may be obtained. The entire proceeds of each
Acquisition Loan shall be used to finance an Approved Acquisition, including
all expenses associated therewith, but for no other purpose.
The Company shall request each Acquisition Loan not later than thirty
(30) days prior to the intended disbursement date thereof, by giving written
notice to the Purchaser to such effect, specifying the intended amount thereof
and intended disbursement date thereof (which shall be a Business Day),
provided that the foregoing is not intended, and shall not be construed, to
reduce any obligations of the Company, contained in the definition of "Approved
Acquisition," to give notices and provide data to enable any intended
Acquisition to become an Approved Acquisition hereunder.
2.6 Tranche B Warrants. Upon the issuance of each Tranche B Note,
Holdings shall sell to Purchaser and Purchaser shall purchase from Holdings,
Warrants to purchase shares of Common Stock in equal proportion to the original
principal amount of such issued Tranche B Note divided by $4,500,000 multiplied
by two and four-tenths of one percent (2.4%) of the number of shares of Common
Stock outstanding as of the date of issuance of such respective Warrant on a
fully-diluted basis. In no event shall the aggregate number of shares of Common
Stock issuable upon the exercise of the Warrants issued pursuant to this
Section 2.6, as determined on the date of issuance of each such Warrant, exceed
two and four-tenths percent (2.4%) of the Common Stock outstanding as of the
Closing Date on a fully-diluted basis.
ARTICLE 3
REPAYMENT OF THE NOTES
3.1 Principal and Interest.
The Company covenants and agrees to make payments on the Notes as follows:
(a) On the first Business Day of each month, commencing on
December 1, 1999, during the term of the Tranche A Notes, the Company will pay
accrued interest computed at a rate per annum equal to 12.75% on the basis of a
year with 360 days, composed of twelve 30-day months, and the actual number of
days elapsed. The principal balance of the Tranche A Notes will be repaid in
eleven (11) equal monthly payments of $1,083,333 payable on the first Business
Day of each month commencing on December 1, 2004. A final payment of all
remaining principal, interest, fees and other amounts due hereunder will be
made on October 31, 2005.
(b) On the first Business Day of each month, commencing on the
first day of the month subsequent to the issuance of a respective Tranche B
Note, and thereafter during the term of Tranche B Notes, the Company will pay
accrued interest on a respective Tranche B Note
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<PAGE> 21
computed at a rate per annum equal to the Prime Rate as of the date of issuance
of such Tranche B Note plus four hundred fifty (450) basis points. Interest
will be computed on the basis of a year with 360 days, composed of twelve
30-day months, and the actual number of days elapsed. The principal balance of
the Tranche B Notes will be repaid in eleven (11) equal monthly payments, based
upon the aggregate outstanding principal balance of the Tranche B Notes as of
the first principal payment date, payable on the first Business Day of each
month commencing on December 1, 2004. A final payment of all remaining
principal, interest, fees and other amounts due hereunder will be made on
October 31, 2005.
3.2 Optional Prepayment of Notes. Subject to the terms of this
Section 3.2, the Company may prepay the outstanding principal amount of the
Notes in whole or in part at any time at a price equal to (1) the accrued
interest, if any, to the date set for prepayment, plus (2) a prepayment fee
representing the amortization of certain of Purchaser's costs incurred in
connection with the purchase of the Notes equal to the principal amount prepaid
multiplied by the following percentage:
<TABLE>
<CAPTION>
If Prepaid During the 12
Month Period Ending on
October 31 of the Following
Years: Percentage
--------------------------- ----------
<S> <C>
2000 5%
2001 4%
2002 3%
2003 2%
2004 1%
</TABLE>
Any prepayment must be in integer multiples of $250,000 (or such
lesser principal amount then outstanding under all of the Notes). All such
prepayments shall be applied ratably to the applicable Notes, first to the
remaining principal payments due on the Tranche A Notes in inverse order of
maturity and then to the remaining principal payments due on the Tranche B
Notes in inverse order of maturity, after application of prepayment to any
prepayment premium payable in connection therewith.
3.3 Notice of Optional Prepayment. If the Company shall elect to
prepay any Notes pursuant to Section 3.2 hereof, the Company shall give notice
of such prepayment to each holder of the Notes to be prepaid not less than
thirty (30) days or more than ninety (90) days prior to the date fixed for
prepayment, specifying (i) the date on which such prepayment is to be made,
(ii) the principal amount of such Notes to be prepaid on such date, and (iii)
the premium, if any, and accrued interest applicable to the prepayment. Such
notice shall be accompanied by a certificate of the President or the Vice
President and of the Treasurer of the Company that such prepayment is being
made in compliance with Section 3.2. Notice of prepayment having been so given,
the aggregate principal amount of the Notes specified in such notice, together
with accrued interest thereon and the premium, if any, shall become due and
payable on the prepayment date set forth in such notice.
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<PAGE> 22
3.4 Mandatory Prepayment. The Notes shall be prepaid in full,
together with all interest, fees and expenses plus a prepayment fee computed in
accordance with Section 3.2, as if such prepayment were a voluntary prepayment,
in the event of a Change of Control or an uncured or unwaived Event of Default
under Sections 8.1(a), (d), (f) or (g); provided, however, that no prepayment
fee shall be payable if such prepayment is in connection with a Qualified
Initial Public Offering or the amounts required to be prepaid are used to
permanently reduce the amount of the Senior Debt.
3.5 Home Office Payment. So long as Purchaser or its successors
and assigns shall be the holder of any Note, and notwithstanding anything
contained in this Agreement or such Note to the contrary, the Company will pay
all sums becoming due on such Note for principal, premium, if any, and interest
by the method and at the address specified for such purpose below the holder's
name in Annex A, or by such other method or at such other address as the holder
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, the holder shall surrender such Note for cancellation, reasonably
promptly after such request, to the Company at their principal executive
office.
3.6 Taxes. Any and all payments by the Loan Parties hereunder or
under the Notes or other Purchase Documents that are made to or for the benefit
of Purchaser shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interests and all other liabilities with respect
thereto (collectively, "Taxes"), excluding, taxes imposed on Purchaser's net
income or capital and franchise taxes imposed on it by the jurisdiction under
the laws of which it is organized or any political subdivision thereof (all
such nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). If
the Loan Parties shall be required by law to deduct any Covered Taxes from or
in respect of any sum payable hereunder or under any Notes or other Purchase
Document to or for the benefit of Purchaser, the sum payable shall be increased
as may be necessary so that after making all required deductions of Covered
Taxes (including deductions of Covered Taxes applicable to additional sums
payable under this paragraph), Purchaser receives an amount equal to the sum it
would have received had no such deductions been made. The Loan Parties shall
make such deductions and the Loan Parties shall pay the full amount so deducted
to the relevant taxation authority or other authority in accordance with
applicable law. In addition, the Loan Parties agree to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies that
arise at any time or from time to time from any payment made under any and all
Purchase Documents or from the execution or delivery by the Loan Parties or
from the filing or recording or maintenance of, or otherwise with respect to
the exercise by Purchaser of its rights under any and all Purchase Documents
(collectively, "Other Taxes"). The Loan Parties, jointly and severally, will
indemnify Purchaser for the full amount of Covered Taxes imposed on or with
respect to amounts payable hereunder and Other Taxes, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. Payment of this indemnification shall be made within thirty (30) days
from the date Purchaser provides the Loan Parties with a certificate certifying
and setting forth in reasonable detail the calculation thereof as to the amount
and type of such Taxes. Any such certificates submitted by Purchaser in good
faith to the Loan Parties shall, absent manifest error, be final, conclusive
and binding on all
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<PAGE> 23
parties. The obligation of the Loan Parties under this Section 3.6 shall
survive the payment of the Notes and the termination of this Agreement. Within
thirty (30) days after the Loan Parties having received a receipt for payment
of Covered Taxes and/or Other Taxes, the Loan Parties shall furnish to
Purchaser, the original or certified copy of a receipt evidencing payment
thereof.
3.7 Maximum Lawful Rate. This Agreement, the Notes and the other
Purchase Documents are hereby limited by this Section 3.7. In no event, whether
by reason of acceleration of the maturity of the amounts due hereunder or
otherwise, shall interest and fees contracted for, charged, received, paid or
agreed to be paid to Purchaser exceed the maximum amount permissible under such
applicable law. If, from any circumstance whatsoever, interest and fees would
otherwise be payable to Purchaser in excess of the maximum amount permissible
under applicable law, the interest and fees shall be reduced to the maximum
amount permitted under applicable law. If from any circumstance, Purchaser
shall have received anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excess of interest
shall be applied to the reduction of the principal amount of the Notes, in such
manner as may be determined by Purchaser, and not to the payment of fees or
interest, or if such excessive interest exceeds the unpaid balance of the
principal amount of the Notes, such excess shall be refunded to the Company.
3.8 Capital Adequacy. If, after the date hereof, either the
introduction of or any change of the interpretation of any law or the
compliance by Purchaser with any guideline or request from any governmental
authority (whether or not having the force of law) has or would have the affect
of reducing the rate of return on the capital or assets of Purchaser as a
consequence of, as determined by Purchaser in its sole discretion, the
existence of Purchaser's obligations under this Agreement or any other Purchase
Documents, then, upon demand by Purchaser, the Loan Parties immediately shall
pay to Purchaser, from the time as specified by Purchaser, additional amounts
sufficient to compensate Purchaser in light of such circumstances. The
obligations of the Loan Parties under this Section 3.8 shall survive the
payments of the Notes and the termination of this Agreement.
ARTICLE 4
CONDITIONS
4.1 Conditions to Purchase of Securities. The obligation of
Purchaser to purchase and pay for the Securities is subject to the
satisfaction, prior to or at the Closing, of the following conditions (and with
respect to the Tranche B Notes, the additional conditions contained in Section
2.5):
(a) Representations and Warranties True. The representations and
warranties contained in Article 5 hereof shall be true and correct in all
material respects at and as of the Closing Date as though then made, except to
the extent of changes caused by the transactions expressly contemplated herein.
(b) Material Adverse Change. There will have been no material
adverse change in the business or financial condition of the Loan Parties,
taken as a whole, or the capital markets since December 31, 1998.
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<PAGE> 24
(c) Current Acquisitions. Purchaser shall have received copies of
all duly executed Current Acquisition Documents, and be satisfied therewith in
all respects; and the Current Acquisitions shall have been consummated
substantially in accordance with the terms and conditions thereof.
(d) Employment Agreements. The Loan Parties shall have provided
Purchaser with copies of all employment contracts and all other agreements
providing compensation in any form whatsoever, including but not limited to,
any benefit plans, between the Loan Parties and any and all directors, officers
or employees of the Loan Parties.
(e) Security Agreement. The Loan Parties shall have entered into
a security agreement in form and substance as set forth in Exhibit C attached
hereto (as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof, the "Security Agreement"). The Loan
Parties shall have executed and delivered to Purchaser such financing
statements ("Financing Statements") as Purchaser shall require in order to
perfect and maintain the continued perfection of the security interest created
by the Security Agreement. Purchaser shall have received reports of filings
with appropriate government agencies showing that there are no Liens on the
assets of the Loan Parties other than Permitted Liens and the Liens of the
Purchaser shall be subordinated in lien priority to no more than $27,000,000 in
Indebtedness.
(f) Pledge Agreement. Such of the Loan Parties who are owners of
the issued and outstanding equity securities of other Loan Parties, shall have
entered into a pledge agreement in form and substance as set forth in Exhibit E
attached hereto (the "Pledge Agreement") and shall have taken the actions
required thereunder in order to perfect the security interests granted under
the Pledge Agreement.
(g) Leases. The Purchaser shall have delivered to Purchaser
landlord consents and lien waivers in the form of Exhibit F attached hereto
(the "Waivers"), for each of the parcels of real property leased by any of
them.
(h) Voting and Co-Sale Agreement. Holdings, Stephen F. Johnston,
Sr., Michael Riley, Stratford Capital Partners, L.P., Stratford Equity
Partners, L.P., and Purchaser will have entered into a Second Amended and
Restated Voting and Co-Sale Agreement (as the same may be amended, modified or
supplemented and in effect from time to time as permitted hereunder the "Voting
and Co-Sale Agreement").
(i) Equity Investment. Holdings shall have received a cash
investment from Stratford or another third-party investor of $7,500,000 for
Preferred Stock on terms reasonably acceptable to Purchaser.
(j) Excess Availability. After giving effect to the Current
Acquisitions, and the making of all loans being made on the Closing Date, the
Company shall have at least $7,500,000 in a combination of immediate
availability under its revolving loan under the Senior Debt and cash on hand.
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<PAGE> 25
(k) Equity. After giving effect to the Current Acquisitions, and
the making of all loans being made on the Closing Date, the equity of the
Company shall be at least $11,500,000.
(l) EBITDA. EBITDA of the Loan Parties on a consolidated pro
forma basis, including the Current Acquisitions, for the twelve (12) months
ended June 30, 1999 shall be no less than $5,700,000.
(m) Existing Credit Agreement. The Purchaser shall have received
evidence that the principal of and interest on, and all other amounts owing in
respect of, the Existing Credit Agreement shall have been, or shall
simultaneously be, repaid in full, that all commitments thereunder shall have
been terminated and that all guaranties in respect of, and all Liens securing,
any such obligations shall have been released (or arrangements for such release
satisfactory to the Purchaser shall have been made).
(n) Credit Agreement. The Credit Agreement initially will provide
for loans to the Company in the aggregate original principal amount of not less
than $25,000,000, the term of such Indebtedness shall be for a minimum of five
(5) years, and the provisions and terms of the Credit Agreement shall otherwise
be in form and substance satisfactory to Purchaser, and the Credit Agreement
will be in full force and effect as of the Closing Date and will not have been
amended or modified.
(o) Additional Debt. The Loan Parties shall have no more than
$30,000,000 in Indebtedness (excluding the Indebtedness to the Purchaser) of
which at least $10,000,000 is amortizing.
(p) Subordination Agreements. Senior Lender, each Seller (except
as provided in Section 4.1(x) below), and each party to the Affiliate
Subordination Agreements shall have executed the Subordination Agreements to
which they are party, in form and substance reasonably satisfactory to
Purchaser.
(q) Life Insurance. The Loan Parties shall have delivered to
Purchaser paid life insurance policies insuring the lives of Michael W. Riley,
in the amount of $1,000,000 and Stephen F. Johnston, Sr., in the amount of
$1,500,000, as of the Closing each naming the Purchaser as beneficiary and
issued by a carrier reasonably acceptable to Purchaser (the "Life Insurance")
with the understanding that the proceeds thereof shall be used by the Purchaser
to reduce the Indebtedness due Purchaser from the Loan Parties.
(r) Closing Documents. The Loan Parties will have delivered or
caused to be delivered to Purchaser all of the following documents in form and
substance satisfactory to Purchaser:
(i) Notes (as designated by Purchaser pursuant to
Section 2.4 hereof) in aggregate original principal amounts as set
forth herein, duly completed and executed by the Company;
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(ii) one or more Warrants (as designated by Purchaser
pursuant to Section 2.4 hereof) evidencing the right to acquire the
number of Common Stock set forth in Section 2.2 hereof, subject to
adjustment from time to time in accordance with the terms thereof;
(iii) certificates of good standing dated not more than 10
days prior to the Closing Date for each of the Loan Parties issued by
its state of organization and each jurisdiction where it is qualified
to do business as a foreign business entity;
(iv) copies of the Charter Documents of each of the Loan
Parties, certified by the appropriate governmental official of the
jurisdiction of its organization as of a date not more than 10 days
prior to the Closing Date;
(v) copies of the Bylaws of each of the Loan Parties,
certified as of the Closing Date by the secretary, assistant secretary
or other comparable officer of the respective Loan Parties;
(vi) certificates of the secretaries, the assistant
secretaries or other comparable officers of each of the Loan Parties,
certifying as to the names and true signatures of the officers of the
respective Loan Parties authorized to sign this Agreement and the
other documents to be delivered by each of the Loan Parties hereunder;
(vii) copies of the respective resolutions duly adopted by
each of the Loan Parties' Board of Directors authorizing the
execution, delivery and performance by the Loan Parties of this
Agreement and each of the other agreements, instruments and documents
contemplated hereby to which the Loan Parties are a party, and the
consummation of all of the other Transactions, certified as of the
Closing Date by the secretaries or assistant secretaries or other
comparable officers of the Loan Parties;
(viii) transaction certificates dated as of the Closing
Date from an officer of each of the Loan Parties stating that the
conditions specified in this Section 4.1 have been fully satisfied by
or on behalf of the Loan Parties or waived by Purchaser;
(ix) certificates of insurance evidencing the existence
of all insurance required to be maintained by each of the Loan Parties
pursuant to Section 7.1(c), and Purchaser shall be satisfied with the
type and extent of such coverage;
(x) an opinion of Smith, Gambrell & Russell, LLP,
counsel to the Loan Parties, in form and substance satisfactory to
Purchaser; and
(xi) such other documents relating to the Transactions
contemplated by this Agreement as Purchaser or its special counsel may
reasonably request.
(s) Purchaser's Fees and Expenses.
(i) Loan Points. On the Closing Date, the Loan Parties
shall pay the balance of the Loan Points to ACS (and the Loan Parties
hereby authorize Purchaser to deduct
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from the aggregate proceeds from the sale of the Notes by the Loan
Parties, the unpaid amount of such Loan Points);
(ii) Other Fees and Expenses. On the Closing Date, the
Loan Parties shall have paid the fees and expenses of Purchaser,
payable by the Loan Parties pursuant to Section 13.4 hereof less any
expense deposits already received by the Purchaser, (and the Loan
Parties hereby authorize Purchaser to deduct from the aggregate
proceeds of the sale of the Notes by the Loan Parties, all such
amounts).
(t) Legal Investment. On the Closing Date, Purchaser's purchase
of the Securities shall not be prohibited by any applicable law, rule or
regulation of any governmental authority (including, without limitation,
Regulations T, U or X of the Board of Governors of the Federal Reserve System)
as a result of the promulgation or enactment thereof or any changes therein, or
change in the interpretation thereof by any governmental authority, subsequent
to the date of this Agreement.
(u) Due Diligence. Purchaser shall have completed such business,
legal and accounting due diligence as it deems necessary in its sole and
absolute discretion.
(v) Proceedings. All proceedings taken or required to be taken in
connection with the transactions contemplated hereby to be consummated at or
prior to the Closing and all documents incident thereto will be satisfactory in
form and substance to Purchaser and its special counsel.
(w) Waiver. Any condition specified in this Section 4.1 may be
waived by Purchaser; provided that no such waiver will be effective against
Purchaser unless it is set forth in a writing executed by Purchaser.
(x) Existing Seller Debts. All Indebtedness due Sellers existing
on the Closing Date (exclusive of any arising in connection with the Current
Acquisitions) shall either: (i) be fully paid and satisfied on or before five
(5) days after the Closing Date; or (ii) (A) be made the subject of a Seller
Subordination Agreement on the Closing Date and (B) be the subject of an escrow
arrangement, the form and substance of which shall be subject to Purchaser's
approval, but which, in any event, shall provide as follows: (1) an amount
sufficient to pay in full each Indebtedness due Seller made subject thereto
(herein, each "Escrowed Seller Debt"), including principal, accrued interest
thereon through at least January 7, 2000 and any prepayment premium, shall be
deposited in an escrow account (the "Escrow Account") using proceeds of the
sale to Purchaser of a Tranche A Note to be established on or prior to the
Closing Date with SouthTrust Bank, Atlanta or another financial institution not
a Lender (as defined in the Credit Agreement) but otherwise mutually acceptable
to the Company and Purchaser (the "Escrow Agent"); (2) no funds on deposit in
the Escrow Account shall be withdrawn therefrom except to pay Escrowed Seller
Debt or as set forth below; (3) each Escrowed Seller Debt shall be paid in full
from funds on deposit in the Escrow Account not later than January 7, 2000; and
(4) to the extent that at such time as all Escrow Seller Debt has been paid in
full there exists any funds in the Escrow Account, then such remainder shall be
applied by the Company against Revolving Loans (as defined in the Credit
Agreement) then outstanding and, thereafter, the amount of such
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payment shall be reserved against borrowing availability under the Credit
Agreement to be made available for the Company to pay other Indebtedness due
Sellers at the Company's discretion.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
5.1 Representations and Warranties of the Loan Parties. As a
material inducement to Purchaser to enter into this Agreement and purchase the
Notes and the Warrants, the Loan Parties hereby, jointly and severally,
represent and warrant to Purchaser as follows:
(a) Organization and Power. Each of the Loan Parties (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its respective state of incorporation as indicated on the Qualification
Schedule, (ii) has all requisite corporate or other organizational power and
authority and all material licenses, permits, approvals and authorizations
necessary to own and operate its properties, to carry on its businesses as now
conducted and presently proposed to be conducted and to carry out the
Transactions, and (iii) is qualified to do business in the jurisdictions shown
on the "Corporate Schedule," which constitute every jurisdiction where the
failure to so qualify would have a Material Adverse Effect. The copies of the
organizational documents of the Loan Parties that have been furnished to
Purchaser reflect all amendments made thereto at any time on or prior to the
date of this Agreement and are correct and complete.
(b) Principal Business. The Loan Parties are not engaged in any
business other than the Permitted Business.
(c) Financial Statements and Financial Projections.
(i) Financial Statements. The Loan Parties have
delivered to the Purchaser copies of the Company's audited
consolidated year-end financial statements for and as of the end of
the fiscal year ended December 31, 1998 and the two month period ended
December 31, 1997 (the "Annual Statements"). The Annual Statements
were compiled from the books and records maintained by the Company's
management, are correct and complete and fairly represent the
consolidated financial condition of the Company as of their dates and
the results of operations for the fiscal periods then ended and have
been prepared in accordance with GAAP consistently applied.
(ii) Financial Projections. The Loan Parties have
delivered to the Purchaser financial projections of the Loan Parties
for the period August 1999 through December 2004 derived from various
assumptions of the Loan Parties' management (the "Financial
Projections"). The Financial Projections represent a reasonable range
of possible results in light of the history of the business, present
and foreseeable conditions and the intentions of the Loan Parties'
management. The Financial Projections accurately reflect the
liabilities of the Loan Parties upon consummation of the transactions
contemplated hereby as of the Closing Date.
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(iii) Accuracy of Financial Statements. The Loan Parties
do not have any liabilities, contingent or otherwise, or forward or
long-term commitments that are not disclosed in the Annual Statements
or in the notes thereto, and except as disclosed therein there are no
unrealized or anticipated losses from any commitments of the Loan
Parties which may cause a Material Adverse Effect.
(d) Capitalization and Related Matters. As of the Closing Date
and immediately thereafter, the authorized capitalization of Holdings and the
Company, the capitalization and ownership of the outstanding equity securities
of each of the other Loan Parties is as shown on the Corporate Schedule.
Immediately following the Closing, none of the Loan Parties will have
outstanding any stock or securities convertible or exchangeable for any of its
equity securities other than as shown on the Corporate Schedule and will not
have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital securities, other than as shown on the Corporate Schedule. As of
the Closing Date, the Loan Parties will not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any of
its equity securities, except as set forth on the Corporate Schedule. As of the
Closing Date, all of the Loan Parties' outstanding capital securities will be
validly issued, fully paid and nonassessable. Holdings has, and will maintain
at all times, sufficient authorized shares of Common Stock to allow for the
exercise of the Warrants.
There are no statutory or contractual stockholders' preemptive rights
with respect to the issuance of the Warrants hereunder except such as have been
waived. The Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its capital
stock, and the offer, sale and issuance of the Securities hereunder do not
require registration under the Securities Act or any applicable state
securities laws except as provided in Section 5.1(k). There are no agreements
among the Company's stockholders with respect to the voting or transfer of the
Company's capital securities other than as contemplated herein.
(e) Subsidiaries. The Loan Parties do not own, or hold any rights
to acquire, any shares of stock or any other security or interest in any other
Person other than the ownership of shown on the Corporate Schedule.
(f) Authorization; No Breach. The execution, delivery and
performance of this Agreement, the other Purchase Documents and all other
agreements contemplated hereby and thereby to which any of the Loan Parties is
a party, including, without limitation, the Credit Agreement, the Securities
Purchase Agreement between Stratford and Holdings dated as of the Closing Date,
and all agreements related to the Acquisitions (collectively, the "Transaction
Documents"), and the consummation of the Transactions have been duly authorized
by each of the Loan Parties. The Transaction Documents have been duly and
validly executed and delivered by the Loan Parties and constitute legal, valid
and binding obligations of each of the Loan Parties, enforceable in accordance
with their respective terms. The execution and delivery by each of the Loan
Parties of the Transaction Documents and the consummation of the Transactions
do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) except as
created pursuant to the Security
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Documents or otherwise permitted hereunder, result in the creation of any Lien
upon any of the Loan Parties' capital stock or assets pursuant to, (iv) give
any third party the right to accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption
or other action by or notice to any Governmental Authority pursuant to, the
Charter Documents or Bylaws of any of the Loan Parties, or any law, statute,
rule or regulation to which any of the Loan Parties are subject, or any
agreement, instrument, order, judgment or decree to which any of the Loan
Parties are a party or to which it or its assets are subject.
(g) Governmental Approvals. Except as specifically provided by
the Transaction Documents, no registration with or consent or approval of, or
other action by, any Governmental Authority is or will be required in
connection with the consummation of the Transactions by any of the Loan
Parties.
(h) Enforceability. This Agreement constitutes, and each of the
other Transaction Documents when duly executed and delivered by the Loan
Parties who are parties thereto will constitute, legal, valid and binding
obligations of the respective Loan Parties, enforceable in accordance with
their respective terms.
(i) No Material Adverse Change. Since December 31, 1998, there
has been no event or occurrence that is likely to have a Material Adverse
Effect on the Loan Parties.
(j) Litigation. Except as described in the "Litigation Schedule,"
there are no actions, suits or proceedings at law or in equity or by or before
any arbitrator or any Governmental Authority now pending or, to the best
knowledge of the Loan Parties' respective management after due inquiry,
threatened against or filed by or affecting any of the Loan Parties or their
respective directors or officers or the businesses, assets or rights of any of
the Loan Parties. The Loan Parties and their respective directors or officers
shall promptly provide Purchaser with a copy of all pleadings of all lawsuits
filed against others and, in the case of other actions, a letter stating the
nature of such suits and a copy of all pleadings.
(k) Compliance with Laws. None of the Loan Parties is in
violation in any material respect of any applicable Law, excluding, however, a
possible violation of Louisiana Blue Sky laws with respect to the issuance of
capital stock to a single employee located there, but such violation shall not
subject any of the Loan Parties to any material penalties or damages. None of
the Loan Parties is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any Governmental Authorities. None of the Loan
Parties is in, and the consummation of the Transactions will not cause any,
default concerning any judgment, order, writ, injunction or decree of any
Governmental Authorities, and there is no investigation pending or threatened
against or affecting any of the Loan Parties by any Governmental Authorities.
To the best knowledge of the Loan Parties, during the past ten (10) years, none
of the officers, directors or management of any of the Loan Parties have been
arrested or convicted of any material crime nor have any of them been bankrupt
or an officer or director of a bankrupt company.
(l) Year 2000 Compliance. Unless the Company has done so already
by the Closing Date, as soon as practicable, but in any event by not later than
November 30, 1999, the Company
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will (and will cause each Loan Party to) take all action reasonably necessary
to ensure that its computer based systems are capable of the following: (i)
handling date information involving all and any dates before, during and/or
after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (ii) operating, accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000 and without any material, adverse change in
performance; and (iii) storing and providing date input information without
creating any ambiguity as to the century (systems satisfying clauses (i)
through (iii) above herein sometimes referred to as being "Y2K Compliant").
Subsequent to November 30, 1999, the Company shall monitor the Loan Parties'
being Year 2000 Compliant, and shall report promptly to the Loan Parties in
writing in the event of any actual or anticipated failure by any Loan Party to
be (or remain) Year 2000 Compliant, specifying in detail the nature of the
failure, the equipment or systems involved and the Company's plan to address
and resolve such failure.
(m) Environmental Protection. Except as specified in
"Environmental Schedule" and after giving effect to the Transactions: (a) the
businesses of the Loan Parties, the methods and means employed by each of the
Loan Parties in the operation thereof (including all operations and conditions
at or in the properties of the Loan Parties), and the assets owned, leased,
managed, used, controlled, held or operated by each of the Loan Parties, comply
in all material respects with all applicable Environmental Laws; (b) with
respect to the Properties and Facilities, and except as disclosed in the
Environmental Schedule, the Loan Parties have obtained, possess, and are in
full compliance with all permits, licenses, reviews, certifications, approvals,
registrations, consents, and any other authorizations required under any
Environmental Laws; (c) none of the Loan Parties has received (i) any claim or
notice of violation, lien, complaint, suit, order or other claim or notice to
the effect that any of the Loan Parties is or may be liable to any Person as a
result of (A) the environmental condition of any of its properties or any other
property, or (B) the release or threatened release of any Pollutant, or (ii)
any letter or request for information under Section 104 of the CERCLA, or
comparable state laws, and to the best of the Loan Parties' knowledge, none of
the operations of any of the Loan Parties is the subject of any investigation
by a Governmental Authority evaluating whether any remedial action is needed to
respond to a release or threatened release of any Pollutant at the Properties
and Facilities or at any other location, including any location to which any of
the Loan Parties has transported, or arranged for the transportation of, any
Pollutants with respect to the Properties and Facilities; (d) except as
disclosed in the Environmental Schedule, none of the Loan Parties nor any prior
owner or operator of the Properties and Facilities has incurred in the past, or
is now subject to, any Environmental Liabilities; (e) except as disclosed in
the Environmental Schedule, there are no Liens, covenants, deed restrictions,
notice or registration requirements, or other limitations applicable to the
Properties and Facilities, based upon any Environmental Laws or other legal
obligations; (f) there are no USTs located in, at, on, or under the Properties
and Facilities other than the USTs identified in the Environmental Schedule as
USTs; and each of those USTs is in full compliance with all Environmental Laws
and other legal obligations; and (g) except as disclosed in the Environmental
Schedule, there are no PCBs, lead paint, asbestos (of any type or form), or
materials, articles or products containing PCBs, lead paint or asbestos,
located in, at, on, under, a part of, or otherwise related to the Properties
and Facilities (including, without limitation, any building, structure, or
other improvement that is a part of the Properties and Facilities), and all of
the PCBs, lead paint, asbestos, and materials, articles and products
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containing PCBs, lead paint or asbestos identified in the Environmental
Schedule are in full compliance with all Environmental Laws and other legal
obligations.
(n) Legal Investments; Use of Proceeds. The Loan Parties will use
the proceeds from the sale of the Notes to refinance existing indebtedness,
finance the costs of the Acquisitions and for general working capital purposes.
None of the Loan Parties is engaged in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" or "margin security"
(within the meaning of Regulations T, U or X issued by the Board of Governors
of the Federal Reserve System), and no proceeds of the sale of the Notes will
be used to purchase or carry any margin stock or margin security or to extend
credit to others for the purpose of purchasing or carrying any margin stock or
margin security.
(o) Taxes. Each of the Loan Parties has filed or caused to be
filed all Federal, state and local tax returns which are required to be filed
by it, and has paid or caused to be paid all taxes shown to be due and payable
on such returns or on any assessments received by it, including payroll taxes.
(p) Labor and Employment. Each of the Loan Parties is and each of
its Plans are in compliance in all material respects with those provisions of
ERISA, the Code, the Age Discrimination in Employment Act, and the regulations
and published interpretations thereunder which are applicable to the Loan
Parties or any such Plan. As of the date hereof, no Reportable Event has
occurred with respect to any Plan as to which any of the Loan Parties is or was
required to file a report with the PBGC. No Plan has any material amount of
unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of
ERISA) or any accumulated funding deficiency (within the meaning of Section
302(a)(2) of ERISA), whether or not waived, and neither the Loan Parties nor
any member of the Controlled Group has incurred or expects to incur any
material withdrawal liability under Subtitle E of Title IV of ERISA to a
Multiemployer Plan. Except as reflected in the Loan Parties' respective balance
sheets dated as of December 31, 1998, each of the Loan Parties is in compliance
in all material respects with all labor and employment laws, rules, regulations
and requirements of all applicable domestic and foreign jurisdictions. There
are no pending of threatened labor disputes, work stoppages or strikes.
(q) Investment Company Act; Public Utility Holding Company Act.
None of the Loan Parties is (a) an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or (b) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(r) Properties; Security Interests. The Loan Parties have good
and marketable title to, or valid leasehold interests in, all of the material
assets and properties used or useful by each of the Loan Parties in the
Business (collectively, the "Properties and Facilities"), subject to no Liens
except for Permitted Liens. All of the Properties and Facilities are in good
repair, working order and condition and all such assets and properties are
owned by the Loan Parties free and clear of all Liens, except for Permitted
Liens. The Properties and Facilities constitute all of the material assets,
properties and rights of any type used in or necessary for the conduct of the
Business. The Security Documents create and grant to Purchaser a valid and
perfected first priority security
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interest in all the collateral thereunder, subject only to Permitted Liens. All
real estate owned or leased by any of the Loan Parties is listed on the
"Properties Schedule."
(s) Intellectual Property; Licenses. The Loan Parties possess all
Proprietary Rights necessary to conduct the Business as heretofore conducted or
as proposed to be conducted. All Proprietary Rights registered in the name of
any of the Loan Parties and applications therefor filed by any of the Loan
Parties are listed on the "Intellectual Property Schedule." No event has
occurred that permits, or after notice or lapse of time or both would permit,
the revocation or termination of any of the foregoing which taken in isolation
or when considered with all other such revocations or terminations could have a
Material Adverse Effect. The Loan Parties do not have notice or knowledge of
any facts or any past, present or threatened occurrence that could preclude or
impair the Loan Parties' ability to retain or obtain any authorization
necessary for the operation of the Business.
(t) Solvency. After giving effect to the Transactions, (i) the
fair value of the assets of each of the Loan Parties, at a fair valuation, will
exceed its debts and liabilities, subordinated, contingent or otherwise, (ii)
the present fair saleable value of the property of each of the Loan Parties
will be greater than the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured,
(iii) each of the Loan Parties will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, and (iv) none of the Loan Parties will have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
(u) Complete Disclosure. All factual information furnished by or
on behalf of any of the Loan Parties to Purchaser for purposes of or in
connection with this Agreement or the Transactions is, and all other such
factual information hereafter furnished by or on behalf of any of the Loan
Parties will be, true and accurate in all material respects on the date as of
which such information is furnished and not incomplete by omitting to state any
fact necessary to make such information not misleading at such time in light of
the circumstances under which such information was provided.
(v) Side Agreements. None of the Loan Parties nor any Affiliate
of the Loan Parties and no director, officer or employee of any of the Loan
Parties or any of its Affiliates, respectively, has entered into, as of the
date hereof, any side agreement, either oral or written, with any individual or
business, pursuant to which the director, officer, employee, Loan Parties or
Affiliate has agreed to do anything beyond the requirements of the formal,
written contracts executed by the Loan Parties and disclosed to Purchaser
herein.
(w) Broker's or Finder's Commissions. No broker's or finder's or
placement fee or commission will be payable to any broker or agent engaged by
the Loan Parties or any of its officers, directors or agents with respect to
the issue of the Notes, the Warrants or the transactions contemplated by this
Agreement, including without limitation the Transactions, except for fees
payable to Purchaser, Stratford, the Senior Lender and to Wachovia Securities.
The Loan Parties jointly and severally, agree to indemnify Purchaser and hold
it harmless from
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against any claim, demand or liability for broker's or finder's or placement
fees or similar commissions, whether or not payable by the Loan Parties,
alleged to have been incurred in connection with such transactions, other than
any broker's or finder's fees payable to Persons engaged by Purchaser without
the knowledge of the Loan Parties.
5.2 Absolute Reliance on the Representations and Warranties. All
representations and warranties contained in this Agreement and any financial
statements, instruments, certificates, schedules or other documents delivered
in connection herewith, shall survive the execution and delivery of this
Agreement, regardless of any investigation made by Purchaser or on Purchaser's
behalf.
ARTICLE 6
TRANSFER OF NOTES
6.1 Restricted Securities. Purchaser acknowledges that the
Securities have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, and that the Loan Parties are not
required to register the Notes or the Warrants, as the case may be.
6.2 Legends; Purchaser's Representations. Purchaser hereby
represents and warrants to the Loan Parties that it is an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act and is acquiring the
Securities for investment for its own account, with no present intention of
dividing its participation with others (except for a potential transfer or
transfers of the Securities to an affiliate or affiliates of Purchaser) or
reselling or otherwise distributing the same in violation of the Securities Act
or any applicable state securities laws. Upon the assignment or transfer by
Purchaser or any of its successors or assignees of all or any part of the
Securities, the term "Purchaser" as used herein shall thereafter mean, to the
extent thereof, the then holder or holders of such Securities, or portion
thereof.
6.3 Transfer of Notes. Subject to Section 6.2 hereof, a holder of
a Note may transfer such Note to a new holder, or may exchange such Note for
Notes of different denominations (but in no event of denominations of less than
$100,000 in original principal amount), by surrendering such Note to the
Company duly endorsed for transfer or accompanied by a duly executed instrument
of transfer naming the new holder (or the current holder if submitted for
exchange only), together with written instructions for the issuance of one or
more new Notes specifying the respective principal amounts of each new Note and
the name of each new holder and each address therefor. The Loan Parties shall
simultaneously deliver to such holder or its designee such new Notes and shall
mark the surrendered Notes as canceled. In lieu of the foregoing procedures, a
holder may assign a Note (in whole but not in part) to a new holder by sending
written notice to the Company of such assignment specifying the new holder's
name and address; in such case, the Company shall promptly acknowledge such
assignment in writing to both the old and new holder.
6.4 Replacement of Lost Securities. Upon receipt of evidence
reasonably satisfactory to the Loan Parties of the mutilation, destruction,
loss or theft of any Securities and the ownership thereof, the Loan Parties
shall, upon the written request of the holder of such
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Securities, execute and deliver in replacement thereof new Securities in the
same form, in the same original principal amount and dated the same date as the
Securities so mutilated, destroyed, lost or stolen; and such Securities so
mutilated, destroyed, lost or stolen shall then be deemed no longer outstanding
hereunder. If the Securities being replaced have been mutilated, they shall be
surrendered to the Loan Parties; and if such replaced Securities have been
destroyed, lost or stolen, such holder shall furnish the Loan Parties with an
indemnity in writing to save it harmless in respect of such replaced Security.
6.5 No Other Representations Affected. Nothing contained in this
Article 6 shall limit the full force or effect of any representation, agreement
or warranty made herein or in connection herewith to Purchaser.
ARTICLE 7
COVENANTS
7.1 Affirmative Covenants. Each of the Loan Parties, jointly and
severally, covenants that, so long as all or any of the principal amount of the
Notes or any interest thereon shall remain outstanding, and, thereafter, so
long as the Purchaser owns any Underlying Common Stock or Warrants, each of the
Loan Parties shall:
(a) Existence. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence.
(b) Businesses and Properties; Compliance with Laws. At all times
(i) do or cause to be done all things necessary to preserve, renew and keep in
full force and effect the rights, licenses, registrations, permits,
certifications, approvals, consents, franchises, patents, copyrights,
trademarks and trade names, and any other trade names which may be material to
the conduct of its business, (ii) comply in all material respects with all laws
and regulations applicable to the operation of such business, including but not
limited to, all Environmental Laws, whether now in effect or hereafter enacted
and with all other applicable laws and regulations, (iii) take all action that
may be required to obtain, preserve, renew and extend all rights, patents,
copyrights, trademarks, tradenames, franchises, registrations, certifications,
approvals, consents, licenses, permits and any other authorizations which may
be material to the operation of such business, (iv) maintain, preserve and
protect all property material to the conduct of such business, and (v) except
for obsolete or worn out equipment, keep its property in good repair, working
order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times.
(c) Insurance. Maintain insurance required by the Purchase
Documents, including but not limited to: (i) the Life Insurance; (ii) coverage
on its insurable properties (including all inventory, equipment and real
property) against the perils of fire, theft and burglary; (iii) public
liability; (iv) workers' compensation; (v) business interruption; (vi) product
liability; and (vii) such other risks as are customary with companies similarly
situated and in the same or similar business as that of the Loan Parties under
policies issued by financially sound and reputable
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insurers in such amounts as are customary with companies similarly situated and
in the same or similar business. The Loan Parties shall pay all insurance
premiums payable by it and shall deliver the policy or policies of such
insurance (or certificates of insurance with copies of such policies) to
Purchaser. All insurance policies of the Loan Parties shall contain
endorsements, in form and substance reasonably satisfactory to Purchaser,
providing that the insurance shall not be cancelable except upon thirty (30)
days' prior written notice to Purchaser. The Purchaser shall be shown as a loss
payee and an additional named insured party under all such insurance policies.
(d) Obligations and Taxes. Pay and discharge promptly when due
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to Liens
or charges upon such properties or any part thereof; provided, however, that
none of the Loan Parties shall not be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the Loan Parties shall have set aside on its books
adequate reserves with respect thereto.
(e) Financial Statements; Reports. Furnish to Purchaser:
(1) Annual Statements. Within ninety (90) days after the
end of each fiscal year, a balance sheet and statements of operations,
shareholders' equity and cash flows of the Loan Parties showing, on a
consolidated and consolidating basis, the financial condition of the
Loan Parties as of the close of such year and the results of
operations during such year, all the foregoing financial statements to
be audited by a firm of independent certified public accountants of
recognized national standing acceptable to Purchaser and accompanied
by an opinion of such accountants without material exceptions or
qualifications. Additionally, such financial statements shall be
accompanied by a certificate of such accountants (which shall not
contain any qualification exception or score limitation not acceptable
to Purchaser) stating that in the course of its regular audit of the
Business of the Loan Parties, which audit was conducted in accordance
with GAAP, no Default or Event of Default relating to financial and
accounting matters has come to their attention, or if any Default or
Event of Default exists, a statement as to the nature thereof.
(ii) Monthly Statements. Within thirty (30) calendar days
after the end of each calendar month, financial statements (including
a balance sheet and cash flow and income statements) showing the
financial condition and results of operations of the Loan Parties, as
of the end of each such month and for the then elapsed portion of the
current fiscal year, together with comparisons to the corresponding
periods in the preceding year and the budget for such periods,
accompanied by a certificate of an officer that such financial
statements have been prepared in accordance with GAAP. In addition,
the Loan Parties shall provide monthly profit and loss statements by
profit center, with comparisons to the corresponding periods in the
preceding year and the budget for such periods.
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(iii) Format; Certificate of Compliance. If requested by
Purchaser, each balance sheet, income statement and cash flow
statement furnished to Purchaser pursuant to subsection (i), (ii) or
(iii) of this Section 7.1(e) will be furnished by an electronic means
in Excel spreadsheet format containing such line items and other
formatting requirements as may be specified by Purchaser. Each
financial statement furnished to Purchaser pursuant to subsections
(i), (ii) and (iii) of this Section 7.1(e) shall be accompanied by a
written certificate signed by the Loan Parties' chief financial
officer (A) to the effect that no Default or Event of Default has
occurred during the period covered by such statements or, if any such
Default or Event of Default has occurred during such period, setting
forth a description of such Default or Event of Default and specifying
the action, if any, taken by the Loan Parties to remedy the same, and
(B) a compliance certificate in the form of Exhibit H showing Loan
Parties' compliance with the covenants set forth in Section 7.3.
(iv) Accountant Reports. Promptly upon the receipt
thereof, copies of all reports, if any, submitted to any of the Loan
Parties by independent certified public accountants in connection with
each annual, interim or special audit or review of the financial
statements of the Loan Parties made by such accountants, including but
not limited to, any comment letter submitted by such accountants to
management in connection with any annual review.
(v) Projections. As soon as available, but in no event
later than December 31 of each year, a projection of the Loan Parties'
consolidated balance sheet, income, retained earnings and cash flow
statements and capital expenditure requirements, respectively, on a
monthly basis for the following fiscal year and on an annual basis for
the following three fiscal years and comparable actual and budgeted
figures for the current year and the months thereof; and within ten
(10) days after any material update or amendment of any such plan or
forecast, a copy of such update or amendment, including a description
of and reasons for such update or amendment. Each such projection,
update or amendment shall be accompanied by a written certificate
signed by Loan Parties' chief financial officer to the effect that it
has been prepared on the basis of the Loan Parties' historical
financial statements and records, together with the assumptions set
forth in such projection and that it reflects expectations, after
reasonable analysis, of Loan Parties' management as to the matters set
forth therein.
(vi) Additional Information. Promptly, from time to time,
such other information regarding the compliance by each of the Loan
Parties with the terms of this Agreement and the other Purchase
Documents or the affairs, operations or condition (financial or
otherwise) of the Loan Parties as Purchaser may reasonably request and
which is capable of being obtained, produced or generated by the Loan
Parties or of which the Loan Parties have knowledge.
(f) Litigation and Other Notices. Give Purchaser prompt written
notice of the following:
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(i) Orders; Injunctions. The issuance by any court or
governmental agency or authority of any injunction, order, decision or
other restraint prohibiting, or having the effect of prohibiting, the
making of any loan or the initiation of any litigation or similar
proceeding seeking any such injunction, order or other restraint.
(ii) Litigation. The notice, filing or commencement of
any action, suit or proceeding against any of the Loan Parties whether
at law or in equity or by or before any court or any Federal, state,
municipal or other governmental agency or authority and which, if
adversely determined against any of the Loan Parties, could result in
uninsured liability in excess of $100,000 in the aggregate.
(iii) Environmental Matters. (i) Any release or threatened
release of any Pollutant required to be reported to any Federal, state
or local governmental or regulatory agency under any applicable
Environmental Laws, (ii) any Removal, Remedial or Response action
taken by the Loan Parties or any other person in response to any
Pollutant in, at, on or under, a part of or about the Loan Parties'
properties or any other property, (iii) any violation by the Loan
Parties of any Environmental Law, in each case, which could result in
a Material Adverse Effect, or (iv) any notice, claim or other
information that the Loan Parties might be subject to an Environmental
Liability.
(iv) Default. Any Default or Event of Default, specifying
the nature and extend thereof and the action (if any) which is
proposed to be taken with respect thereto.
(v) Material Adverse Effect. Any development in the
business or affairs of the Loan Parties which could have a Material
Adverse Effect.
(vi) Board Meetings. Written notice of each regular
meeting of each of the Loan Parties' Board of Directors at least
twenty-one (21) days in advance of such meeting and prior written
notice of each special meeting of the Board of Directors at least two
(2) days in advance of such meeting, but in any case such notice shall
be delivered no later than the date on which the stockholders of the
Board of Directors are notified of such meeting. In addition, each of
the Loan Parties will send Purchaser copies of all reports and
materials provided to stockholders of their respective Board of
Directors at meetings or otherwise.
(g) ERISA. Comply in all material respects with the applicable
provisions of ERISA and the provisions of the Code relating thereto and furnish
to Purchaser (i) as soon as possible, and in any event within thirty (30) days
after the Loan Parties knows or has reason to know thereof, notice of (A) the
establishment by the Loan Parties of any Plan, (B) the commencement by the Loan
Parties of contributions to a Multiemployer Plan, (C) any failure by the Loan
Parties or any of its ERISA Affiliates to make contributions required by
Section 302 of ERISA (whether or not such requirement is waived pursuant to
Section 303 of ERISA), or (D) the occurrence of any Reportable Event with
respect to any Plan or Multiemployer Plan for which the reporting requirement
is not waived, together with a statement of an officer setting forth details as
to such Reportable Event and the action which the Loan Parties propose to take
with respects thereto, together with a copy of the notice of such Reportable
Event given to the PBGC if any such notice
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was provided by the Loan Parties, and (ii) promptly after receipt thereof, a
copy of any notice the Loan Parties may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Multiemployer Plan, or to
appoint a trustee to administer any Plan or Multiemployer Plan, and (iii)
promptly after receipt thereof, a copy of any notice of withdrawal liability
from any Multiemployer Plan.
(h) Maintaining Records; Access to Premises and Inspections.
Maintain financial records in accordance with generally accepted practices and,
upon reasonable notice, at all reasonable times and as often as any Purchaser
may reasonably request (and at any time after the occurrence and during the
continuation of a Default or Event of Default), permit any authorized
representative designated by Purchaser to visit and inspect the properties and
financial records of each of the Loan Parties and to make extracts from such
financial records, all at the Loan Parties' reasonable expense, and permit any
authorized representative designated by Purchaser to discuss the affairs,
finances and conditions of the Loan Parties with the Loan Parties' chief
financial officers and such other officers as the Loan Parties shall deem
appropriate, and the Loan Parties' independent public accountants.
(i) Board of Directors. The Company's Board of Directors shall
have a maximum of seven (7) members and shall meet not less frequently than
quarterly. Purchaser shall be entitled to designate at least one member of the
Board of Directors of the Company and of each of the other Loan Parties. The
Company's Board of Directors shall have a compensation committee and an audit
committee, each of which shall be composed solely of non-employee Directors
(with the exception of one member of the Company's management with respect to
the Compensation Committee), and Purchaser shall have the right to designate
one member of each such committee. In addition, in the event that (i) the Notes
have not been fully, finally and indefeasibly paid in full, and (ii) an uncured
or unwaived Event of Default of the type specified in Section 8.1(a) shall
exist or there shall have been an uncured or unwaived Event of Default as a
result of breach of any of the covenants set forth in Section 7.3 herein for
four (4) successive calendar quarters or the payment of principal on the Notes
is accelerated for any reason, then, in any such event, the Purchaser shall
have the right to immediately designate two additional members of the Company's
and each other Loan Party's Board of Directors (while maintaining a maximum of
seven (7) members, and such right shall continue for twelve (12) months after
such Event of Default shall be cured or waived, at which time the right shall
expire, provided, however, that should an Event of Default entitling Purchaser
to designate such two (2) additional members of the Company's Board of
Directors occur after any such cure or waiver, Purchaser shall thereafter have
the right to designate a total of three (3) members to the Company's Board of
Directors and each other Loan Party's Board of Directors (while maintaining a
maximum of seven (7) members). In the event that Purchaser shall waive its
right to designate a member of the Board of Directors hereunder, Purchaser
shall have the right to designate an observer for all meetings of the Board of
Directors and receive (i) notice of all meetings of the Board of Directors
(including committees); and (ii) all information provided to the stockholders
of the Board of Directors. Such directors or observer shall be entitled to the
same compensation as other non-employee members of the Board of Directors and,
in any case, to receive reimbursement for reasonable out-of-pocket expenses
from the Company incurred in connection with attendance at Board of Directors
and committee meetings.
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(j) Pledge of Stock. The upon the establishment, creation or
acquisition thereof, as to each such Subsidiary established, created or
acquired subsequent to the Closing Date in accordance with Section 7.2(m)
below, the Company shall, or (as the case may be) shall cause each of its
Subsidiaries to, pledge to Purchaser, as security for payment of the
Obligations, pursuant to one or more Pledge Agreements, all Equity Interests
owned in the Company by Holdings or by the Company or any such Subsidiary in
any such Subsidiaries of the Company of the Loan Parties.
(k) Future Financings. The Loan Parties shall give to Purchaser
an opportunity to participate in any future financings of the Loan Parties
which involve the issuance of junior securities.
7.2 Negative Covenants. The Loan Parties, jointly and severally,
covenant that, so long as all or any part of the principal amount of the Notes
or any interest thereon shall remain outstanding:
(a) Indebtedness. None of the Loan Parties shall create, incur,
assume guarantee or be or remain liable for, contingently or otherwise, or
suffer to exist any Indebtedness, except:
(i) Indebtedness under this Agreement;
(ii) Senior Debt;
(iii) Indebtedness of the Sellers;
(iv) Indebtedness incurred in the ordinary course of
business with respect to customer deposits, trade payables and other
unsecured current liabilities not the result of borrowing and not
evidenced by any note or other evidence of indebtedness;
(v) Indebtedness not to exceed $1,250,000 in the
aggregate at any time outstanding secured by purchase money Liens or
incurred with respect to Capital Leases; and
(vi) Performance and payment bonds in an aggregate amount
at any time outstanding not to exceed $5,000,000.
(b) Negative Pledge; Liens. The Loan Parties shall not create,
incur, assume or suffer to exist any Lien of any kind on any of its properties
or assets of any kind, except the following (collectively, "Permitted Liens"):
(i) Liens on the assets of the Loan Parties created in
connection with the Senior Debt, to which Purchaser's Liens under the
Security Documents will be subordinate;
(ii) Liens for or priority claims imposed by law that are
incidental to the conduct of business or the ownership of properties
and assets (including mechanic's,
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warehousemen's, attorneys' and statutory landlords' liens) and
deposits, pledges or liens to secure statutory obligations, surety or
appeal bonds or other liens of like general nature incurred in the
ordinary course of business and not in connection with the borrowing
of money; provided, however, that in each case, the obligation secured
is not overdue, or, if overdue, is being contested in good faith and
adequate reserves have been set up by the Loan Parties as the case may
be; provided, further, that the lien and security interest provided in
the Security Documents or any portion thereof created or intended to
be created thereby is not, in the opinion of Purchaser, unreasonably
jeopardized thereby;
(iii) Liens securing the payments of taxes, assessments
and governmental charges or levies incurred in the ordinary course of
business either (a) not delinquent, or (b) being contested in good
faith by appropriate legal or administrative proceedings and as to
have set aside on its books adequate reserves, and so long as during
the period of any such contest, the Loan Parties shall suffer no loss
of any privilege of doing business or any other right, power or
privilege necessary or material to the operation of the Business;
(iv) Liens listed on the Permitted Liens Schedule;
(v) Liens for purchase money obligators; provided that,
(a) the purchase of the asset subject to any such Lien is permitted
under Section 7.3(e) below; (b) the Indebtedness secured by any such
Lien is permitted under Section 7.2(a) above; and (c) the Lien
encumbers solely the asset so purchased;
(vi) extensions, renewals and replacements of Liens
referred to in clauses (i) through (v) of this Section 7.2(b)
provided, however, that any such extension, renewal or replacement
Lien shall be limited to the property or assets covered by the Lien
extended, renewed or replaced and that the obligations secured by any
such extension, renewal or replacement Lien shall be in an amount not
greater than the amount of the obligations secured by the Lien
extended, renewed or replaced.
(c) Contingent Liabilities. The Loan Parties shall not become
liable for any Guaranties, except for the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
(d) Leases. The Loan Parties shall not, in any Fiscal Year, enter
into any leases to the extent that the aggregate annual rental payments
thereunder shall exceed $1,800,000.
(e) Agreements. None of the Loan Parties shall enter into any
loan agreements, leases or other agreements that would prevent the Purchaser
from curing defaults thereunder.
(f) Restriction on Fundamental Changes. The Company will not, and
will not permit any of the Loan Parties, directly or indirectly, to: (a) amend,
modify or waive any term or provision of its Charter Documents or Bylaws,
unless and except to the extent required by law or to the extent such
amendment, modification or waiver does not have, and would not reasonably be
expected to have, a Material Adverse Effect; (b) enter into any transaction of
merger or
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consolidation except: (i) pursuant to the Current Acquisitions on the Closing
Date, (ii) in connection with an Approved Acquisition, (iii) that any
Subsidiary of the Company may be merged with or into the Company (provided that
the Company is the surviving entity) or with or into any other Subsidiary of
the Company which is then or immediately thereafter becomes an Affiliate
Guarantor, and (iv) that the Company or any of its Subsidiaries may effect a
merger solely for the purpose of changing its jurisdiction of incorporation or
formation; (c) liquidate, wind-up or dissolve itself (or suffer any liquidation
or dissolution) unless (i) the entity in question is not Holdings or the
Company and (ii) all, or substantially all, assets of the entity in question
are distributed to the Company or one of the Company's Subsidiaries which is
then an Affiliate Guarantor; or (d) make any Acquisition, except an Approved
Acquisition.
(g) Affiliate Transactions and Executive Compensation. The Loan
Parties shall not make any loan or advance to any director, officer or employee
of the Loan Parties or any Affiliate, or enter into or be a party to any
transaction or arrangement with any Affiliate of the Loan Parties, including,
without limitation, the purchase from, sale to or exchange of property with,
any merger or consolidation with or into, or the rendering of any service by or
for, any Affiliate, except pursuant to the reasonable requirements of the Loan
Parties' business and upon fair and reasonable terms no less favorable to the
Loan Parties than would be obtained in a comparable arm's-length transaction
with a Person other than an Affiliate.
(h) Dividends and Stock Purchases. None of the Loan Parties shall
directly or indirectly: declare or pay any dividends or make any distribution
of any kind on its outstanding equity securities or any other payment of any
kind to any of its stockholders or stockholders or its Affiliates (including
any redemption, purchase or acquisition of, whether in cash or in property,
securities or a combination thereof, any partnership interests or capital
accounts or warrants, options or any of its other securities), or set aside any
sum for any such purpose; provided, however, that this Section 7.2(h) shall not
apply to stock purchases pursuant to Article 9 hereof and shall not prevent
dividends, distributions or other payments made in-kind; and provided, further,
that so long as no Default or Event of Default shall exist or be continuing
hereunder or be created as a result thereof, the Loan Parties may pay cash
dividends to Stratford and the holders of the Series C Convertible Preferred
Stock and Class A Convertible Preferred Stock on or after the second
anniversary of the Closing Date, and provided further that, one hundred eighty
(180) days after the last to occur of (i) the date upon which the final Put
Option Closing occurs at which all, or all remaining, Subject Securities are
purchased by Holdings, and (ii) all Indebtedness due Purchaser hereunder,
including all amounts due and owing the respect to the Notes, have been paid in
full, the Series C Convertible Preferred Stock and Class A Convertible
Preferred Stock may be redeemed.
(i) Advances, Investments and Loans. The Loan Parties shall not
purchase, or hold beneficially any stock, other securities or evidences of
Indebtedness of, or make or permit to exist any loan, Guaranty or advance to,
or make any investment or acquire any interest whatsoever in, any other Person
(including, but not limited to, the formation or acquisition of any
Subsidiaries), except:
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(i) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than six months
from the date of acquisition;
(ii) United States dollar denominated time deposits,
certificates of deposit and bankers acceptances of any bank or any
bank whose short-term debt rating from Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), is at
least A-1 or the equivalent or from Moody's Purchasers Service, Inc.
("Moody's") is at least P-1 or the equivalent with maturities of not
more than six months from the date of acquisition;
(iii) commercial paper with a rating of at least A-1 or
the equivalent by S&P or at least P-1 or the equivalent by Moody's
maturing within six months after the date of acquisition;
(iv) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within six months
from the date of acquisition thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or
Moody's;
(v) Investments in money market funds substantially all
the assets of which are comprised of securities of the types described
in clauses (i) through (iv) above;
(vi) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course
of business;
(vii) receivables owing to the Loan Parties created or
acquired in the ordinary course of business and payable on customary
trade terms of the Loan Parties;
(viii) deposits made in the ordinary course of business
consistent with past practices to secure the performance of leases or
in connection with bidding on government contracts;
(ix) advances to employees in the ordinary course of
business for business expenses; provided, however, that the aggregate
amount of such advances at any time outstanding shall not exceed
$125,000; and
(x) Approved Acquisitions. In determining the amount of
Investments, acquisitions, loans, advances and Guaranties, permitted
pursuant to this Section 7.2(i), Investments and acquisitions shall
always be taken at the original cost thereof (regardless of any
subsequent appreciation or depreciation therein), loans and advances
shall be taken at the principal amount thereof then remaining unpaid,
and Guaranties shall be taken at the amount of obligations guaranteed
thereby.
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(j) Use of Proceeds. The Loan Parties shall not use any proceeds
from the sale of the Notes hereunder, directly or indirectly, for the purposes
of purchasing or carrying any "margin securities" within the meaning of
Regulations T, U or X promulgated by the Board of Governors of the Federal
Reserve Board or for the purpose of arranging for the extension of credit
secured, directly or indirectly, in whole or in part by collateral that
includes any "margin securities."
(k) Stock Issuances. None of the Loan Parties shall issue any
capital stock or other equity interests or any options or warrants to purchase,
or securities convertible into capital or equity interests or establish any
stock appreciation rights or similar programs based on the value of any of the
Loan Parties' equity interests except for (i) in connection with an Approved
Acquisition, or (ii) as permitted under Section 7.2(h) above or (iii) in
connection with Exempt Shares.
(l) Disposal of Assets or Subsidiary Stock. The Company will not,
and will not permit any of the Loan Parties, directly or indirectly, to:
convey, sell, lease, sublease, transfer or otherwise dispose of, or grant any
Person an option to acquire, in one transaction or a series of transactions,
any of its property, business or assets, or the capital stock of or any other
Equity Interests in any of the Loan Parties, whether now owned or hereafter
acquired, except for: (a) bona fide sales of inventory to customers in the
Ordinary Course of Business; (b) transfers of assets by, between or among the
Company and the Affiliate Guarantors in the ordinary course of business; and
(c) Asset Dispositions, if, but only if, all of the following conditions are
met: (i) the aggregate value of total assets sold or otherwise disposed of in
any fiscal year of the Company and its Subsidiaries, based on the sales price
received therefor, does not exceed $500,000; (ii) the sale or other disposition
is made to a Person which is other than an Affiliate of the Company; (iii) the
sole consideration received is cash or property in which the Purchaser has a
first priority security interest (subject to Permitted Liens); (iv) the Net
Proceeds of such Asset Disposition are applied in repayment of the Notes or the
Senior Debt; (v) after giving effect to the sale or other disposition of the
assets included within the Asset Disposition and the repayment of Indebtedness
with the proceeds thereof, the Company is in compliance with the covenants set
forth in Section 7.3 recomputed on a pro forma basis using financial data for
the most recently ended month for which information is available and is in
compliance with all other terms and conditions contained in this Agreement; and
(vi) no Default or Event of Default then exists or shall result from such sale
or other disposition
(m) Subsidiaries. None of the Loan Parties shall establish or
acquire any Subsidiary, directly or indirectly, to establish, create or acquire
any new Subsidiary, except pursuant to Approved Acquisitions; provided,
however, that any Subsidiary which is established, created or acquired
hereafter either pursuant to an Approved Acquisition or otherwise with the
prior written consent of the Purchaser, shall, upon its establishment, creation
or acquisition, become an Affiliate Guarantor hereunder by its execution and
delivery to the Purchaser of a joinder agreement in substantially the same form
of Exhibit I hereto, and the Company shall (or shall cause its applicable
subsidiary) to comply with Section 5.1(j) in regard thereto. Except as
expressly permitted by this Agreement, no Loan Party shall sell, transfer or
otherwise dispose of any Equity Interests in any Subsidiary owned by it, nor
permit any Subsidiary to issue any shares of stock of any class whatsoever to
any Person other than to a Loan Party. The Loan Parties will
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take such action from time to time as shall be necessary to ensure that the
percentage of the Equity Interests of any class or character owned by it in any
Subsidiary on the Closing Date hereof (or, in the case of any newly formed or
newly acquired Subsidiary, on the date of formation or acquisition) is not any
time decreased, other than by reason of transfers to another Loan Party. In the
event that any additional Equity Interests shall be issued by any Loan Party,
the respective holder of such Equity Interests shall forthwith deliver to the
Purchaser pursuant to a Pledge Agreement any certificates evidencing such
Equity Interests, accompanied by undated stock powers executed in blank and to
take such other action as the Purchaser shall request to perfect the security
interest created therein pursuant to such Pledge Agreement.
(n) Business. None of the Loan Parties shall engage, directly or
indirectly, in any business other than the Permitted Business.
(o) Fiscal Year; Accounting. None of the Loan Parties shall
change its Fiscal Year from ending on December 31 or method of accounting
(other than immaterial changes in methods), except as required by GAAP.
(p) Establishment of New or Changed Business Locations. None of
the Loan Parties shall relocate its principal executive offices or other
facilities, and shall not establish new business locations or store any
inventory or other assets at a location not identified to Purchaser on or
before the date hereof, without providing not less than thirty (30) days
advance written notice to Purchaser.
(q) Changed or Additional Business Names. None of the Loan
Parties shall change its corporate name or establish new or additional trade
names without providing thirty (30) days advance written notice to Purchaser.
(r) Key Management. None of Key Management shall cease to be
permanently employed by the Company full time unless a substitution thereto or
deletion thereof shall be approved by the Board of Directors within seventy
five (75) days; provided, however, in the event that the Company employs a vice
president of operations and a controller, each of which are satisfactory to the
Board of Directors, the Company shall have one hundred twenty (120) days to
find a replacement for any member of Key-Management which replacement shall be
satisfactory to Board of Directors.
7.3 Financial Covenants. The Company will maintain, and cause
each of the other Loan Parties to assist the Company in maintaining, the
financial covenants described below:
(a) Fixed Charge Coverage. The Company shall not permit Fixed
Charge Coverage, measured monthly, at the end of each fiscal month of the
Company for each Test Period, beginning with the Initial Test Month, to be less
than 1.0:1.0 for each Test Period.
(b) Senior Fixed Charge Coverage. The Company shall not permit
Senior Fixed Charge Coverage, measured monthly, at the end of each fiscal month
of the Company, for each Test Period, beginning with the Initial Test Month, to
be less than (i) 1.10:1.0, through December
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31, 1999; (ii) 1.15:1.0, from and after January 1, 2000, through December 31,
2002; and (iii) 1.35:1.0, from and after January 1, 2003.
(c) Total Debt Coverage. The Company shall not permit its Total
Debt Coverage, measured monthly, at the end of each fiscal month of the
Company, for each Test Period, beginning with the Initial Test Month, to be
greater than (i) 4.40:1.0, through December 31, 1999; (ii) 4.0:1.0, from and
after January 1, 2000, through December 31, 2000; (iii) 3.85:1.0, from and
after January 1, 2001, through December 31, 2001; (iv) 3.50:1.0, from and after
January 1, 2002, through December 31, 2002; and (v) 3.25:1.0, from and after
January 1, 2003.
(d) Senior Debt Coverage. The Company shall not permit its Senior
Debt Coverage measured monthly, at the end of each fiscal month of the Company,
beginning with the Initial Test Month, to be greater than 2.75.
(e) Capital Expenditures. The Company will not permit Capital
Expenditures in any fiscal year of the Company to exceed One Million Five
Hundred Thousand Dollars ($1,500,000).
(f) Interest Coverage. The Company shall not permit Interest
Coverage, measured monthly at the end of each fiscal month of the Company, for
each Test Period beginning with the Initial Test Month, to be less than (i)
2.475:1.0, through December 31, 2000, (ii) 2.70:1.0, from and after January 1,
2001, through December 31, 2001; (iii) 2.925:1.0, from and after January 1,
2002, through December 31, 2002; and (iv) 3.15:1.0, from and after January 1,
2003.
(g) Excess Working Capital. The Company shall not permit Excess
Working Capital, at any time, to be less than One Dollar ($1.00).
ARTICLE 8
EVENTS OF DEFAULT
8.1 Events of Default. An Event of Default means the occurrence
of one or more of the following described events:
(a) the Company shall default in the payment of (i) interest on
the Notes within five (5) Business Days after its due date or (ii) principal of
the Notes when due, whether at maturity, upon notice of prepayment in
accordance with Sections 3.4 or 3.5, upon any scheduled payment date or by
acceleration or otherwise;
(b) any of the Loan Parties shall be in default under the terms
of any agreement under which any Indebtedness in an aggregate principal amount
of $100,000 or more is created in a manner entitling the holder of such
Indebtedness to accelerate the maturity of such Indebtedness;
(c) any representation or warranty herein made by any of the Loan
Parties, or any certificate or financial statement furnished pursuant to the
provisions hereof, shall prove to have been false or misleading in any material
respect as of the time made or furnished or deemed made or furnished;
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(d) any of the Loan Parties shall default in the performance of
any covenant, condition or provision of (i) Section 7.1(e) or (f) and such
failure shall continue for five (5) Business Days, or (ii) Sections 4.1(x),
7.1(h) or (i), 7.2 or 7.3;
(e) any of the Loan Parties shall default in the performance of
any other covenant, condition or provision of this Agreement, the Notes or the
other Purchase Documents, and such default shall not be remedied for a period
of thirty (30) days of the earlier of (i) written notice from the Purchaser to
the Company of such default (ii) actual knowledge by any of the Loan Parties of
such default or (iii) any applicable notice or cure period therein;
(f) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any of the Loan Parties in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of any of the Loan Parties or for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of sixty (60) days;
(g) any of the Loan Parties shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of any of the Loan Parties or for any
substantial part of its property, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing;
(h) both the following events shall occur; (i) a Reportable
Event, the occurrence of which would have a Material Adverse Effect which could
cause the imposition of a Lien under Section 4068 of ERISA, shall have occurred
with respect to any Plan or Plans; and (ii) the aggregate amount of the then
"current liability" (as defined in Section 412(l)(7) of the Internal Revenue
Code of 1986, as amended) of all accrued benefits under such Plan or Plans
exceeds the then current value of the assets allocable to such benefits by more
than $100,000 at such time;
(i) a final judgment which, with other undischarged final
judgments against any of the Loan Parties, exceeds an aggregate of $100,000
(excluding judgments to the extent the Loan Parties are fully insured or the
deductible or retention limit does not exceed $100,000 and with respect to
which the insurer has assumed responsibility in writing), shall have been
entered against any of the Loan Parties if, within thirty (30) days after the
entry thereof, such judgment shall not have been discharged or execution
thereof stayed pending appeal, or if, within thirty (30) days after the
expiration of any such stay, such judgment shall not have been discharged;
(j) any Security Document shall at any time after the Closing
Date cease for any reason to be in full force and effect or shall cease to
create perfected security interests in favor of Purchaser in the collateral
subject or purported to be subject thereto, subject to no other Liens other
than Permitted Liens shall have been transferred to any Person without the
prior written consent of the holders of a majority in principal amount of the
outstanding Notes; and
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(k) a Change of Control shall have occurred.
8.2 Consequences of Event of Default.
(a) Bankruptcy. If an Event of Default specified in paragraphs
(h) or (g) of Section 8.1 hereof shall occur, the unpaid balance of the Notes
and interest accrued thereon and all other liabilities of the Loan Parties to
the holders thereof hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or (except as expressly required
hereby) notice of any kind, all of which are hereby expressly waived.
(b) Other Defaults. If any other Event of Default shall occur the
holders of a majority of the outstanding principal balance of the Notes may at
their option, by written notice to the Loan Parties, declare the entire unpaid
balance of the Notes, as the case may be, and interest accrued thereon and all
other liabilities of the Loan Parties hereunder and thereunder to be forthwith
due and payable, and the same shall thereupon become immediately due and
payable, without presentment, demand, protest or (except as expressly required
hereby) notice of any kind, all of which are hereby expressly waived.
(c) Penalty Interest. Following the occurrence and during the
continuance of any Event of Default, the holders of the Notes shall be entitled
to receive, to the extent permitted by applicable law, interest on the
outstanding principal of, and premium and overdue interest, if any, on, the
Notes at a rate per annum equal to the interest rate thereon (determined as
provided in Section 3.1) plus two hundred (200) basis points.
(d) Premium. In the event of any acceleration of Notes pursuant
to Section 8.2(b) hereof, the Loan Parties shall also pay to holders of Notes
the prepayment premium that would otherwise be payable upon any voluntary
prepayment of such Notes.
8.3 Security. Payments of principal of, and premium, if any, and
interest on, the Notes and all other obligations of the Loan Parties under this
Agreement or the Notes are secured pursuant to the terms of the Security
Documents.
ARTICLE 9
PUT OPTION AND UNLOCKING RIGHTS
9.1 Grant of Option. Holdings hereby grants to each holder of
Subject Securities (a "Holder") an option to sell to Holdings, and Holdings is
obligated to purchase from each Holder under such option (the "Put Option"),
all (or such portion as is designated by any such Holder pursuant to Section
9.3 below) of the Subject Securities then owned by such Holder. The Put Option
will be effective at any time and from time to time after the earlier to occur
(i) the date five (5) years after the date hereof, (ii) the date of the payment
in full of the outstanding principal, interest and fees of the Notes, (iii) the
sale of Holdings or the Company or a material portion of their assets, (iv) the
redemption of the Preferred Stock, or (v) the occurrence of an Event of Default
under (A) Sections 8.1(a), (d), (f) or (g) (excluding with respect to Section
8.1(d), an event of Default arising as a result of a violation of Sections
7.2(d) and (o)).
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9.2 Put Price. In the event that any Holder exercises the Put
Option, the price (the "Put Price") to be paid to each such Holder pursuant to
this Agreement will be the sum of the amount determined by multiplying the
number of shares of Subject Securities for which the Put Option is being
exercised (collectively, the "Put Shares") by the Fair Market Value therefor.
9.3 Exercise of Put Option. If any Holder elects to exercise its
Put Option, such Holder shall give notice to Holdings and each other Holder of
such Holder's election to exercise the Put Option, specifying, among other
things, the date on which the Put Option Closing (as hereinafter defined) shall
occur, which date shall not be less than twenty (20) nor more than thirty (30)
days after the date of such notice. If a Holder receives such notice of another
Holder's exercise of such other Holder's Put Option and the Put Option of the
Holder receiving such notice is effective pursuant to Section 9.1, the Holder
receiving such notice may elect to exercise its Put Option and designate a Put
Option Closing simultaneous with that of such other Holder. The Company will
provide each Holder desiring to exercise its Put Option with the name and
address of each other Holder. Notwithstanding the foregoing, the right of each
Holder to exercise its Put Option shall be an individual and separate right,
and the exercise of any Put Option by any Holder shall not be conditioned upon
the exercise by any other Holder of its Put Option.
9.4 Certain Remedies. In the event that Holdings defaults on its
obligation to purchase all or any portion of the Put Shares upon exercise of
the Put Option by any Holder, the Holder may elect, in addition to any other
rights or remedies of such Holder, either to (i) rescind its exercise of the
Put Option, in which case the Put Option will continue in full force and
effect, or (ii) receive a Note in the form attached hereto as Exhibit A, duly
executed by the Loan Parties, payable to the Holder in the principal amount of
the Put Price, which Note shall constitute a "Note" for all purposes hereunder
and under the Transaction Documents; provided, however, that such Note shall
bear interest on the outstanding principal thereof at a rate per annum equal to
the Prime Rate, as such may adjust from time to time, plus two hundred (200)
basis points per annum; provided, further, that the Loan Parties shall repay
the unpaid principal balance of such Note in full, together with all accrued
and unpaid interest, fees and other amounts due thereunder, in 60 consecutive
equal payments commencing on the first Business Day of the first full month
following the execution of such Note and there shall be no premium charged for
prepaying such Note.
9.5 Put Option Closing. Each closing for the purchase and sale of
the Put Shares as to which any Holder has notified Holdings of such Holder's
intention to exercise the Put Option (a "Put Option Closing") shall occur on
the date specified in such notice of exercise. At any Put Option Closing, to
the extent applicable, the Holder of the Put Shares will deliver the
certificate or certificates evidencing the Put Shares being purchased, duly
endorsed in blank. In consideration therefor, Holdings will deliver to the
Holder the Put Price, which will be payable at the option of the Holder either
(i) subject to Intercreditor terms by cashier's or certified check or by wire
transfer of immediately payable funds to an account designated by such Holder
or (ii) by the delivery to the Holder of debt securities of the same type
contemplated by clause (ii) in Section 9.4 hereof with the same terms as the
Notes. In the event multiple Holders have exercised the Put Option and there is
insufficient cash available to pay each such Holder the full
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amount of funds they have requested pursuant to clause (i) of the preceding
sentence, any payment of cash will be made on a pro rata basis among such
Holders in proportion to their respective number of Put Share.
9.6 Unlocking Rights. In the event that at any time after the
date five (5) years from the Closing Date, the Company and/or Holdings shall
receive a bona fide third-party offer to purchase all or substantially all of
the Common Stock or assets of the Holdings and/or the Company, or to merge with
either or both of them that would cause the Company's shareholders to receive
cash or publicly-traded securities in exchange for their Common Stock, and
Purchaser shall have notified the Company that it supports such offer, either
(i) the Company shall accept such offer or (ii) the Company does not accept
such offer, Purchaser shall have the right to put all, but not less than all,
of its Warrants and underlying Common Stock to the Company in accordance with
Section 9.1 at any time after the date the Company declines to accept such
third-party offer, except that the Fair Market Value per share shall be deemed
to be equal to the amount of such third-party offer.
ARTICLE 10
PREEMPTIVE RIGHTS
10.1 Limited Preemptive Rights. If after the date of this
Agreement, Holdings authorizes the issuance and sale of any units of capital
securities or any securities containing options or rights to acquire any units
of capital securities (other than in connection with an underwritten public
offering or the issuance of such securities in exchange for the securities or
assets of another Person as a part of an Approved Acquisition) at any time that
Purchaser holds any Common Stock or Warrants, Holdings will offer to sell to
Purchaser a portion of such securities equal to the percentage determined by
dividing (i) the number of Common Stock and Underlying Common Stock (without
duplication) then held by Purchaser by (ii) the number of Common Stock
outstanding (on a fully diluted basis). Purchaser will be entitled to purchase
such stock or securities at the same price and on the same terms as such are to
be offered to any other Person. Purchaser must exercise its purchase rights
within thirty (30) days after receipt of written notice from Holdings
describing in reasonable detail the stock or securities being so offered, the
purchase price thereof, the payment terms and Purchaser's percentage allotment.
Upon the expiration of such period of thirty (30) days, Holdings will be free
to sell such securities that Purchaser has not elected to purchase during the
one hundred twenty (120) days following such expiration on terms and conditions
no more favorable to purchasers thereof than those offered to Purchaser. Any
securities offered or sold by Holdings after such 90-day period must be
reoffered to Purchaser pursuant to the terms of this Section 10.1. Any
securities purchased by a Purchaser from Holdings pursuant to this Section 10.1
shall, upon such purchase and thereafter be deemed to be Securities and
Registrable Securities for all purposes of this Agreement.
10.2 Exceptions. The provisions of Section 10.1 shall not apply to
issuances of (a) Common Stock in respect of Exempt Securities or (b) other
capital stock in connection with rights of existing holders of Preferred Stock
as it relates to such Preferred Stock. The provisions of Section 10.1 shall
terminate upon the consummation of an Qualified Initial Public Offering of
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Holding's Common Stock registered under the Securities Act with an investment
banking firm of national reputation as managing underwriter.
ARTICLE 11
REGISTRATION RIGHTS
10.3 Piggyback Registrations.
(a) Whenever Holdings proposes to register any of its securities
under the Securities Act and the registration form to be used may be used for
the registration of Registrable Securities (a "Piggyback Registration"),
Holdings will give prompt written notice (in any event within three Business
Days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement) to all holders of Registrable Securities with
respect of the proposed offering at least thirty (30) days before the initial
filing with the SEC of such registration statement, and offer to include in
such filing such Registrable Securities as any such holder may request. Each
such holder of Registrable Securities desiring to have Registrable Securities
registered under this Section 11.1 shall advise Holdings in writing within
fifteen (15) days after the date of receipt of such notice from Holdings,
setting forth the amount of such Registrable Securities for which registration
is requested. The Company shall thereupon include in such filing the number of
Registrable Securities for which registration is so requested, and shall use
its best efforts to effect registration under the Securities Act of such
Registrable Securities.
(b) The registration expenses of the holders of Registrable
Securities will be paid by Holdings in all Piggyback Registrations to the
extent provided in Section 11.6.
(c) If a Piggyback Registration is an underwritten primary
registration on behalf of Holdings, and the managing underwriters advise
Holdings in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to Holdings,
Holdings will include in such registration: (i) first, the securities Holdings
proposes to sell, (ii) second, the Registrable Securities and other securities
requested to be included in such registration by DFW, Stratford, and, subject
to underwriter discretion, Clear Investors, LLC, pro rata among the holders of
such Registrable Securities and other securities on the basis of the number of
units owned by each such holder, and (iii) third, other securities requested to
be included in registration.
(d) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of Holding's securities, and the managing
underwriters advise Holdings in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, Holdings will
include in such registration, the Registrable Securities and other securities
requested to be included in such registration, DFW, Stratford, and, subject to
underwriter discretion, Clear Investors, LLC, pro rata among the holders of
such Registrable Securities and other securities on the basis of the number of
units owned by each such holder, and (iii) third, other securities requested to
be included in registration.
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(e) If any Piggyback Registration is an underwritten offering,
the selection of investment banker(s) and manager(s) for the offering must be
approved by the holders of a majority of the Registrable Securities who request
to be included in such Piggyback Registration. Such approval will not be
unreasonably withheld.
(f) If Holdings has previously filed a registration statement
with respect to Registrable Securities pursuant to this Section 11.1, and if
such previous registration has not been withdrawn or abandoned, Holdings will
not file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for
its equity securities under the Securities Act (except on Form S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 180 days has elapsed
from the effective date of such previous registration.
11.2 Demand Registration Rights.
(a) If, at any time after Holdings has filed any registration
statement under the Securities Act or the Securities Exchange Act, except with
respect to registration statements filed on Form S-8 or any successor form,
Holdings receives a written request by the holders of a majority of the
Registrable Securities to effect the registration under the Securities Act of
such securities, Holdings shall follow the procedures described in this Section
11.2. Within five (5) days of its receipt of such request, Holdings shall give
written notice of such proposed registration (a "Demand Registration") to all
holders of Registrable Securities, and thereupon, Holdings shall, as
expeditiously as possible, use its best reasonable efforts to effect the
registration on a form of general use under the Securities Act of the units it
has been requested to register in such initial request and in any response to
such notice given to Holdings within twenty (20) days after Holding's giving of
such notice.
(b) The Company may not be required to effect a registration
pursuant to this Section 11.2 during the first 180 days after the effective
date of any registration statement filed by Holdings under Section 11.1 if the
holders of Registrable Securities requesting registration have been afforded
the opportunity to register in such registration all or a majority of their
Registrable Securities.
(c) The Company may include in any registration under this
Section 11.2 any other Common Stock or other equity securities (including
issued and outstanding Common Stock as to which the holders thereof have
contracted with Holdings for "piggyback" registration rights) so long as the
inclusion in such registration of such units will not, in the opinion of the
managing underwriter of the Common Stock of the stockholders first demanding
registration (if the offering is underwritten), interfere with the successful
marketing in accordance with the intended method of sale or other disposition
of all the securities sought to be registered by such demanding stockholders or
stockholders pursuant to this Section 11.2.
11.3 S-3 Demand Registration Rights. In addition to the
registration rights provided in Sections 11.1 and 11.2 above, if at any time
Holdings is eligible to use SEC Form S-3 (or any
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successor form) for registration of secondary sales of Registrable Securities,
any holder of Registrable Securities may request in writing that Holdings
register units of Registrable Securities on such form. Upon receipt of such
request, Holdings will promptly notify all holders of Registrable Securities in
writing of the receipt of such request and each such Holder may elect (by
written notice sent to Holdings within thirty (30) days of receipt of Holding's
notice) to have its Registrable Securities included in such registration
pursuant to this Section 11.3. Thereupon, Holdings will, as soon as
practicable, use its best efforts to effect the registration on Form S-3 of all
Registrable Securities that Holdings has so been requested to register by such
holder for sale. The Company will use its best efforts to qualify and maintain
its qualification for eligibility to use Form S-3 for such purposes and will
continue to maintain such Form S-3 as a shelf registration under Rule 415 under
the Securities Act or any successor rule.
11.4 Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution (including sales pursuant to Rule 144 under the
Securities Act or any successor rule) of equity securities of Holdings, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and during the 90-day period (or such longer
period, not to exceed 90 additional days, as the managing underwriter shall
require) beginning on the effective date of any underwritten Piggyback
Registration in which Registrable Securities are included or Demand
Registration (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) Holdings agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any
underwritten Piggyback Registration or Demand Registration (except as part of
such underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) to cause each holder of at least 10% (on a
fully-diluted basis) of its equity securities, or any securities convertible
into or exchangeable or exercisable for its equity securities, purchased from
Holdings at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
11.5 Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, Holdings will use reasonable efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Warrants
held by a holder of Registrable Securities requesting registration as to which
Holdings has received reasonable assurances that only Registrable Securities
will be distributed to the public), and pursuant thereto Holdings will as
expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use reasonable efforts to cause such
registration statement to become
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effective (provided that before filing a registration statement or prospectus
or any amendments or supplements thereto, Holdings will furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel);
(b) furnish to each seller of Registrable 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 Registrable Securities
owned by such seller;
(c) use reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Securities reasonably requests and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller (provided that
Holdings will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdictions, (iii)
consent to general service of process in each such jurisdiction or (iv)
undertake such actions in any jurisdiction other than the states of the United
States of America and the District of Columbia);
(d) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, Holdings will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
purchasers of such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(e) use its best efforts to cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
Holdings are 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 Registrable
Securities covered by such registration statements as a NASDAQ "national market
system security" within the meaning of Rule 11Aa2-1 of the Securities and
Exchange Commission or, failing that, to secure NASDAQ authorization for such
Registrable 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 Registrable Securities with the NASD;
(f) provide a transfer agent and registrar for all such
Registrable 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 holders of
a majority of the Registrable
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Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities
(including, without limitation, effecting a split or a combination of units);
(h) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of Holdings, and cause Holding's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(i) otherwise use its 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 Holding'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;
(j) permit any holder of Registrable Securities which holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of Holdings, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to Holdings in writing, which in the reasonable judgment of
such holder and its counsel should be included; and
(k) 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 shares of Common Stock included in such registration statement for sale in
any jurisdiction, Holdings will use its reasonable best efforts promptly to
obtain the withdrawal of such order. If any such registration or comparable
statement refers to any holder by name or otherwise as the holder of any
securities of Holdings and if in its sole and exclusive judgment such holder is
or might be deemed to be a controlling person of Holdings, such holder shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to such holder and presented to Holdings in writing, to
the effect that the holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment quality of
Holding's securities covered thereby and that such holding does not imply that
such holder will assist in meeting any future financial requirements of
Holdings, (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder; provided that with
respect to this clause (ii) such holder shall furnish to Holdings an opinion of
counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to Holdings.
11.6 Registration Expenses. All expenses incident to Holding's
performance of or compliance with this Article 11, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and
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delivery expenses, and fees and disbursements of counsel for Holdings and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by Holdings (all such expenses,
excluding underwriting discounts and commissions, being herein called
"Registration Expenses"), will be borne by Holdings. The Company will bear the
cost of one set of counsel for the Holders of Registrable Securities
participating in any Piggyback Registration or Demand Registration. All
underwriting discounts and commissions will be borne by the seller of the
securities sold pursuant to the registration.
11.7 Indemnification.
(a) Holdings agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to Holdings by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after Holdings
has furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, Holdings will indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will
furnish to Holdings in writing such information and affidavits as Holdings
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify Holdings, its
directors and officers and each Person who controls Holdings (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder;
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of
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more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event Holding's
indemnification is unavailable for any reason.
11.8 Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration
shall be required to make any representations or warranties to Holdings or the
underwriters other than representations and warranties regarding such holder
and such holder's intended method of distribution.
11.9 Other Rights. The Company will not grant to any Person any
registration rights, unless such rights are fully subordinated to the
registration rights of the Holders provided herein.
ARTICLE 12
AFFILIATE GUARANTYAFFILIATE GUARANTY
12.1 The Guarantee. The Affiliate Guarantors hereby jointly and
severally guarantee to the Purchaser the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of all obligations,
liabilities and indebtedness of every nature of each Loan Party from time to
time owed to Purchaser under the Purchase Documents, including all Notes, the
principal amount of all other debts, claims and indebtedness, including accrued
and unpaid interest, and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable under the Purchase Documents
whether before or after the filing of a proceeding under the bankruptcy code by
or against any Loan Party (collectively, the "Guaranteed Obligations"), in each
case strictly in accordance with the terms hereof. The Affiliate Guarantors
hereby further jointly and severally agree that if the Company shall fail to
pay in full when due (whether at stated maturity, by acceleration or otherwise)
any of the Guaranteed Obligations, the Affiliate Guarantors will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
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12.2 Obligations Unconditional. The obligations of the Affiliate
Guarantors hereunder are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Company under this Agreement, the Notes or any other
Loan Document or any substitution, release or exchange of any other guarantee
of or security for any of the Guaranteed Obligations, and, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor (other than, subject to clause (C) below, full
payment and satisfaction of all Guaranteed Obligations), it being the intent of
this Section that the obligations of the Affiliate Guarantors hereunder shall
be absolute and unconditional, joint and several, under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that, to the extent permitted by applicable law, the occurrence of any one or
more of the following shall not alter or impair the liability of the Affiliate
Guarantors hereunder which shall remain absolute and unconditional as described
above:
(a) at any time or from time to time, without notice to any of
the Affiliate Guarantors, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein on the part of the Company to be done shall fail to be done or be
omitted;
(c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement or
the Notes or any other Loan Document shall be waived or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of, the
Loan Parties as security for any of the Guaranteed Obligations shall fail to be
perfected.
The Affiliate Guarantors hereby expressly waive diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that any of the Loan Parties exhaust any right, power or remedy or
proceed against the Company under this Agreement or the Notes or any other
Purchase Document, or against any other Person under any other Guaranty of, or
security for, any of the Guaranteed Obligations.
12.3 Reinstatement. The obligations of the Affiliate Guarantors
hereunder shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Affiliate Guarantors jointly
and severally agree that they will indemnify each of the Loan Parties on demand
for all reasonable costs and expenses (including, without limitation,
reasonable fees and disbursements of legal counsel) incurred by the Loan
Parties in connection with such rescission or restoration, including any such
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costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
12.4 Deferral of Subrogation. Each Affiliate Guarantor hereby
subordinates to the Loan Parties all rights of subrogation or contribution
against the Company, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Bankruptcy
Code) or otherwise by reason of any payment by it pursuant to the provisions
hereof until all Obligations (other than any constituting contingent indemnity
obligations) are fully paid and satisfied and all Commitments are terminated.
12.5 Remedies. The Affiliate Guarantors jointly and severally
agree that, as between the Affiliate Guarantors and the Loan Parties, the
Guaranteed Obligations may be declared to be forthwith due and payable as
provided herein (and shall be deemed to have become automatically due and
payable in the circumstances provided herein) for purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable)
as against the Company and that, in the event of such declaration in accordance
with the terms hereof (whether or not due and payable by the Company) shall
forthwith become due and payable by the Affiliate Guarantors for purposes
hereof.
12.6 Instrument for the Payment of Money. Each Affiliate Guarantor
hereby acknowledges that its guaranty herein constitutes an instrument for the
payment of money.
12.7 Continuing Guaranty. The guaranty set forth herein is a
continuing guaranty, and shall apply to all Guaranteed Obligations, whenever
and howsoever arising.
12.8 Rights of Contribution. The Affiliate Guarantors hereby
agree, as between themselves, that if any Affiliate Guarantor shall become an
"Excess Funding Guarantor" (as defined below) by reason of the payment by such
Affiliate Guarantor of any Guaranteed Obligations, each other Affiliate
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Affiliate Guarantor's "Pro Rata Share" (as defined below and determined, for
this purpose, without reference to the properties, debts and liabilities of
such Excess Funding Guarantor) of the "Excess Payment" (as defined below) in
respect of such Guaranteed Obligations. The payment obligation of an Affiliate
Guarantor to any Excess Funding Guarantor under this Section shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Affiliate Guarantor under the other provisions of this
Section 1.11 and such Excess Funding Guarantor shall not exercise any right or
remedy with respect to such excess until payment and satisfaction in full of
all such obligations. For purposes hereof, (i) "Excess Funding Guarantor"
means, in respect of any Guaranteed Obligations, an Affiliate Guarantor that
has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its
Pro Rata Share of such Guaranteed Obligations (iii) "Pro Rata Share" means, for
any Affiliate Guarantor, the ratio (expressed as a percentage) of (x) the
amount by which the aggregate present fair saleable value of all assets of such
Affiliate
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Guarantor (excluding any shares of stock of any other Affiliate Guarantor)
exceeds the amount of all the debts and liabilities of such Affiliate Guarantor
(including contingent, subordinated, unmatured and unliquidated liabilities,
but excluding the obligations of such Affiliate Guarantor hereunder and any
obligations of any other Affiliate Guarantor that have been guaranteed by such
Affiliate Guarantor) to (y) the amount by which the aggregate fair saleable
value of all assets of all of the Affiliate Guarantors exceeds the amount of
all the debts and liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities, but excluding the obligations of the Affiliate
Guarantor hereunder) of the Affiliate Guarantors, determined (A) with respect
to any Affiliate Guarantor that is a party hereto on the Closing Date, as of
the Closing Date, and (B) with respect to any other Affiliate Guarantor, as of
the date such Affiliate Guarantor becomes an Affiliate Guarantor hereunder.
12.9 Limitation on Guaranteed Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Affiliate Guarantors hereunder,
after giving effect to the contribution rights provided herein above, would
otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability hereunder, then, notwithstanding any other provision hereof to
the contrary, the amount of such liability shall, without any further action by
any Affiliate Guarantor, any of the Loan Parties or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
ARTICLE 13
MISCELLANEOUS
13.1 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that (i) none of the Loan Parties may assign or transfer
its rights hereunder or any interest herein or delegate its duties hereunder
without the prior written consent of Purchaser and (ii) Purchaser shall have
the right to assign its rights hereunder and under the Securities.
13.2 Modifications, Amendments or Waivers. The provisions of this
Agreement may be modified, amended or waived, but only by a written instrument
signed by each of the Loan Parties and Purchaser and to the extent such
modification, amendment or waiver relates to the Tranche A Notes, the Tranche B
Notes, the Warrants or the Underlying Common Stock, by prior written consent of
holders of a majority in aggregate principal amount of the outstanding Tranche
A Notes or Tranche B Notes or holders of a majority of the Warrants or the
Underlying Common Stock, as applicable; provided that no such action will
change (i) the rate at which, or the manner in which, interest accrues on the
Notes or the times at which such interest becomes payable, (ii) any provision
relating to the scheduled payments or prepayments of principal on the Notes, or
(iii) this Section 13.2 without the written consent of all holders of the
relevant Notes.
13.3 No Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of
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steps to enforce such a right, power or remedy preclude any further exercise
thereof or of any other right, power or remedy. The rights and remedies
hereunder are cumulative and not exclusive of any rights or remedies which
Purchaser or any holder of Notes would otherwise have. Any waiver, permit,
consent or approval of any kind or character of any breach or default under
this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent in such
writing specifically set forth.
13.4 Reimbursement of Expenses; Taxes. The Loan Parties, jointly
and severally, upon demand shall pay or reimburse Purchaser for all fees and
expenses incurred or payable by Purchaser (including, without limitation,
reasonable fees and expenses of special counsel for Purchaser), from time to
time (i) arising in connection with the negotiation, preparation and execution
of this Agreement, the Notes, the other Purchase Documents and all other
instruments and documents to be delivered hereunder or thereunder or arising in
connection with the transactions contemplated hereunder or thereunder, (ii)
relating to any amendments, waivers or consents pursuant to the provisions
hereof or thereof, and (iii) arising in connection with the enforcement of this
Agreement or collection of the Notes. The Loan Parties, jointly and severally,
agree to pay and save Purchaser harmless from all liability for any stamp,
transfer or other similar taxes which may be payable in connection with this
Agreement or the performance of any transactions contemplated hereby.
13.5 Holidays. Whenever any payment or action to be made or taken
hereunder or under the Notes shall be stated to be due on a day which is not a
Business Day, such payment or action shall be made or taken on the next
following Business Day, and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
13.6 Notices. All notices and other communications given to or
made upon any party hereto in connection with this Agreement shall, except as
otherwise expressly herein provided, be in writing (including telecopy, but in
such case, a confirming copy will be sent by another permitted means) and
mailed via certified mail, telecopied or delivered by guaranteed overnight
parcel express service or courier to the respective parties, as follows:
to the Loan Parties:
Clear Communications Group, Inc.
440 Interstate North Parkway
Atlanta, Georgia 30339
Attn: Stephen F. Johnston, Sr.
Telecopy: (770) 763-5635
with a copy to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, NE
Atlanta, Georgia 30309-3592
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Attn: Terry F. Schwartz, Esq.
Telecopy: (404) 685-7031
to Purchaser:
American Capital Strategies, Ltd.
2 Bethesda Metro Center, Suite 1400
Bethesda, Maryland 20814
Attn: President
Telecopier: (301) 654-6714
with a copy to:
Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attn: Stanley O. Mayo, Esq.
Telecopier: (214) 758-1550
or in accordance with any subsequent written direction from the recipient party
to the sending party. All such notices and other communications shall, except
as otherwise expressly herein provided, be effective upon delivery if delivered
by courier or overnight parcel express service; in the case of certified mail,
three (3) Business Days after the date sent; or in the case of telecopy, when
received.
13.7 Survival. All representations, warranties, covenants and
agreements of the Loan Parties contained herein or made in writing in
connection herewith shall survive the execution and delivery of this Agreement
and the purchase of the Notes and the Warrants and shall continue in full force
and effect so long as any Note or Warrant is outstanding and until payment in
full of all of the Loan Parties' obligations hereunder or thereunder.
13.8 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
13.9 Jurisdiction, Consent to Service of Process.
(a) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMIT, FOR THEMSELVES AND THEIR PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF
ANY MARYLAND STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA
SITTING IN THE STATE OF MARYLAND, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES OR ANY OTHER PURCHASE DOCUMENT, OR FOR RECOGNITION OR
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ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH MARYLAND OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT PURCHASER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER
PURCHASE DOCUMENT AGAINST THE LOAN PARTIES OR ITS PROPERTIES IN THE COURTS OF
ANY JURISDICTION.
(b) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES OR ANY OTHER PURCHASE DOCUMENT IN ANY MARYLAND OR FEDERAL COURT. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 13.6 HEREOF. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
13.10 Jury Trial Waiver. THE LOAN PARTIES HEREBY IRREVOCABLY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND
AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
13.11 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law in any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating any other provision of this Agreement.
13.12 Headings. Article, section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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13.13 Indemnity. The Loan Parties, jointly and severally, hereby
agree to indemnify, defend and hold harmless Purchaser and its officers,
directors, employees, agents and representatives, and its respective successors
and assigns in connection with any losses, claims, damages, liabilities and
expenses, including reasonable attorneys' fees, to which Purchaser may become
subject (other than as a result of the gross negligence or willful misconduct
of any such Person), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or by reason of any investigation,
litigation or other proceedings related to or resulting from any act of, or
omission by, any of the Loan Parties or its Affiliates or any officer,
director, employee, agent or representative of any of the Loan Parties or its
Affiliates with respect to the Transactions, the Notes, Charter Documents, the
Bylaws or any agreements entered into in connection with any such agreements,
instruments or documents and to reimburse Purchaser and each such Person and
Affiliate, upon demand, for any legal or other expenses incurred in connection
with investigating or defending any such loss, claim, damage, liability,
expense or action. To the extent that the foregoing undertakings may be
unenforceable for any reason, each of the Loan Parties agrees to make the
maximum contribution to the payment and satisfaction of indemnified liabilities
set forth in this Section 13.13 which is permissible under applicable law.
13.14 Environmental Indemnity. Each of the Loan Parties, and its
successors and assigns, hereby releases and discharges, and agrees to defend,
indemnify and hold harmless, Purchaser and its Affiliates (including their
partners, subsidiaries, customers, guests, and invitees, and the successors and
assigns of all of the foregoing, and their respective officers, employees and
agents) from and against any and all Environmental Liabilities, whenever and by
whomever asserted, to the extent that such Environmental Liabilities are based
upon, or otherwise relate to: (i) any Condition at any time in, at, on, under,
a part of, involving or otherwise related to the Properties and Facilities
(including any of the properties, materials, articles, products, or other
things included in or otherwise a part of the Properties and Facilities); (ii)
any action or failure to act of any Person, including any prior owner or
operator of the Properties and Facilities (including any of the properties,
materials, articles, products, or other things included in or otherwise a part
of the Properties and Facilities), involving or otherwise related to the
Properties and Facilities or operations of the Loan Parties; (iii) the
Management of any Pollutant, material, article or product (including Management
of any material, article or product containing a Pollutant) in any physical
state and at any time, involving or otherwise related to the Properties and
Facilities or any property covered by clause (iv) (including Management either
from the Properties and Facilities or from any property covered by clause (iv),
and Management to, at, involving or otherwise related to the Properties and
Facilities or any property covered by clause (iv)); (iv) Conditions, and
actions or failures to act, in, at, on, under, a part of, involving or
otherwise related to any property other than the Properties and Facilities,
which property was, at or prior to the Closing Date, (I) acquired, held, sold,
owned, operated, leased, managed, or divested by, or otherwise associated with,
(A) the Loan Parties, (B) any of the Loan Parties' Affiliates, or (C) any
predecessor or successor organization of those identified in (A) or (B); or
(II) engaged in any tolling, contract manufacturing or processing, or other
similar activities for, with, or on behalf of the Loan Parties; (v) any
violation of or noncompliance with or the assertion of any Lien under the
Environmental Laws, (vi) the presence of any toxic or hazardous substances,
wastes or contaminants on, at or from the past and present properties and
facilities, including, without limitation, human exposure thereto; (vii)
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any spill, release, discharge or emission affecting the past and present
properties and facilities, whether or not the same originates or emanates from
such properties and facilities or any contiguous real estate, including,
without limitation, any loss of value of such properties and facilities as a
result thereof; or (viii) a misrepresentation in any representation or warranty
or breach of or failure to perform any covenant made by the Loan Parties in
this Agreement. This indemnity and agreement to defend and hold harmless shall
survive any termination or satisfaction of the Notes or the sale, assignment or
foreclosure thereof or the sale, transfer or conveyance of all or part of the
past and present properties and facilities or any other circumstances which
might otherwise constitute a legal or equitable release or discharge, in whole
or in part, of the Loan Parties under the Notes.
13.15 Counterparts. This Agreement may be executed in any number of
counterparts and by either party hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
13.16 Integration. This Agreement and the other Purchase Documents
set forth the entire understanding of the parties hereto with respect to all
matters contemplated hereby and supersede all previous agreements and
understandings among them concerning such matters. No statements or agreements,
oral or written, made prior to or at the signing hereof, shall vary, waive or
modify the written terms hereof.
13.17 The Company as Agent and Attorney-in-Fact. Each of the Loan
Parties other than the Company hereby appoints the Company as its agent and
attorney-in-fact for all purposes hereunder and under all of the other Purchase
Documents. Such appointment shall be irrevocable and coupled with an interest
and Purchaser shall be entitled to rely unconditionally on any writing or other
communication that it receives purporting to be delivered pursuant thereto.
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SIGNATURE PAGE TO
NOTE AND EQUITY PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LOAN PARTIES:
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ Stephen F. Johnston, Sr.
--------------------------------------------
Stephen F. Johnston, Sr.
Chief Executive Officer
CLEAR HOLDINGS, INC.
By: /s/ Stephen F. Johnston
-------------------------------------------
Stephen F. Johnston, Sr.
Chief Executive Officer
PURCHASER:
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/ Adam Blumenthal
-------------------------------------------
Adam Blumenthal
President
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AFFILIATE GUARANTORS:
<TABLE>
<CAPTION>
<S> <C>
CLEAR HOLDINGS, INC. TWR LIGHTING, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- ----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
CELLULAR TECHNOLOGY
INTERNATIONAL, INC. CLEAR TOWER CORPORATION
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- ----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
SPECIALTY DRILLING, INC. CLEAR PROGRAM MANAGEMENT, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- ----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
TWR TELECOM, INC. ROOKER TOWER COMPANY
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- ----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
COMMUNICATIONS DEVELOPMENT
SYSTEMS, INC. ISDC, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- ----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
</TABLE>
67
<PAGE> 68
ANNEX A
INFORMATION RELATING TO PURCHASER
<TABLE>
<CAPTION>
Name and Address Principal Amount of
of Purchaser Notes to be Purchased
- ---------------- ---------------------
<S> <C>
AMERICAN CAPITAL STRATEGIES, LTD. Tranche A Notes
2 Bethesda Metro Center $13,000,000
Suite 1400
Bethesda, MD 20814 Tranche B Notes
$4,500,000
Warrants to Purchase
1,032,763 shares of Common Stock
Warrants to Purchase up to a
number of shares of Common
Stock as permitted in Article 2.
</TABLE>
All Notes will be assigned to:
ACS FUNDING TRUST I
c/o AMERICAN CAPITAL STRATEGIES, LTD.,
as Servicer
2 Bethesda Metro Center
Suite 1400
Bethesda, MD 20814
(1) All payments:
If by wire:
Account Name: ACS Funding
Trust I
Account #: 8601046967
Bank: LaSalle National Bank, Chicago
ABA #: 071000505
If by mail:
ACS Funding Trust I
135 South LaSalle Street, Dept 4522
Chicago, Illinois 60674-4522
If by overnight parcel service (e.g., FedEx, UPS, etc):
ACS Funding Trust I
<PAGE> 69
200 West Monroe Street, Suite 200
Chicago, Illinois 60606
Attn: ACS Funding Trust I, Dept. 4522
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written confirmations of such wire
transfers:
American Capital Strategies, Ltd., as Servicer
2 Bethesda Metro Center, Suite 1400
Bethesda, Maryland 20814
Attn: Comptroller
Telecopier: (301) 654-6714
(3) All other communications:
American Capital Strategies, Ltd., as Servicer
2 Bethesda Metro Center, Suite 1400
Bethesda, Maryland 20814
Attn: President
Telecopier: (301) 654-6714
<PAGE> 70
ANNEX B
TWR TELECOM, INC., a Texas corporation and wholly-owned Subsidiary of the
Company ("TWR");
TWR LIGHTING, INC., a Texas corporation and wholly-owned Subsidiary of the
Company ("TLC");
ROOKER TOWER COMPANY, a Tennessee corporation and wholly-owned Subsidiary of
the Company ("RTC");
CLEAR PROGRAM MANAGEMENT, INC., a Georgia corporation and wholly-owned
Subsidiary of the Company ("CPM");
SPECIALTY DRILLING, INC., a Texas corporation and wholly-owned Subsidiary of
the Company ("SDI");
CELLULAR TECHNOLOGY INTERNATIONAL, INC., a Missouri corporation and
wholly-owned Subsidiary of the Company ("CTI");
COMMUNICATIONS DEVELOPMENT SYSTEMS, INC., a New Jersey corporation and
wholly-owned Subsidiary of the Company ("CDS");
CLEAR TOWER CORPORATION, a Georgia corporation and wholly-owned Subsidiary of
the Company ("Tower"); and
ISDC, INC., a Georgia corporation and wholly-owned Subsidiary of the Company.
<PAGE> 71
SCHEDULE 7.2(b)(iv)
PERMITTED LIENS SCHEDULE
EXHIBITS
EXHIBIT A-1 Form of Tranche A Note
EXHIBIT A-2 Form of Tranche B Note
EXHIBIT B Form of Warrant
EXHIBIT C Form of Security Agreement
EXHIBIT D Intentionally Omitted
EXHIBIT E Form of Pledge Agreement
EXHIBIT F Form of Landlord Consent
EXHIBIT G Form of Acquisition Certificate
EXHIBIT H Form of Compliance Certificate
EXHIBIT I Form of Joinder Agreement
SCHEDULES
"Seller and Seller Debt Schedule" (Section 1.1)
"Corporate Schedule" (Section 5.1(a))
"Litigation Schedule" (Section 5.1(j)
"Environmental Schedule" (Section 5.1(m))
"Properties Schedule" (Section 5.1(r))
"Intellectual Properties Schedule" (Section 5.1(s))
"Permitted Liens Schedule" (Section 7.2(b)(iv))
ANNEX
Annex A Purchaser Information
Annex B List of Subsidiaries
<PAGE> 72
AMENDMENT NO. ONE
TO PURCHASE AGREEMENT
This constitutes Amendment No. One to the Agreement dated November 1,
1999, respecting the American Capital Strategies, Ltd. Purchase of $17,500,000
Senior Subordinated Notes to be Issued by Clear Communications Group, Inc. and
the Issuance of Warrants to Purchase Shares of Common Stock of Clear Holdings,
Inc. (the "Purchase Agreement").
The defined terms contained in this Agreement shall have the same
meaning as ascribed to them in the Purchase Agreement.
This Amendment to the Purchase Agreement is dated April 30, 2000 and
the Purchase Agreement is amended as follows:
1. Notwithstanding any provisions to the contrary contained in
Section 7.1 of the Purchase Agreement respecting "Affirmative Covenants,"
Purchaser hereby agrees that upon the (i) payment in full of the principal
amount of the Notes and all interest thereon and (ii) consummation of a
Qualified Initial Public Offering, the affirmative covenants contained in
Section 7.1 shall become null and void and shall be of no further force or
effect, so long as the Company is in compliance with the reporting requirements
under the Securities Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
One to the Purchase Agreement as of the day and year first above written.
THE LOAN PARTIES:
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ Stephen F. Johnston, Sr.
------------------------------------
Stephen F. Johnston, Sr.
Chairman and Chief Executive Officer
CLEAR HOLDINGS, INC.
By: /s/ Stephen F. Johnston, Sr.
------------------------------------
Stephen F. Johnston, Sr.
Chairman and Chief Executive Officer
PURCHASER:
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/ Roland Cline
------------------------------------
Name: Roland Cline
----------------------------------
Title: Vice President
---------------------------------
<PAGE> 73
SECOND AMENDMENT
TO
NOTE AND EQUITY AGREEMENT
This Second Amendment ("Amendment") to the Note and Equity Purchase
Agreement, dated as of November 1, 1999, as amended (the "Purchase Agreement"),
among American Capital Strategies, Ltd., a Delaware corporation ("ACAS"), Clear
Communications Group, Inc., a Georgia corporation (the "Company"), Clear
Holdings, Inc., a Georgia corporation ("Holdings"), and the subsidiaries of
Holdings signatory thereto (the "Subsidiaries", together with Holdings and the
Company, the "Note Parties") is made and entered into as of May 9, 2000.
RECITALS
WHEREAS, the Note Parties and ACAS entered into the Purchase
Agreement, pursuant to which (a) ACAS purchased Tranche A Notes in the
original principal amount of $13,000,000, (b) ACAS purchased Tranche B Notes in
the original principal amount of $4,500,000 and (c) ACAS purchased and the
Company sold and issued warrants to purchase shares of Common Stock of the
Company;
WHEREAS, the Note Parties and ACAS entered into that certain
Amendment No. One to Purchase Agreement dated as of April 30, 2000; and
WHEREAS, the Note Parties and ACAS have agreed to amend the Purchase
Agreement as specifically set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. Unless otherwise specified herein, all
capitalized terms herein shall have the same meaning as those terms have in the
Purchase Agreement.
2. AMENDMENTS.
(a) Section 9.1 of the Purchase Agreement is
hereby amended by deleting subsection (i) of Section 9.1 and replacing it with
"(i) May 9, 2001".
(b) Section 9.1 of the Purchase Agreement is further amended
by adding the following sentence at the end of such Section 9.1:
"Notwithstanding the foregoing, the right of any Holder to exercise the Put
Option shall terminate and have no further force or effect after the
consummation of a Qualified Initial Public Offering."
(c) Section 9.2 of the Purchase Agreement is amended by adding
the following at the end of such Section 9.2:
Notwithstanding anything to the contrary contained herein,
Holdings shall not be required to pay more than $9,294,867
("Put Price Limit") in respect of any exercise
-1-
<PAGE> 74
of the Put Option with respect to the Warrants and Subject
Securities. If the Put Price in respect of the exercise of the
Put Option with respect to the Warrants and Subject Securities
exceeds the Put Price Limit, each Holder shall receive upon
exercise of the Put Option (a) an amount in cash equal to the
pro rata portion of the Put Price Limit (based on the
percentage that the number of Warrants and Subject Securities
owned by such Holder bears to the aggregate number of Warrants
and Subject Securities owned by all Holders ("Pro Rata
Share")) and (b) at the option of such Holder, either (i) a
new Warrant evidencing the right to purchase such Holder's Pro
Rata Share of the Non-Put Shares (as defined below) or (ii) a
certificate evidencing shares of Common Stock equal to such
Holders Pro Rata Share of the Non-Put Shares. For purposes of
this Section 9.2, Non-Put Shares shall mean the product of (x)
the aggregate number of Warrants and Subject Securities prior
to exercise of the Put Option multiplied by (y) the quotient
determined by dividing (i) the remainder of (A) the Put Price
minus (B) Put Price Limit, by (ii) the Put Price with respect
to the Common Stock. After the payment by Holdings to the
Holders of an amount equal to the Put Price Limit in
connection with the exercise of the Put Options, there shall
be no further Put Option with respect to the Non-Put Shares.
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be considered an original for all purposes,
and all of which when taken together shall constitute a single counterpart
instrument. Executed signature pages to any counterpart instrument may be
detached and affixed to a single counterpart, which such single counterpart with
multiple executed signature pages affixed thereto constituting the original
counterpart instrument. All of those counterpart pages shall be read as though
one, and they shall have the same force and effect as if all the signers had
executed a single signature page.
4. Reaffirmation. Except as amended hereby, the Agreement shall
remain in full force and effect, the parties hereto hereby restate and reaffirm
all of the terms and provisions of the Agreement.
[Signature page to follow]
-2-
<PAGE> 75
The undersigned have executed this Amendment as of the date first set
forth above.
LOAN PARTIES:
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ Stephen F. Johnston, Sr.
----------------------------
Stephen F. Johnson, Sr.
Chief Executive Officer
CLEAR HOLDINGS, INC.
By: /s/ Stephen F. Johnston, Sr.
----------------------------
Stephen F. Johnson, Sr.
Chief Executive Officer
PURCHASER:
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/ Roland Cline
----------------
Name: Roland Cline
Title: Vice President
AFFILIATE GUARANTORS:
CLEAR HOLDINGS, INC. TWR LIGHTING, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
---------------------------- ----------------------------
Name: Stephen F. Johnson, Sr. Name: Stephen F. Johnson, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
CELLULAR TECHNOLOGY
INTERNATIONAL, INC. CLEAR TOWER CORPORATION
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
---------------------------- ----------------------------
Name: Stephen F. Johnson, Sr. Name: Stephen F. Johnson, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
<PAGE> 76
SPECIALTY DRILLING, INC. CLEAR PROGRAM MANAGEMENT, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- -----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
TWR TELECOM, INC. ROOKER TOWER COMPANY
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- -----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
COMMUNICATIONS DEVELOPMENT ISDC, INC.
SYSTEMS, INC.
By: /s/ Stephen F. Johnston, Sr. By: /s/ Stephen F. Johnston, Sr.
----------------------------- -----------------------------
Name: Stephen F. Johnston, Sr. Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 4.11
This Warrant was originally issued on November 1, 1999, and such
issuance was not registered under the Securities Act of 1933, as amended. The
transfer of this Warrant and the securities obtainable upon exercise thereof is
subject to the conditions on transfer specified in the Note and Equity Purchase
Agreement, dated as of November 1, 1999 (as amended from time to time, the
"Purchase Agreement") by and among the issuer hereof (the "Company"), its
wholly-owned subsidiaries and the Purchaser (as such term is defined in the
Purchase Agreement), and the Company reserves the right to refuse the transfer
of such security until such conditions have been fulfilled with respect to such
transfer. Upon written request, a copy of such conditions will be furnished by
the Company to the holder hereof without charge.
WARRANT
Date of Issuance: November 1, 1999 Certificate No. W-[1]
FOR VALUE RECEIVED, CLEAR HOLDINGS, INC., a Georgia corporation (the
"Company"), hereby grants to AMERICAN CAPITAL STRATEGIES, LTD., or its
registered assigns (the "Registered Holder") the right to purchase from the
Company 1,032,763 shares (as adjusted from time to time hereunder, the "Exercise
Shares"), of the Company's Common Stock, $.01 par value ("Common Stock"), at a
price per share of $.01 (as adjusted from time to time hereunder, the "Exercise
Price"). This Warrant is one of one or more Warrants (collectively, the
"Warrants") originally issued by the Company to certain investors on November 1,
1999. Certain capitalized terms used herein are defined in Section 4 hereof.
Certain capitalized terms used and not defined herein are defined in the Note
and Equity Purchase Agreement dated as of November 1, 1999 (as amended from time
to time, the "Purchase Agreement") by and among the Company, its subsidiaries
named therein, and the Purchaser (as such term is defined in the Purchase
Agreement). The amount and kind of securities purchasable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may exercise, in whole
or in part (but not as to a fractional share of Common Stock), the purchase
rights represented by this Warrant at any time and from time to time, to and
including the date that is the tenth anniversary of the original date of
issuance (the "Exercise Period"). The Company will give the Registered Holder
written notice at least 30 days but not more than 90 days prior to the
expiration of the Exercise Period. If at the time of exercise (i) the Company
has in effect a valid election under Subchapter S of the Code, (ii) no uncured
Event of Default or Default shall have occurred and (iii) the Company has never
breached its obligations under Article 9 of the Agreement by failing to honor
any Holder's Put Option in accordance with the terms set forth therein,
Registered Holder shall provide the Company written notice of not more than 90
days prior to Registered Holder's
<PAGE> 2
determination to exercise this Warrant to permit the Company to complete an
orderly termination of its Subchapter S status under the Code.
(i) Exercise Procedure. This Warrant will be deemed to
have been exercised when the Company has received all of the following items
(the "Exercise Time"):
(a) A completed Exercise Agreement, as described
in paragraph 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the
name of the initial Purchaser, an assignment or assignments in the form set
forth in Exhibit II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder will have complied with the
provisions set forth in Section 6 hereof; and
(d) check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
Price"); provided, however, that the Registered Holder may exercise this Warrant
in whole or in part by the surrender of this Warrant to the Company, with a duly
executed Exercise Agreement marked to reflect "Net Issue Exercise" and
specifying the number of shares of Common Stock to be purchased and upon such
Net Issue Exercise, the Registered Holder shall be entitled to pay the exercise
price for Common Stock purchased hereunder by cancellation of shares of Common
Stock to be purchased hereunder, valued at Fair Market Value less the Exercise
Price thereof.
(ii) Certificates for shares of Common Stock purchased
upon exercise of this Warrant will be delivered by the Company to the Purchaser
within five Business Days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have been
exercised, the Company will prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and will, within such five-day period, deliver
such new Warrant to the Person designated for delivery in the Exercise
Agreement.
(iii) The Common Stock issuable upon the exercise of this
Warrant will be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser will be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common
Stock upon exercise of this Warrant will be made without charge to the
Registered Holder or the Purchaser for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock issuable
upon exercise of this Warrant will, upon payment of the Exercise Price therefor,
be fully paid and nonassessable and free from all liens and charges with respect
to the issuance thereof.
(v) The Company will not close its books against the
transfer of this Warrant or of any share of Common Stock issued or issuable upon
the exercise of this Warrant in any
- 2 -
<PAGE> 3
manner which interferes with the timely exercise of this Warrant. The Company
will from time to time take all such action as may be necessary to assure that
the par value per share of the unissued Common Stock acquirable upon exercise of
this Warrant is at all times equal to or less than the Exercise Price then in
effect.
(vi) The Company shall assist and cooperate with any
Registered Holder or Purchaser required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or sale of the Company, the exercise of any portion of this
Warrant may, at the election of the holder hereof, be conditioned upon the
consummation of the public offering or sale of the Company in which case such
exercise shall not be deemed to be effective until the consummation of such
transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock solely for
the purpose of issuance upon the exercise of the Warrants, the number of shares
of Common Stock issuable upon the exercise of all outstanding Warrants. All
shares of Common Stock that are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Company shall use its best efforts to assure that all such shares
of Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance).
1B. Exercise Agreement. Upon any exercise of this Warrant, the
Exercise Agreement will be substantially in the form set forth in Exhibit I
hereto, except that if the shares of Common Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, the Exercise
Agreement will also state the name of the Person to whom the certificates for
the shares of Common Stock are to be issued, and if the number of shares of
Common Stock to be issued does not include all the shares of Common Stock
purchasable hereunder, it will also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to be delivered.
Such Exercise Agreement will be dated the actual date of execution thereof.
1C. Fractional Shares. If a fractional share of Common Stock
would, but for the provisions of paragraph 1A, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within five Business Days
after the date of the Exercise Time, deliver to the Purchaser a check payable to
the Purchaser in lieu of such fractional share in an amount equal to the
difference between Fair Market Value of such fractional share as of the date of
the Exercise Time and the Exercise Price of such fractional share.
Section 2. Adjustment of Number of Exercise Shares. In order to prevent
dilution of the rights granted under this Warrant, the number of Exercise Shares
shall be subject to adjustment from time to time as provided in this Section 2.
- 3 -
<PAGE> 4
2A. Adjustment of Number of Exercise Shares upon Issuance of
Shares of Common Stock or Stock Equivalents. If and whenever on or after the
Closing Date, the Company issues or sells, or in accordance with paragraph 2B is
deemed to have issued or sold, any shares of Common Stock for a consideration
per share of Common Stock less than the Fair Market Value per share of Common
Stock at the time of such issue or sale (not including the issuance of shares of
Common Stock pursuant to exercise of the Warrants or Exempt Securities), then
forthwith upon such issue or sale, the Exercise Shares will be increased by
multiplying such number by a fraction, (A) the numerator of which is the Fair
Market Value per share of Common Stock at the time of such issue or sale and (B)
the denominator of which is the amount determined by dividing (a) the sum of (1)
the product derived by multiplying the Fair Market Value per share of Common
Stock at the time of such issue or sale times the number of shares of Common
Stock outstanding on a Fully Diluted Basis immediately prior to such issue or
sale, plus (2) the aggregate consideration, if any, received by the Company upon
such issue or sale, by (b) the number of shares of Common Stock outstanding on a
Fully Diluted Basis immediately after such issue or sale; provided, however,
that notwithstanding any other provision of this paragraph 2A or of paragraph
2B, no adjustment shall be made for (i) the issuance of options to acquire
Common Stock pursuant to the Management Option Plan, (ii) the issuance of shares
of Common Stock upon exercise of such management stock options or (iii) the
issuance of shares of Common Stock upon conversion of Preferred Stock.
2B. Effect on Exercise Shares of Certain Events. For purposes of
determining the adjusted Exercise Shares of Common Stock under paragraph 2A
above, the following will be applicable:
(i) Issuance of Stock Equivalents. If the Company in any
manner grants or issues Stock Equivalents other than Exempt Securities as
permitted by the Purchase Agreement and the lowest price per share of Common
Stock for which any one share of Common Stock of the Company or analogous
economic right is issuable upon the exercise of any such Stock Equivalent is
less than the Fair Market Value at the time of the granting or issuing of such
Stock Equivalent, then such shares of Common Stock will be deemed to have been
issued and sold by the Company for such price per share of Common Stock. For
purposes of this paragraph, the "lowest price per share of Common Stock for
which any one share of Common Stock or analogous economic right is issuable"
will be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common
Stock or analogous economic right upon the exercise of the Stock Equivalent
(whether by conversion, exchange or otherwise) or other similar indication of
the price per share of Common Stock as of the time of granting (such as the
floor value for stock appreciation rights). No further adjustment of the
Exercise Shares will be made upon the actual issue of such shares of Common
Stock or upon the exercise of any rights under the Stock Equivalents.
(ii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Stock Equivalent, the additional
consideration, if any, payable upon the issue, conversion or exchange of any
Stock Equivalent, or the rate at which any Stock Equivalent is convertible into
or exchangeable for shares of Common Stock changes at any time, the Exercise
Shares in effect at the time of such change will be readjusted to the Exercise
Shares which would have been in effect at such time had such Stock Equivalent
still outstanding provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold; provided that if such adjustment
- 4 -
<PAGE> 5
would result in a decrease in the Exercise Shares then in effect, such
adjustment will not be effective until thirty (30) days after written notice
thereof has been given by the Company to all holders of the Warrants.
(iii) Treatment of Expired and Unexercised Stock
Equivalents. Upon the expiration of any Stock Equivalent or the termination of
any right to convert or exchange any Stock Equivalent without the exercise of
such Stock Equivalent, the Exercise Shares then in effect will be adjusted to
the Exercise Shares which would have been in effect at the time of such
expiration or termination had such Stock Equivalent, to the extent outstanding
immediately prior to such expiration or termination, never been issued; provided
that if such expiration or termination would result in a decrease in the
Exercise Shares then in effect, such decrease shall not be effective until
thirty (30) days after written notice thereof has been given to all holders of
the Warrants.
(iv) Calculation of Consideration Received. If any shares
of Common Stock or Stock Equivalents are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company. In case any shares of Common Stock or
Stock Equivalents are issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company will be the
Fair Market Value of such consideration. In case any shares of Common Stock or
Stock Equivalents are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the Fair Market Value of
such portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock or Stock Equivalents, as the case
may be.
(v) Integrated Transactions. In case any Stock Equivalent
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Stock Equivalent by the parties thereto, the
Stock Equivalent will be deemed to have been issued without consideration.
(vi) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, or Stock Equivalents or
(B) to subscribe for or purchase Common Stock or Stock Equivalents, then such
record date will be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
2C. Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Shares in effect immediately prior to
such subdivision will be proportionately increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Shares in effect immediately prior to such combination will be proportionately
decreased.
- 5 -
<PAGE> 6
2D. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction that is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as "Organic Change." Prior to the
consummation of any Organic Change, the Company will make appropriate provision
(as determined by the Board of Directors, but in form and substance reasonably
satisfactory to the Registered Holders of the Warrants representing a majority
of the Common Stock obtainable upon exercise of all Warrants then outstanding)
to insure that each of the Registered Holders of the Warrants will thereafter
have the right to acquire and receive in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and receivable
upon the exercise of such holder's Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of such holder's Warrant had such Organic Change not taken place. In
any such case, the Company will make appropriate provision (in form and
substance satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure that
the provisions of this Section 2 and Sections 3 and 4 hereof will thereafter be
applicable to the Warrants (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing entity is other than
the Company, an immediate adjustment of the Exercise Price to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of Exercise Shares, if the
value so reflected is less than the Exercise Price in effect immediately prior
to such consolidation, merger or sale). The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the corporation purchasing such assets assumes by written instrument
(in form and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all of
the Warrants then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
2E. Notices.
(i) Immediately upon any adjustment of the Exercise
Shares, the Company will give written notice thereof to the Registered Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company will give written notice to the
Registered Holder at least 20 days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation.
(iii) The Company will also give written notice to the
Registered Holders at least 20 days prior to the date on which any Organic
Change, dissolution or liquidation will take place.
- 6 -
<PAGE> 7
Section 3. Dividends
3A. In the event that, during the term of the Warrants, the
Company pays any cash dividend or makes any cash distribution to any holder of
Common Stock each Registered Holder shall be entitled to receive in respect of
its Warrant a dilution fee in cash (the "Dilution Fee") on the date of payment
of such dividend or distribution, which Dilution Fee shall be equal to the
difference between (a) the product of (i) the highest amount per share paid to
holders of Common Stock times (ii) the number of Exercise Shares to which the
Holder is then entitled. No such dividend or distribution shall be paid unless
the Holders shall have received advance written notice thereof at least ten (10)
days prior to the record date.
3B. If the Company declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Company will pay to the Registered
Holder of this Warrant at the time of payment thereof the Liquidating Dividend
which would have been paid to such Registered Holder on the Common Stock had
this Warrant been fully exercised immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 4. Definitions. The following terms have meanings set forth
below:
"Common Stock" means, collectively, Common Stock and, except for
purposes of the shares obtainable upon exercise of this Warrant, any capital
stock of any class of the Company hereafter authorized that is not limited to a
fixed sum or percentage of par or stated value in respect to the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon any liquidation, dissolution or winding up of the Company.
"Fair Market Value" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of each day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Fair Market Value" is being determined and
the 20 consecutive Business Days prior to such day. If at any time such security
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Fair Market Value" shall be the fair value
therefor determined jointly by the Board of Directors of the Corporation and the
holders of a majority of the Warrants. If such parties are unable to reach
agreement within reasonable period of time, such Fair Market Value shall be
determined by an appraiser in the same way as the Put Price for Common Stock is
determined under the Purchase Agreement.
- 7 -
<PAGE> 8
"Fully Diluted Basis" means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of Stock
Equivalents then outstanding (including Warrants), regardless of their exercise
price or its equivalent.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Stock Equivalents" means any option, warrant, right or similar
security or claim exercisable into, exchangeable for, or convertible to shares
of Common Stock or the economic equivalent value of shares of Common Stock
(including, by way of illustration, stock appreciation rights).
Section 5. No Voting Rights; Limitations of Liability. This Warrant
will not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such holder for the Exercise Price of Common Stock acquirable
by exercise hereof or as a stockholder of the Company.
Section 6. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder,
upon surrender of this Warrant with a properly executed Assignment (in the form
of Exhibit II hereto) at the principal office of the Company.
Section 7. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
will represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexplored and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
Section 8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the Company
(provided that if the holder is a financial institution or other institutional
investor its own agreement will be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Company will (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the same rights represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
Section 9. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant will be in writing and will be delivered
personally, sent by reputable
- 8 -
<PAGE> 9
express courier service (charges prepaid) or sent by registered or certified
mail, return receipt requested, postage prepaid and will be deemed to have been
given when so delivered, one Business Day after being so sent or three Business
Days after being so deposited in the U.S. Mail (i) to the Company, at its
principal executive offices and (ii) to the Registered Holder of this Warrant,
at such holder's address as it appears in the records of the Company (unless
otherwise indicated by any such holder).
Section 10. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing a majority of the shares of Common
Stock obtainable upon exercise of the Warrants; provided that no such action may
change the Exercise Price of the Warrants or the number of shares or class of
stock obtainable upon exercise of each Warrant without the written consent of
the Registered Holders of Warrants representing at least 60% of the shares of
Common Stock obtainable upon exercise of the Warrants.
Section 11. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The construction,
validity and interpretation of this Warrant will be governed by the internal
law, and not the conflicts law, of the State of Maryland.
* * * * *
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
CLEAR HOLDINGS, INC.
By:
----------------------------------
Stephen F. Johnston, Sr.
Chief Executive Officer
<PAGE> 11
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W- ), hereby agrees to subscribe for the
purchase of shares of the Common Stock covered by such Warrant and makes
payment herewith in full therefor at the price per share provided by such
Warrant.
[ ] CHECK BOX FOR NET ISSUE EXERCISE
Signature
-----------------------------------
Address
-------------------------------------
<PAGE> 12
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________ hereby sells, assigns, and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-___ ) with respect to the number of shares of the Common
Stock covered thereby set forth below, unto:
<TABLE>
<CAPTION>
Names of Assignee Address No. of Shares
----------------- ------- -------------
<S> <C> <C>
</TABLE>
Signature
-----------------------------------
<PAGE> 1
EXHIBIT 4.12
CLEAR COMMUNICATIONS GROUP, INC.
TRANCHE A NOTES DUE OCTOBER 31, 2005
No. SN - 1 November 1, 1999
$13,000,000
FOR VALUE RECEIVED, the undersigned CLEAR COMMUNICATIONS GROUP, INC.
(the "Company") hereby promises to pay to AMERICAN CAPITAL STRATEGIES, LTD., or
registered assigns (the "Holder"), the principal sum of THIRTEEN MILLION DOLLARS
($13,000,000), with interest thereon, on the terms and conditions set forth in
the Purchase Agreement (as defined herein).
Payments of principal of, interest on and any premium with respect to
this Note are to be made in lawful money of the United States of America by
check mailed and addressed to the registered Holder hereof at the address shown
in the register maintained by the Company for such purpose, or, at the option of
the Holder, in such manner and at such other place in the United States of
America as the Holder hereof shall have designated to the Company in writing.
Notwithstanding any provision to the contrary in this Note, the
Purchase Agreement or any other agreement, the Company shall not be required to
pay, and the Holder shall not be permitted to contract for, take, reserve,
charge or receive, any compensation which constitutes interest under applicable
law in excess of the maximum amount of interest permitted by law.
This Note is one of a series of Tranche A Notes Due October 31, 2005
(herein called the "Tranche A Notes") issued pursuant to the Note and Equity
Purchase Agreement, dated as of November 1, 1999 (as from time to time amended,
the "Purchase Agreement"), between the Company and American Capital Strategies,
Ltd., a corporation organized and existing under the laws of the State of
Delaware, and the Holder is entitled to the benefits thereof. All terms used
herein has the meanings ascribed to them in the Purchase Agreement. Each Holder
of this Note will be deemed, by its acceptance hereof, to have agreed to the
provisions and to have made the representations and warranties set forth in
Article 6 of the Purchase Agreement.
The Notes are issuable as registered notes. This Note is transferable
only by surrender hereof at the principal office of the Company in Atlanta,
Georgia duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder of this Note.
This Note is also subject to optional prepayment, in whole or in part
at the times and on the terms specified in the Purchase Agreement, but not
otherwise.
If an Event of Default as defined in the Purchase Agreement occurs and
is continuing, the unpaid principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
premium) and with the effect provided in the Purchase Agreement.
<PAGE> 2
Payments of principal, interest on and any premium with respect to this
Note are secured pursuant to the terms of the Security Documents.
This Note and the rights and obligations of the parties hereto shall be
deemed to be contracts under the laws of the State of Maryland and for all
purposes shall be governed by and construed and enforced in accordance with the
laws of said State, except for its rules relating to the conflict of laws.
CLEAR COMMUNICATIONS GROUP, INC.
--------------------------------------------
Name: Stephen F. Johnston, Sr.
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 4.13
FORM OF WARRANT CERTIFICATE
THE OFFER AND SALE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON AN EXERCISE OF SUCH WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SALE OR TRANSFER OR THE COMPANY RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY) STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
No. ___ __________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate ("Warrant Certificate") certifies that
Stratford Capital Partners, L.P., a Texas limited partnership ("Warrant
Holder"), or registered assigns, is the registered holder of 775,713 Warrants
("Warrants") to purchase Common Stock of Clear Holdings, Inc., a Georgia
corporation (the "Company"). Each Warrant entitles the holder, subject to the
conditions set forth herein and in the Securities Purchase Agreement referred to
below, to purchase from the Company before 5:00 P.M., Dallas, Texas time, on the
Warrant Expiration Date (as defined in the Securities Purchase Agreement), one
fully paid and nonassessable share of the Common Stock of the Company (the
"Warrant Shares") at a price (the "Warrant Exercise Price") of $0.01 per Warrant
Share, subject to adjustment as provided in Section 3.2 of the Securities
Purchase Agreement, payable in lawful money of the United States of America (or,
subject to the terms of Section 3.1 of the Securities Purchase Agreement, by
offsetting the accrued dividends on the Preferred Shares, upon surrender of this
Warrant Certificate, execution of the form of Election to Purchase on the
reverse hereof, and payment of the Warrant Exercise Price (in lawful money of
the United States of America or by offsetting the accrued dividends on the
Preferred Shares) to the Company, at its offices located at 440 Interstate North
Parkway, Atlanta, Georgia 30339, or at such other address as the Company may
specify in writing to the registered holder of the Warrants evidenced hereby
(the "Warrant Office"). The Warrant Exercise Price and number of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment prior to the
Expiration Date upon the occurrence of certain events as set forth in Section
3.2 of the Securities Purchase Agreement.
No Warrant may be exercised after 5:00 P.M., Dallas, Texas time, on the
Warrant Expiration Date, except as provided in Section 3.4 of the Securities
Purchase Agreement, all rights of the registered holders of the Warrants shall
cease after 5:00 P.M., Dallas, Texas time, on such date.
The Company may deem and treat the registered holder(s) of the Warrants
evidenced hereby as the absolute owner(s) thereof (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
Warrant Certificates, when surrendered at the office of the Company at
the above-mentioned address by the registered holder hereof in person or by a
legal representative duly authorized in writing, may be exchanged, in the manner
and subject to the limitations provided in the Securities Purchase
<PAGE> 2
Agreement, but without payment of any service charge, for another Warrant
Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company at the above-mentioned address and
subject to the conditions set forth on this Certificate and in Section 4.2 of
the Securities Purchase Agreement, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Securities Purchase Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred to
in the Securities Purchase Agreement, dated as of November 1, 1999, between the
Company, the Warrant Holder and Stratford Equity Partners, L.P. Said Securities
Purchase Agreement is hereby incorporated by referenced in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
CLEAR HOLDINGS, INC.
By:
-----------------------------
Title:
--------------------------
<PAGE> 3
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ Warrant Shares and
herewith [ ] tenders payment for such Warrant Shares to the order of the Company
in the amount of $_______ in accordance with the terms hereof, or [ ] represents
and warrants to the Company that the undersigned is the legal and beneficial
owner of the Shares and hereby advises the Company that the undersigned has
offset accrued dividends on the Preferred Shares in the amount of $__________ in
payment for the Warrant Shares. The undersigned requests that a certificate for
such Warrant Shares be registered in the name of ___________ whose address is
________ _____________ and that such certificate be delivered to __________
whose address is ____________________. If said number of Warrant Shares is less
than all of the Warrant Shares purchased hereunder, the undersigned requests
that a new Warrant Certificate be registered in the name of ______________ whose
address is ______________ and that such Warrant Certificate is to be delivered
to _______________ whose address is __________________.
Signature:
-----------------------------------
(Signature must conform in all respects to name as
specified on the face of the Warrant Certificate.)
Date:
---------------
<PAGE> 1
EXHIBIT 10.1
CLEAR HOLDINGS, INC.
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
In connection with the Plan of Reorganization of Clear Communications
Group, Inc. ("Clear Communications"), dated as of July 10, 1998, whereby Clear
Holdings, Inc. (the "Company") issued, on a one-for-one basis, shares of its
$.0001 par value per share common stock for all of the outstanding shares of
Clear Communications' $.0001 par value per share common stock, the Clear
Communications Group, Inc. 1997 Stock Option Plan (the "1997 Plan") was assumed
by the Company pursuant to Section 8(i) of the 1997 Plan. Accordingly, this Plan
amends and restates the 1997 Plan, as amended.
1. PURPOSE
The primary purpose of the Clear Holdings, Inc. 1998 Stock Option Plan
(the "Plan") is to encourage and enable eligible directors, officers and key
employees of the Company and its subsidiaries to acquire proprietary interests
in the Company through the ownership of Common Stock of the Company. The Company
believes that directors, officers and key employees who participate in the Plan
will have a closer identification with the Company by virtue of their ability as
shareholders to participate in the Company's growth and earnings. The Plan also
is designed to provide motivation for participating directors, officers and key
employees to remain in the employ of and to give greater effort on behalf of the
Company. It is the intention of the Company that the Plan provide for the award
of "incentive stock options" qualified under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder, as well as the award of non-qualified stock options. Accordingly,
the provisions of the Plan related to incentive stock options shall be construed
so as to extend and limit participation in a manner consistent with the
requirements of Section 422 of the Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the
Company and an Eligible Employee or Eligible Participant pursuant to the terms
of this Plan.
(b) "Board of Directors" shall mean the Board of Directors of the
Company or the Executive Committee of such Board.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean Clear Holdings, Inc., a Georgia
corporation.
<PAGE> 2
(e) "Eligible Employee(s)" shall mean key employees regularly
employed by the Company or a Subsidiary (including officers, whether or not they
are directors) as the Board of Directors or the Committee shall select from time
to time.
(f) "Eligible Participant(s)" shall mean directors, officers, key
employees of the Company and its Subsidiaries, consultants, advisors and other
persons who may not otherwise be eligible to receive Qualified Incentive Options
pursuant to Section 8 of the Plan.
(g) "Exercise Price" shall be not less than one hundred percent
(100%) of the fair market value of the Stock on the day the Option is granted,
as determined by the Board of Directors or the Committee, but in no case less
than the par value of such stock.
(h) "Optionee" shall mean an Eligible Employee or Eligible
Participant having a right to purchase Common Stock under an Agreement.
(i) "Option(s)" shall mean the right or rights granted to Eligible
Employees or Eligible Participants to purchase Common Stock under the Plan.
(j) "Plan" shall mean this Amended and Restated Clear Holdings,
Inc. 1998 Stock Option Plan.
(k) "Shares," "Stock," or "Common Stock" shall mean shares of the
$.0001 par value common stock of the Company.
(l) "Subsidiary" or "Subsidiaries" shall mean any corporation(s),
if the Company owns or controls, directly or indirectly, more than a majority of
the voting stock of such corporation(s).
(m) "Ten Percent Owner" shall mean an individual who, at the time
an Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") is November 18,
1997, the date the 1997 Plan was adopted by the unanimous written consent of the
Board of Directors and shareholders of Clear Communications.
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible
Employees or Eligible Participants under the Plan may at the election of the
Board of Directors be either treasury shares or Shares originally issued for
such purpose. The maximum number of Shares which shall be
2
<PAGE> 3
reserved and made available for sale under the Plan shall be one million
(1,000,000); provided, however, that such Shares shall be subject to the
adjustments provided in Section 8(h). Any Shares subject to an Option which for
any reason expires or is terminated unexercised may again be subject to an
Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the
Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members, each
of whom qualifies as a "Non-Employee Director" as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine, unless otherwise
specified herein, the price to be paid for the Shares upon exercise of each
Option, the period within which each Option may be exercised, and the terms and
conditions of each Option granted pursuant to the Plan. The Board of Directors
and Committee members shall be reimbursed for out-of-pocket expenses reasonably
incurred in the administration of the Plan.
If the Plan is administered by the Board of Directors, a majority of
the members of the Board of Directors shall constitute a quorum, and the act of
a majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants.
7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which
may become subject to the Plan shall have been purchased pursuant to Options
granted under the Plan; provided that Options under the Plan must be granted
within ten (10) years from the Effective Date. The Plan shall expire on the
tenth anniversary of the Effective Date.
3
<PAGE> 4
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be
qualified incentive stock options under the provisions of Section 422 of the
Code and the regulations thereunder or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such Options are granted.
Such Options shall be evidenced by stock option agreements in such form and not
inconsistent with this Plan as the Committee or the Board of Directors shall
approve from time to time, which Agreements shall contain in substance the
following terms and conditions:
(a) Price. The purchase price for shares purchased upon exercise
will be equal to the Exercise Price. The purchase price of stock deliverable
upon the exercise of a qualified incentive stock option granted to a Ten Percent
Owner under this Section 8 shall be not less than one hundred ten percent (110%)
of the fair market value of the Stock on the day the Option is granted, as
determined by the Board of Directors or the Committee, but in no case less than
the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of
Shares which the Optionee may purchase under such Option, as determined by the
Board of Directors or the Committee.
(c) Exercise of Options. The shares subject to the Option may be
purchased in whole or in part by the Optionee in accordance with the terms of
the Agreement from time to time after shareholder approval of the Plan, as
determined by the Board of Directors or the Committee, but in no event later
than ten (10) years from the date of grant of the Option. Notwithstanding the
foregoing, Shares subject to an Option granted to a Ten Percent Owner under this
Section 8 may be purchased from time to time but in no event later than five (5)
years from the date of grant of the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an
Agreement shall be paid for in full at the time of purchase. Payment of the
purchase price shall be in cash or, in lieu of payment of all or part of the
purchase price in cash, the Optionee may surrender to the Company shares of the
Common Stock of the Company valued at the fair market value of such Stock on the
date of exercise of the Option in accordance with the terms of the Agreement and
as determined in good faith by the Board of Directors or the Committee. Upon
receipt of payment, the Company shall, without transfer or issue tax, deliver to
the Optionee (or other person entitled to exercise the Option) a certificate or
certificates for such Shares.
(e) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such Shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
4
<PAGE> 5
(f) Nonassignability of Option. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death. In the event
that an Optionee during his or her lifetime ceases to be an employee of the
Company or of any Subsidiary of the Company for any reason (including
retirement) other than death or permanent and total disability, any Option or
unexercised portion thereof which was otherwise exercisable on the date of
termination of employment shall expire unless exercised within a period of three
(3) months from the date on which the Optionee ceased to be an employee, but in
no event after the term provided in the Optionee's Agreement. In the event that
an Optionee ceases to be an employee of the Company or of any Subsidiary of the
Company for any reason (including retirement) other than death or permanent and
total disability prior to the time that an Option or portion thereof becomes
exercisable, such Option or portion thereof which is not then exercisable shall
terminate and be null and void. Whether authorized leave of absence for military
or government service shall constitute termination of employment for the purpose
of this Plan shall be determined by the Board of Directors or the Committee,
which determination shall be final and conclusive.
In the event that an Optionee during his or her lifetime ceases to be
an employee of the Company or any Subsidiary of the Company by reason of death
or permanent and total disability, any Option or unexercised portion thereof
which was otherwise exercisable on the date such Optionee ceased employment
shall expire unless exercised within a period of one (1) year from the date on
which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee's Agreement. In the event that an Optionee during his
or her lifetime ceases to be an employee of the Company or any Subsidiary of the
Company by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee ceased
employment may, in the discretion of the Board of Directors or the Committee, be
accelerated and become immediately exercisable for a period of one (1) year from
the date on which the Optionee ceased to be an employee, but in no event shall
the exercise period extend past the term provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as
defined in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be
exercisable by his or her personal representatives, heirs or legatees, as
provided herein.
(h) Recapitalization. In the event that dividends are payable in
Common Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased proportionately, as the
case may be, and the number and Option exercise price of Shares deliverable upon
the exercise thereafter of any Option theretofore granted shall be increased or
decreased proportionately, as the case may be, as determined to be proper and
appropriate by the Board of Directors or the Committee.
5
<PAGE> 6
(i) Reorganization. In case the Company is merged or consolidated
with another corporation and the Company is not the surviving corporation, or in
case the property or stock of the Company is acquired by another corporation, or
in case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the Shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee, provide that the Option
(including, in the discretion of the Board of Directors, any portion of such
Option which is not then exercisable) must be exercised within sixty (60) days
of the date of such notice or it will be terminated. If any adjustment under
this Section 8(i) would create a fractional share of Stock or a right to acquire
a fractional share, such shall be disregarded and the number of shares of Stock
available under the Plan and the number of Shares covered under any Options
previously granted pursuant to the Plan shall be the next lower number of shares
of Stock, rounding all fractions downward. An adjustment made under this Section
8(i) by the Board of Directors shall be conclusive and binding on all affected
persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of shares of Common Stock subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(j) Annual Limitation. The aggregate fair market value (determined
at the time the Option is granted) of the shares with respect to which incentive
stock options are exercisable for the first time by an Optionee during any
calendar year (under all incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000. Any excess over such amount shall be
deemed to be related to and part of a non-qualified stock option granted
pursuant to Section 9.
6
<PAGE> 7
(k) General Restriction. Each Option shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
reasonable discretion, that the listing, registration or qualification of the
Shares subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees
or Eligible Participants Options under the Plan which are not qualified
incentive stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c)
with respect to Ten Percent Owners shall not be applicable to non-qualified
options granted to any Ten Percent Owner;
(ii) the limitations set forth in Section 8(g) with
respect to termination of employment or death shall not be applicable to
non-qualified option grants, and any such limitations shall be determined on a
case by case basis by the Board of Directors or the Committee at the time of the
non-qualified option grant;
(iii) the limitation set forth in Section 8(j) with respect
to the annual limitation of incentive stock options shall not be applicable to
non-qualified option grants; and
(iv) the limitations set forth in Section 8(a) with
respect to the Exercise Price shall not be applicable to non-qualified option
grants.
10. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified
or amended by the affirmative vote of not less than a majority of the shares
present and voting thereon by the Company's shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
7
<PAGE> 8
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that incentive options granted hereunder shall
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time respecting "Qualified Incentive Options."
The Company's Board of Directors may also suspend the granting of Options
pursuant to the Plan at any time and may terminate the Plan at any time;
provided, however, no such suspension or termination shall modify or amend any
Option granted before such suspension or termination unless (1) the affected
participant consents in writing to such modification or amendment or (2) there
is a dissolution or liquidation of the Company.
11. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
12. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options exercised hereunder will be used for general corporate
purposes.
8
<PAGE> 1
EXHIBIT 10.2
CLEAR HOLDINGS, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Option Agreement") made and
entered into this __________ day of _______________, _____ by and between Clear
Holdings, Inc., a Georgia corporation (the "Company") and
__________________________ ("Eligible Employee").
W I T N E S S E T H:
In connection with the Plan of Reorganization of Clear Communications
Group, Inc. ("Clear Communications"), dated as of July 10, 1998, whereby Clear
Holdings, Inc. (the "Company") issued, on a one-for-one basis, shares of its
$.0001 par value per share common stock ("Stock") for all of the outstanding
shares of Clear Communications' $.0001 par value per share common stock, the
Clear Communications Group, Inc. 1997 Stock Option Plan (the "1997 Plan") was
assumed by Clear Holdings, Inc. pursuant to Section 8(i) of the 1997 Plan. On
August 12, 1998, the 1997 Plan was restated and titled the Clear Holdings, Inc.
Amended and Restated 1998 Stock Option Plan (the "Plan"). A copy of the Plan is
attached hereto as Exhibit "A" and incorporated herein by reference. Pursuant to
the terms of the Plan, the Board of Directors or its designated committee has
selected Eligible Employee to participate in the Plan and desires to grant to
Eligible Employee certain incentive stock options to purchase shares of Stock,
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INCORPORATION OF PLAN PROVISIONS
This Option Agreement is subject to and is to be construed in all
respects in a manner which is consistent with the terms of the Plan, the
provisions of which are hereby incorporated by reference into this Option
Agreement. Eligible Employee acknowledges receipt of a copy of the Plan prior to
the execution of this Agreement. Unless specifically provided otherwise, all
terms used in this Option Agreement shall have the same meaning as in the Plan.
2. GRANT OF OPTION
Subject to the further terms and conditions of this Option Agreement,
Eligible Employee is hereby granted a stock option to purchase __________ shares
of Stock, effective as of the date first written above. This stock option is
intended to be an Incentive Stock Option as provided in ss. 422 of the Internal
Revenue Code.
3. MARKET PRICE OF STOCK
<PAGE> 2
The Market Price per share of Stock as of the date this stock option is
granted is $__________.
4. EXERCISE PRICE
The Board of Directors has determined that the price for each share of
Stock purchased under this Option Agreement shall be $__________ (the "Exercise
Price").
5. EXPIRATION OF OPTIONS
The option to acquire Stock pursuant to this Option Agreement shall
expire, to the extent not previously fully exercised, upon the first to occur of
the following:
(a) ____________ (the 10th anniversary of the date of grant of the
option);
(b) As to any option or unexercised portion thereof which was
otherwise exercisable on the date of termination of
Employment;
(i) The date which is three (3) months following the date
on which Eligible Employee ceases his employment with
the Company or any subsidiary of the Company,
otherwise than as a result of Eligible Employee's
death or permanent and total disability, but in no
event after the term provided in paragraph (a) of
this Article 5.
(ii) The date which is the first anniversary of the date
upon which Eligible Employee ceases to be employed by
the Company, or any subsidiary of the Company, by
reason of Eligible Employee's death or permanent and
total disability but in no event after the date
provided in paragraph (a) of this Article 5;
(c) As to any options or portion thereof that were not exercisable
on the date Eligible Employee ceases Employment with the
Company by reason of death or total disability, and which
become exercisable thereafter in the discretion of the Board
of Directors, the date which is one (1) year following such
termination but in no event after the date provided in
paragraph (a) of this Article 5;
6. EXERCISE OF OPTION
Unless options hereunder shall earlier lapse or expire pursuant to
Article 5 hereof, the option to acquire the aggregate number of shares subject
to this Option Agreement may be first exercised on the dates and with respect to
the aggregate number of shares subject to this Option Agreement as follows:
2
<PAGE> 3
(i) as of ____________, 1999, ________ shares;
(ii) as of ____________, 2000, an additional __________
shares;
(iii) as of ____________, 2001, an additional __________
shares;
(iv) as of ____________, 2002, an additional __________
shares; and
(v) as of ____________, 2003, an additional __________
shares.
To the extent such options become vested in accordance with the
foregoing, Eligible Employee may exercise this stock option, in whole or part,
from time to time. The option exercise price may be paid by Eligible Employee
either in cash or by surrender of other shares of the Stock held by Eligible
Employee for at least six months or a combination of cash and Stock.
7. MANNER OF EXERCISE
This stock option may be exercised, subject to the restrictions
contained in Article 8 of the Plan, by written notice to the Secretary of the
Company specifying the number of shares to be purchased and signed by Eligible
Employee or such other person who may be entitled to acquire Stock under this
Option Agreement. If any such notice is signed by a person other than Eligible
Employee, such person shall also provide such other information and
documentation as the Secretary of the Company may reasonably require to assure
that such person is entitled to acquire Stock under the terms of the Plan and
this Option Agreement.
After receipt of the notice and any other assurances requested by the
Company under this Article 7, and upon receipt of the full option price, the
Company shall issue to the person giving notice of exercise under this Option
Agreement the number of shares specified in such notice.
8. PLAN TO CONTROL
The Plan is incorporated in this Option Agreement by this reference.
Any question of interpretation or application of the Plan or this Option
Agreement shall be resolved by the Board of Directors or its designated
committee, and such determination shall be final and binding on the Company and
Eligible Employee. In the event of any conflict between the provisions of the
Plan and the provisions of this Option Agreement, the Plan shall control.
9. BINDING EFFECT
This Option Agreement shall bind and inure to the benefit of the
parties hereto, the successors and assigns of the Company and the person to whom
the rights of Eligible Employee are transferred by will or the laws of descent
and distribution.
10. RESTRICTIONS ON TRANSFERABILITY
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<PAGE> 4
The stock option granted hereunder shall not be transferable by
Eligible Employee otherwise than by will or by the laws of descent and
distribution, and such stock option shall be exercisable during Eligible
Employee's lifetime only by Eligible Employee.
4
<PAGE> 5
11. FURTHER RESTRICTIONS ON EXERCISE AND SALE OF STOCK
Eligible Employee acknowledges and understands that the Stock subject
to this Option Agreement is not registered under the Federal Securities Act of
1933, as amended ("Federal Act") or under the Georgia Securities Act of 1973, as
amended (the "State Act"). Each option shall be subject to the requirement that
if at any time the Board of Directors shall determine, in its discretion, that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issue or
purchase of shares thereunder, such option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors. The costs of any such listing, registration, qualification,
consent or approval shall be paid by the Company. Alternatively, the Company
shall not permit any exercise of this stock option unless it receives such
representations, factual assurances, and legal opinions as it may deem necessary
to determine and document the availability of an exemption from registration
under both the Federal Act and the State act with respect to any particular
issuance of shares under this Option Agreement. Further, the Board of Directors
shall require that Stock issued in respect of any exercise of this stock option
shall bear such restrictions on further transfer as shall be necessary to insure
the availability of any exemption so claimed.
12. RECAPITALIZATION
In the event that dividends are payable in Stock or in the event there
are splits, subdivisions or consolidations of shares of Stock, the number of
shares deliverable upon the exercise of any Option granted pursuant to this
Option Agreement and the exercise price with respect to such Option shall each
be increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price, as determined to be appropriate by the Board of
Directors or its designated committee.
13. REORGANIZATION
In case the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or in the case of the sale of
all or substantially all of the assets of the Company, or in case of a
dissolution or liquidation of the Company, or in the case of a sale or exchange
of eighty percent (80%) or more of the outstanding stock of the Company by the
shareholders of the Company, the Board of Directors of the Company or its
designated committee shall upon written notice to Eligible Employee provide that
the Option (including the shares not then exercisable) must be exercised within
thirty (30) days of the date of such notice or it will be terminated.
Notwithstanding anything in this Option Agreement or the Plan to the contrary,
nothing shall extend Eligible Employee's right to exercise this Option after the
expiration of ten (10) years from the date it is granted.
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<PAGE> 6
14. GOVERNING LAW
This Option Agreement shall be interpreted and construed according to
and governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by a duly authorized officer of the Company, and Eligible Employee has
executed this Option Agreement as of the date first written above.
CLEAR HOLDINGS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
"ELIGIBLE EMPLOYEE"
-----------------------------------------
Name:
6
<PAGE> 1
EXHIBIT 10.3
PREFERRED STOCK PURCHASE AGREEMENT
Among
CLEAR HOLDINGS, INC.,
DFW CAPITAL PARTNERS, L.P.,
CLEAR INVESTORS, LLC
STEPHEN F. JOHNSTON, SR.
and
OTHER PERSONS ELECTING TO SUBSCRIBE
Dated as of June 24, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. THE PREFERRED STOCK..................................................... 1
SECTION 1.01 Issuance and Sale of the Initial Shares................................. 1
SECTION 1.02 First Closing Date...................................................... 2
SECTION 1.03 Issuance and Sale of Subsequent Closing Shares.......................... 2
SECTION 1.04 Subsequent Closing Date................................................. 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 2
SECTION 2.01 Organization, Qualifications and Corporate Power......................... 2
SECTION 2.02 Authorization of Agreements, Shares and Conversion Shares................ 3
SECTION 2.03 Validity................................................................. 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASERS ......................................................... 4
SECTION 3.01 Investment Representation................................................ 4
ARTICLE IV. CONDITIONS ............................................................. 4
SECTION 4.01 Conditions to the Obligations of the Initial Purchasers.................. 4
SECTION 4.02 Conditions to the Obligations of the Company at the First Closing........ 5
SECTION 4.03 Conditions to the Obligations of the Subsequent Closing Purchasers....... 6
SECTION 4.04 Conditions to the Obligations of the Company at the Subsequent Closing... 6
ARTICLE V. COVENANTS OF THE COMPANY................................................ 7
SECTION 5.01 Financial Statements, Reports, Etc....................................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI. MISCELLANEOUS........................................................... 8
SECTION 6.01 Survival of Agreements................................................... 8
SECTION 6.02 Brokerage................................................................ 9
SECTION 6.03 Parties in Interest...................................................... 9
SECTION 6.04 Certain Consents and Waivers............................................. 9
SECTION 6.05 Notices.................................................................. 9
SECTION 6.06 Assignability............................................................ 10
SECTION 6.07 Entire Agreement......................................................... 10
SECTION 6.08 LAW GOVERNING............................................................ 10
SECTION 6.09 Counterparts............................................................. 10
TESTIMONIUM.................................................................................... 12
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Section
Exhibit Description Reference
- ------- ----------- ---------
<S> <C> <C>
EXHIBIT A Form of Amendment 2.01(a)
to Registration Rights Agreement
EXHIBIT B Form of Amendment 2.01(a)
to Voting and Co-Sale Agreement
EXHIBIT C List of Eligible Holders 1.03
</TABLE>
ii
<PAGE> 4
PREFERRED STOCK PURCHASE AGREEMENT, dated as of June 24, 1999,
(the "Agreement") between CLEAR HOLDINGS, INC., a Georgia corporation (the
"Company"), and DFW CAPITAL PARTNERS, L.P., a Delaware limited partnership
("DFW"), Clear Investors, LLC, a Georgia limited liability company ("LLC",
Stephen F. Johnston, Sr. ("Johnston") (LLC, together with DFW, collectively the
"Initial Purchasers") and such other persons who elect to purchase Shares
pursuant to this Agreement (collectively, the "Subsequent Closing Purchasers"
and, together with the Initial Purchasers, collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the
Purchasers up to 30,000 shares (the "Shares") of Series C Convertible Preferred
Stock, no par value (the "Series C Preferred Stock"), of the Company
WHEREAS, in order to induce the Purchasers to enter into this
Agreement and consummate the transactions contemplated hereby the Company wishes
to enter into this Agreement and make the representations, warranties, covenants
and agreements set forth herein.
WHEREAS, each of the Initial Purchasers wish to purchase, and
the Company wishes to sell to each Initial Purchaser, 5,000 Shares (such
aggregate 10,000 Shares to be purchased by the Initial Purchasers being herein
called the "Initial Shares").
WHEREAS, the Company wishes to offer certain holders of
outstanding Common Stock, $.0001 par value, of the Company ("Common Stock") or
outstanding options to purchase Common Stock, as well as other persons who are
"Accredited Investors" as defined in Rule 501 under the Securities Act of 1933,
as amended, the right to purchase up to an aggregate of 20,000 Shares, such
right to be exercisable by such holders, in the event of over-subscription, pro
rata according to the respective numbers of shares and options held by them. The
Shares purchased by such holders and other purchasers are sometimes herein
called the "Subsequent Closing Shares".
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
I.
THE SHARES
SECTION 1.01 Issuance and Sale of the Initial Shares. (a)
Subject to the terms and conditions set forth herein, on the Closing Date (as
defined herein) the Company shall issue and sell to each Initial Purchaser, and
each Initial Purchaser shall purchase from the Company, 5,000 Shares and the
Company shall issue and deliver to each Initial Purchaser certificates in
1
<PAGE> 5
definitive form, registered in the name of such Initial Purchaser, evidencing
the Shares purchased by such Initial Purchaser.
(b) As payment in full for the Initial Shares purchased
by it, and against delivery of the certificates for such Shares as aforesaid,
each Initial Purchaser shall tender to the Company $500,000 aggregate principal
amount of promissory notes of the Company or Clear Communications Group, Inc.
for credit toward such purchase price at 100% of principal amount. The Company
will on the First Closing Date pay all accrued interest on notes tendered in
payment for the Initial Shares. Each Initial Purchaser may elect to apply such
accrued interest to the purchase of additional Shares at the First Closing or
any Subsequent Closing.
SECTION 1.02 First Closing Date. The closing of the sale and
purchase of the Initial Shares shall take place at the offices of Smith,
Gambrell & Russell, LLP, Suite 3100, Promenade II, 1230 Peachtree Street, NE,
Atlanta, Georgia 30309, on June 24, 1999 or at such other date and time as may
be mutually agreed upon between the Initial Purchasers and the Company (such
date and time of closing being herein called the "First Closing Date").
SECTION 1.03 Issuance and Sale of Subsequent Closing Shares.
Each holder of Common Stock or outstanding options (whether or not vested)
("Options") to purchase Common Stock of the Company listed in Exhibit C
(collectively, the "Eligible Holders") shall have the right, by delivery of
notice to the Company not later than July 7, 1999, to purchase such holder's pro
rata share (based on all Eligible Holders' holdings of Common Stock and Options)
at a purchase price of $100 per share, of the Subsequent Closing Shares. In the
event the Subsequent Closing Shares are not fully subscribed, purchasing
Eligible Holders and other purchasers, including the Initial Purchasers, shall
have the right to elect to purchase additional Subsequent Closing Shares.
SECTION 1.04 Subsequent Closing Dates. The closing of the sale
and purchase of the Subsequent Closing Shares shall take place at the offices of
Smith, Gambrell & Russell, LLP, Suite 3100, Promenade II, 1230 Peachtree Street,
NE, Atlanta, Georgia 30309, on July 8, 1999, in the case of purchase by Eligible
Holders, and on July 30, 1999 in the case of purchase by other holders, or at
such other dates and times as may be specified by the Company by notice to the
Subsequent Closing Purchasers (each such date and time of closing being herein
called a "Subsequent Closing Date").
2
<PAGE> 6
II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to each Purchaser as
follows:
SECTION 2.01 Organization, Qualifications and Corporate Power.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of Georgia. The Company has the corporate power and
authority (i) to own and hold its properties; (ii) to carry on its business as
currently conducted and as proposed to be conducted; (iii) to execute, deliver
and perform its obligations under this Agreement, the Amendment to Registration
Rights Agreement, the form of which is attached hereto as Exhibit A (the
"Registration Rights Amendment"); (iv) the Amended and Restated Voting and
Co-Sale Agreement, the Form of which is attached hereto as Exhibit B (the
"Voting and Co-Sale Agreement"); and (v) to issue, sell and deliver the Shares
and the shares of Common Stock issuable upon conversion of the Shares (the
"Conversion Shares").
SECTION 2.02 Authorization of Agreements, Shares and
Conversion Shares. (a) The execution, delivery and performance by the Company of
this Agreement, the Registration Rights Amendment and the Voting and Co-Sale
Agreement, the issuance and sale of the Shares and the issuance and delivery of
the Conversion Shares upon conversion of the Shares have been duly authorized by
all requisite corporate action. The execution, delivery and performance by the
Company of this Agreement, the Registration Rights Amendment and the Voting and
Co- Sale Agreement, the issuance and delivery of the Shares and the issuance and
delivery of the Conversion Shares upon conversion of the Shares will not (i)
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or By-laws of the Company, or any
provision of any material indenture, agreement or other instrument by which the
Company or and of its subsidiaries or any of their respective properties or
assets is bound or affected; (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
material indenture, agreement or other instrument; (iii) result in the creation
or imposition of any material lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company in any
Subsidiary, except for such violations, conflicts or defaults which have been
waived or consented to by the appropriate party or parties to such indenture,
agreement or instrument.
(b) The Shares, when issued against payment in accordance
with this Agreement, will be duly authorized, validly issued and outstanding,
fully paid and non-assessable. The Conversion Shares have been duly reserved by
the Company for issuance upon conversion of the Shares and, when so issued and
delivered upon conversion of the Shares, will be duly authorized, validly issued
and outstanding, fully paid and nonassessable shares of Common Stock. The
issuance, sale and delivery of the Shares nor the issuance and delivery of the
Conversion Shares upon conversion of the Shares is not subject to any preemptive
rights of
3
<PAGE> 7
shareholders of the Company or to any right of first refusal or other similar
right in favor of any person, except for the preemptive rights of holders of the
Company's Class A Convertible Preferred Stock and the rights of certain holders
under the Shareholders Agreement dated as of November 20, 1997, all of which
have been waived pursuant to Section 6.04 hereof.
SECTION 2.03 Validity. This Agreement has been duly executed
and delivered by the Company and constitutes, and the Registration Rights
Amendment and the Voting and Co-Sale Agreement, when executed and delivered as
contemplated by this Agreement, will constitute, the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, reorganization,
insolvency and other limitations on creditors' rights generally, and to general
equitable principles.
III.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
As an inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, and with knowledge that
the Company shall reply thereon, each Purchaser represents and warrants to the
Company, severally and not jointly, the following:
SECTION 3.01 Investment Representation. Such Purchaser is
acquiring the Shares and will, upon conversion of the Shares, acquire the
Conversion Shares for its, his or her own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof.
Such Purchaser further represents that he, she or it understands that (i) none
of the Shares or the Conversion Shares have been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof; (ii) the
Shares and, upon conversion thereof, the Conversion Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; (iii) the Shares and the
Conversion Shares will bear a legend to such effect; and (iv) the Company will
make a notation on its transfer books to such effect. Such Purchaser further
understands that the exemption from registration afforded by Rule 144 under the
Securities Act depends on the satisfaction of various conditions and that, if
applicable, Rule 144 affords the basis of sales of the Shares and/or the
Conversion Shares in limited amounts under certain conditions.
4
<PAGE> 8
IV.
CONDITIONS
SECTION 4.01 Conditions to the Obligations of the Initial
Purchasers. The obligation of the Initial Purchasers to purchase and pay for the
Initial Shares on the First Closing Date is, at the option of the Purchasers,
subject to the satisfaction, on or prior to the First Closing Date, of each of
the following conditions:
(a) Representations and Warranties to Be True and
Correct. The representations and warranties contained in Article II
hereof shall be true and correct in all material respects on and as of
the First Closing Date with the same effect as though such
representations and warranties had been made on and as of such date,
and if requested by the Initial Purchasers, the Company shall have
certified to such effect to the Initial Purchasers in writing.
(b) Performance. The Company shall have performed and
complied in all material respects with all agreements and conditions
contained herein and required to be performed or complied with by it
prior to or at the Closing Date, and, if requested by the Purchaser,
the Company shall have certified to such effect to the Purchasers in
writing.
(c) All Proceedings to Be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the
Purchasers and their counsel, and the Initial Purchasers and said
counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
(d) Fleet Consent. Fleet National Bank shall have
consented to the transactions contemplated by this Agreement.
(e) Opinion of Company Counsel. The Initial Purchasers
shall have received an opinion of Smith, Gambrell & Russell, L.L.P. as
to the matters referred to in Sections 2.01 and 2.02, in form, scope
and substance reasonably satisfactory to the Initial Purchasers and
their counsel.
(f) Registration Rights Amendment and Voting and Co-Sale
Agreement. The Registration Rights Amendment and Voting and Co-Sale
Agreement shall have been executed and delivered by the Company, and
the same shall be in full force and effect on the Closing Date.
(g) SBA Forms. The Company shall have executed and
delivered to the Purchaser for redelivery to the Small Business
Administration ("SBA") SBA Form 480
5
<PAGE> 9
(Size Status Declaration) and SBA Form 652 (Assurance of Compliance For
NonDiscrimination), and shall have provided the Purchaser with
sufficient information to enable such Purchaser to accurately complete
and deliver SBA Form 1031 (Portfolio Financing Report) to the SBA.
SECTION 4.02 Conditions to the Obligations of the Company at
the First Closing. The obligation of the Company to issue and sell the Initial
Shares to the Initial Purchasers on the First Closing Date is, at the Company's
option, subject to the satisfaction, on or before such date of the following
conditions:
(a) Representations and Warranties to Be True and
Correct. The representations and warranties of the Initial Purchasers
contained in Article III hereof shall be true and correct in all
material respects on and as of the First Closing Date with the same
effect as though such representations and warranties had been made on
and as of such date, and, if requested by the Company, the Initial
Purchasers shall have certified to such effect to the Company in
writing.
(b) Performance. The Initial Purchasers shall have
performed and complied in all material respects with all agreements and
conditions contained herein required to be performed or complied with
by them prior to or at the Closing Date, and if requested by the
Company the Initial Purchasers shall have certified to such effect to
the Company in writing.
(c) Registration Rights Amendment and Voting and Co-Sale
Agreement. The Registration Rights Amendment and Voting and Co-Sale
Agreement shall have been executed and delivered by the Initial
Purchasers.
(d) Fleet Consent. Fleet National Bank shall have
consented to the transactions contemplated by this Agreement.
SECTION 4.03 Conditions to the Obligations of Each of the
Subsequent Closing Purchasers. The obligation of the Subsequent Closing
Purchasers to purchase and pay for Subsequent Closing Shares on each Subsequent
Closing Date is, at the option of the Company, subject to the satisfaction, on
or prior to each Subsequent Closing Date, of each of the following conditions:
(a) Representations and Warranties to Be True and
Correct. The representations and warranties contained in Article II
hereof shall be true and correct in all material respects on and as of
each Subsequent Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
6
<PAGE> 10
(b) Performance. The Company shall have performed and
complied in all material respects with all agreements and conditions
contained herein and required to be performed or complied with by it
prior to or at such Subsequent Closing Date.
(c) All Proceedings to Be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the
Subsequent Closing Purchasers.
SECTION 4.04 Conditions to the Obligations of the Company at
Each Subsequent Closing. The obligation of the Company to issue and sell
Subsequent Closing Shares to the Subsequent Closing Purchasers on each
Subsequent Closing Date is, at the Company's option, subject to the
satisfaction, on or before such date of the following conditions:
(a) Representations and Warranties to Be True and
Correct. The representations and warranties of the Subsequent Closing
Purchasers purchasing on such Subsequent Closing Date contained in
Article III hereof shall be true and correct in all material respects
on and as of such date with the same effect as though such
representations and warranties had been made on and as of such date.
(b) Performance. The Subsequent Closing Purchasers
purchasing on such Closing Date shall have performed and complied in
all material respects with all agreements and conditions contained
herein required to be performed or complied with by them prior to or at
such date.
(c) Registration Rights Amendment and Voting and Co-Sale
Agreement. The Registration Rights Amendment and Voting and Co-Sale
Agreement shall have been executed and delivered by the Subsequent
Closing Purchasers purchasing on such Closing Date.
(d) Questionnaire. Each Subsequent Closing Purchaser
purchasing on such Closing Date shall have executed and delivered to
the Company an Accredited Investor Questionnaire, and the Company and
its counsel shall be satisfied with such questionnaires and all matters
pertaining to the Company's compliance with applicable federal and
state securities laws.
V.
COVENANTS OF THE COMPANY
SECTION 5.01. Financial Statements, Reports, Etc. The Company
covenants and agrees that so long as any Initial Purchaser shall hold at least
25% of the Shares acquired by
7
<PAGE> 11
it pursuant to this Agreement, or any person acquiring, directly or indirectly,
Shares from an Initial Purchaser shall hold an equivalent number of Shares, the
Company will furnish each such Initial Purchaser or subsequent holder each of
the items listed in this Section 5.01.
(a) Within 90 days after the end of each fiscal year of
Company, a consolidated balance sheet of Company and any subsidiaries as of the
end of such fiscal year and the related consolidated statements of operations,
shareholders' equity and cash flows of Company and any subsidiaries for the
fiscal year then ended, together with an auditor's management letter and
supporting notes thereto, certified without qualification as to scope of audit
by a firm of independent public accountants of recognized national standing
selected by Company and reasonably acceptable to a majority in interest of the
Purchasers or such subsequent holders;
(b) within 30 days after the end of each month in each
fiscal year, consolidating and consolidated balance sheets of Company and any
subsidiaries and the related consolidating and consolidated statements of
operations and cash flows (including comparisons therein to historical results
from the corresponding month in the prior year), unaudited but certified by the
principal financial officer of Company, such balance sheets to be as of the end
of such month and such statements of income to be for such month and for the
period from the beginning of the fiscal year to the end of such month, in each
case subject to normal year-end audit adjustments;
(c) not less than quarterly, a certificate by the
principal financial officer of Company stating the amount of available
borrowings under Company's senior credit facility and either certifying
compliance by Company with its covenants and obligations under such credit
facility or describing in reasonable detail any instances of non-compliance by
Company thereunder;
(d) within 15 days prior to the beginning of each fiscal
year of Company (and with respect to any revision thereof, promptly after such
revision has been prepared), a proposed operating budget for Company (or for
Company and any subsidiaries) including projected monthly income statements,
cash flow statements during such fiscal year and a projected balance sheet as of
the end of such fiscal year, and each monthly financial statement furnished
pursuant to (b) above shall reflect variances from such operating budget, as the
same may from time to time be revised;
(e) promptly upon filing, copies of all registration
statements, prospectuses, periodic reports and other documents filed by Company
with the Securities and Exchange Commission;
(f) (A) promptly upon receipt, all notices or reports
from any lenders regarding compliance deficiencies and (B) prompt notice
concerning material litigation, any other events that may have a material
adverse effect on the business, properties, operations, condition (financial or
otherwise) or prospects of the Company and its subsidiaries, taken as a whole;
and any default or event of default under any credit facility of the Company or
any subsidiary;
8
<PAGE> 12
(g) promptly, but in any event within 10 days upon
entering into any letter of intent or negotiations regarding an acquisition of,
investment in or merger with a third party, such information concerning such
proposed transaction as would be reasonably required for the Purchaser to
evaluate the transaction and the effect thereof upon the Purchaser's investment
in the Company; and
(h) by Wednesday of each week, the weekly sales and cash
collections/disbursements flash report for the preceding week.
The term "subsidiary" as used herein shall mean any corporation or other
business entity a majority of whose outstanding voting stock entitled to vote
for the election of directors is at the time owned by Company and/or one or more
other subsidiaries.
VI.
MISCELLANEOUS
SECTION 6.01 Survival of Agreements. All covenants,
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 6.02 Brokerage. The Company, on the one hand, and the
Purchasers, on the other hand (severally and not jointly), agree to indemnify
and hold each other harmless against and in respect of any claim for brokerage
or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
SECTION 6.03 Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
SECTION 6.04 Certain Consents and Waivers. DFW, as holder of
all outstanding shares of the Company's Class A Convertible Preferred Stock,
hereby (i) consents to the issuance of the Shares and (ii) waives its preemptive
rights with respect to the issuance and sale of the Shares. Johnston, as the
holder of a majority of the outstanding Common Stock of the Company, hereby
approves the transactions contemplated by this Agreement for all purposes of the
Shareholders Agreement dated as of November 20, 1997 among Johnston, Clear
Communications Group, Inc. and certain other parties.
SECTION 6.05 Notices. All notices, consents and other
communications hereunder (i) shall be in writing, (ii) shall be addressed to the
parties as indicated below, unless notified in writing of a change in address,
and (iii) shall be deemed to have been given either
9
<PAGE> 13
when (w) personally delivered to the recipient, (x) sent to the recipient by a
nationally recognized express courier service (charges prepaid), (y) mailed by
certified or registered mail, return receipt requested and postage prepaid, or
(z) sent by facsimile to the recipient followed by the sending of a copy of such
notice in a manner described above, as follows:
(a) if to the Company, to it at:
Clear Holdings, Inc.
440 Interstate North Parkway
Atlanta, Georgia 30339
Attention: Chief Executive Officer
Facsimile No. (770) 763-5635
with a copy to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, NE
Atlanta, Georgia 30309-3592
Attention: Terry Ferraro Schwartz, Esq.
Facsimile No. (404) 815-3509
(b) if to the DFW Capital Partners, to it at:
DFW Capital Partners, L.P.
300 Frank W. Burr Boulevard
Glenpointe Centre East - 5th Fl.
Teaneck, New Jersey 07666
Attention: Lisa Roumell
Facsimile No. (201) 836-5666
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: John Maynard, Esq.
Facsimile No. (212) 841-5725
10
<PAGE> 14
(c) if to Clear Investors, LLC, to it at:
c/o Stephen F. Johnston, Sr.
550 River Valley Road
Atlanta, Georgia 30328
(d) If to any Subsequent Closing Purchaser or if to any
subsequent holder of the Shares or the Conversion
Shares, to such person at its address appearing on the
stock transfer records of the Company.
SECTION 6.06 Assignability. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
SECTION 6.07 Entire Agreement. This Agreement, its Exhibits
and Schedules, and all other documents executed on the First or Subsequent
Closing Dates in connection herewith, constitute the entire Agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except in writing.
SECTION 6.08 LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
SECTION 6.09 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.
11
<PAGE> 15
IN WITNESS WHEREOF, the Company and the Initial Purchasers
have caused this Agreement to be executed as of the day and year first above
written. Subsequent Closing Purchasers shall become parties to this Agreement by
executing and delivering a counterpart of this Agreement with their name and the
number of Subsequent Closing Shares filled in, but this Agreement shall not be
effective as to any such Subsequent Closing Purchaser until the Company has
delivered a counterpart hereof to such Subsequent Closing Purchaser with the
Company's acceptance endorsed hereon.
CLEAR HOLDINGS, INC.
By: /s/ Michael W. Riley
-----------------------------------
Name: Michael W. Riley
---------------------------------
Title: President
--------------------------------
/s/ Stephen F. Johnston
---------------------------------------
Stephen F. Johnston, Sr.
INITIAL PURCHASERS:
DFW CAPITAL PARTNERS, L.P.
By Capital Partners - GP, L.P.,
General Partner
By: /s/ Lisa Roumell
-----------------------------------
Lisa Roumell
General Partner
CLEAR INVESTORS, LLC
By: /s/ Stephen F. Johnston
-----------------------------------
Stephen F. Johnston, Sr.
Managing Member
12
<PAGE> 16
<TABLE>
<CAPTION>
Number of
Subsequent Closing Subsequent Closing Company
Shares Purchasers Acceptance
- ------------------ ------------------ -----------
<S> <C> <C>
- -------------------- ---------------------- ------------------
- -------------------- ---------------------- ------------------
- -------------------- ---------------------- ------------------
- -------------------- ---------------------- ------------------
- -------------------- ---------------------- ------------------
- -------------------- ---------------------- ------------------
</TABLE>
13
<PAGE> 1
EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
AMONG
STRATFORD CAPITAL PARTNERS, L.P.,
STRATFORD EQUITY PARTNERS, L.P.
AND
CLEAR HOLDINGS, INC.
NOVEMBER 1, 1999
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE I
TERMS DEFINED..................................................................................................1
SECTION 1.1 Definitions.....................................................................................1
SECTION 1.2 Accounting Terms and Determinations............................................................13
SECTION 1.3 Gender and Number..............................................................................13
SECTION 1.4 References to Agreement........................................................................13
ARTICLE II
PURCHASE AND SALE OF SECURITIES...............................................................................14
SECTION 2.1 Purchase and Sale..............................................................................14
SECTION 2.2 Closing........................................................................................14
SECTION 2.3 Delivery.......................................................................................14
SECTION 2.4 Payment........................................................................................14
ARTICLE III
CERTAIN TERMS APPLICABLE TO WARRANTS..........................................................................15
SECTION 3.1 Exercise of Warrants...........................................................................15
SECTION 3.2 Adjustment of Number of Warrant Shares Purchasable.............................................15
SECTION 3.3 Notices to Warrant Holders.....................................................................18
SECTION 3.4 Put Rights.....................................................................................19
SECTION 3.5 Reservation and Issuance of Warrant Shares.....................................................20
ARTICLE IV
TRANSFER OF SECURITIES........................................................................................20
SECTION 4.1 Restrictions on Transfer.......................................................................20
SECTION 4.2 Registration, Transfer and Exchange of Warrants................................................21
SECTION 4.3 Mutilated or Missing Warrant Certificates......................................................21
ARTICLE V
CONDITIONS....................................................................................................22
SECTION 5.1 Conditions Precedent to Closing................................................................22
(a) Closing Deliveries ............................................................................22
(b) Acquisitions...................................................................................23
(c) Wachovia Senior Credit Agreement...............................................................23
(d) ACS Note Purchase Agreement....................................................................23
(e) Legal Matters..................................................................................23
(f) Absence of Default ............................................................................23
(g) Representations and Warranties.................................................................23
(h) No Material Adverse Change.....................................................................23
(i) Payment of Expenses ...........................................................................23
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE VI
<S> <C>
REPRESENTATIONS AND WARRANTIES................................................................................24
SECTION 6.1 Corporate Existence and Power..................................................................24
SECTION 6.2 Corporate and Governmental Authorization; Contravention........................................24
SECTION 6.3 Binding Effect.................................................................................24
SECTION 6.4 Capitalization.................................................................................24
SECTION 6.5 Issuance of Securities.........................................................................25
SECTION 6.6 Financial Information..........................................................................25
SECTION 6.7 Material Agreements............................................................................26
SECTION 6.8 Ancillary Agreements...........................................................................26
SECTION 6.9 Investments....................................................................................26
SECTION 6.10. Outstanding Debt...............................................................................26
SECTION 6.11. Transactions with Affiliates...................................................................26
SECTION 6.12. Employment Matters.............................................................................26
SECTION 6.13. Operating Leases...............................................................................27
SECTION 6.14. Litigation.....................................................................................27
SECTION 6.15. ERISA..........................................................................................27
SECTION 6.16. Taxes and Filing of Tax Returns................................................................28
SECTION 6.17. Ownership of Properties; Liens.................................................................28
SECTION 6.18. Licenses, Permits, Etc.........................................................................28
SECTION 6.19. Proprietary Rights.............................................................................28
SECTION 6.20. Compliance with Law ...........................................................................28
SECTION 6.21. Environmental Matters..........................................................................29
SECTION 6.22. Burdensome Obligations.........................................................................29
SECTION 6.23. Fiscal Year....................................................................................29
SECTION 6.24. No Default.....................................................................................29
SECTION 6.25. Insurance......................................................................................29
SECTION 6.26. Government Regulation..........................................................................29
SECTION 6.27. Casualties.....................................................................................29
SECTION 6.28. Investment Company Act.........................................................................30
SECTION 6.29. Securities Laws................................................................................30
SECTION 6.30. Brokers and Finders............................................................................30
SECTION 6.31. Full Disclosure................................................................................30
SECTION 6.32. Small Business Concern.........................................................................30
SECTION 6.33. Year 2000......................................................................................30
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...............................................................31
SECTION 7.1 Due Authorization; No Conflicts................................................................31
SECTION 7.2 Securities Representations.....................................................................31
(a) No Intended Distribution ......................................................................31
(b) Accredited Investor ...........................................................................31
(c) Investment Experience..........................................................................31
(d) Access to Books and Records; Opportunity to Ask Questions......................................31
</TABLE>
<PAGE> 4
<TABLE>
ARTICLE VIII
<S> <C>
AFFIRMATIVE COVENANTS..........................................................................................32
SECTION 8.1. Information..................................................................................32
(a) Annual Statements .........................................................................32
(b) Monthly Statements .........................................................................32
(c) Financial Officer's Certificate..............................................................32
(d) Budget ......................................................................................33
(e) Accountant's Letters.........................................................................33
(f) Defaults ....................................................................................33
(g) Shareholder Information......................................................................33
(h) SEC Reports .................................................................................33
(i) Litigation ..................................................................................33
(j) Other Information ...........................................................................33
SECTION 8.2. Right of Inspection..........................................................................33
SECTION 8.3. Maintenance of Insurance.....................................................................34
SECTION 8.4. Payment of Taxes and Claims..................................................................34
SECTION 8.5. Compliance with Laws and Documents...........................................................34
SECTION 8.6. Operation of Properties and Equipment........................................................34
SECTION 8.7. Additional Documents.........................................................................34
SECTION 8.8. ERISA........................................................................................34
SECTION 8.9. Election as Director; Directors Meetings; Representation.....................................35
SECTION 8.10 Maintenance of Books and Records.............................................................35
SECTION 8.11 Environmental Matters........................................................................35
SECTION 8.12 Additional Subscription Rights...............................................................36
SECTION 8.13 Year 2000....................................................................................36
SECTION 8.14 Unlocking Right..............................................................................36
ARTICLE IX
NEGATIVE COVENANTS.............................................................................................37
SECTION 9.1. Distributions................................................................................37
SECTION 9.2. Business of the Company......................................................................37
SECTION 9.3. Liens........................................................................................37
SECTION 9.4. Incurrence of Debt and Guarantees............................................................37
SECTION 9.5. Modification of Capitalization Documents.....................................................37
SECTION 9.6. Consolidations, Mergers, Sales of Assets, and Maintenance....................................37
SECTION 9.7. Use of Proceeds..............................................................................38
SECTION 9.8. Investments..................................................................................38
SECTION 9.9. Transactions with Affiliates.................................................................38
SECTION 9.10. ERISA........................................................................................38
SECTION 9.11. Fiscal Year..................................................................................38
SECTION 9.12. Capital Expenditures.........................................................................38
SECTION 9.13. Lease Obligations............................................................................38
SECTION 9.14. Executive Compensation.......................................................................38
SECTION 9.15. Acquisitions.................................................................................38
SECTION 9.16. Equity Issuances.............................................................................38
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE X
DEFAULTS......................................................................................................39
SECTION 10.1. Events of Default.............................................................................39
ARTICLE XII
MISCELLANEOUS.................................................................................................40
SECTION 11.1. Notices.......................................................................................40
SECTION 11.2. No Waivers....................................................................................40
SECTION 11.3. Expenses; Indemnification.....................................................................40
SECTION 11.4. Amendments and Waivers; Sale of Interest......................................................41
SECTION 11.5. Survival......................................................................................41
SECTION 11.6. Invalid Provisions............................................................................41
SECTION 11.7. Successors and Assigns........................................................................42
SECTION 11.8. GOVERNING LAW.................................................................................42
SECTION 11.9. Counterparts; Effectiveness...................................................................42
SECTION 11.10. No Third Party Beneficiaries..................................................................42
SECTION 11.11. FINAL AGREEMENT...............................................................................42
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE.........................................................................................42
SECTION 11.13. WAIVER OF RIGHT TO TRIAL BY JURY..............................................................42
SECTION 11.14. Issue Price...................................................................................43
</TABLE>
<TABLE>
<CAPTION>
Exhibits
<S> <C>
Exhibit A Form of Put Note
Exhibit B Form of Certificate of Designation
Exhibit C Form of Warrant Certificate
Schedules
Schedule 1.1(a) Permitted Debt
Schedule 1.1(b) Pro Forma Opening Balance Sheet
Schedule 6.1 Jurisdictions
Schedule 6.4 Capitalization
Schedule 6.6(c) Past Due Trade Payables
Schedule 6.6(d) Projections
Schedule 6.6(f) Exceptions to GAAP
Schedule 6.6(g) Projections
Schedule 6.7 Material Agreements
Schedule 6.10 Outstanding Debt
Schedule 6.11 Transactions with Affiliates
Schedule 6.12 Employment Matters
Schedule 6.13 Operating Leases
Schedule 6.14 Litigation
Schedule 6.15 ERISA
Schedule 6.17 Ownership of Properties
Schedule 6.25 Insurance
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Schedule 6.30 Brokers and Finders
</TABLE>
<PAGE> 7
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into effective this 1st
day of November, 1999, by and among Stratford Capital Partners, L.P., a Texas
limited partnership and a federal licensee under the Small Business Investment
Act of 1958 ("Stratford Capital"), Stratford Equity Partners, L.P., a Texas
limited partnership and a federal licensee under the Small Business Investment
Act of 1958 ("Stratford Equity", and together with Stratford Capital, the
"Investors"), and Clear Holdings, Inc., a Georgia corporation (the "the
Company").
W I T N E S S E T H:
WHEREAS, the Company has authorized and desires to issue and sell to
the Investors hereunder (a) certain shares of the Company's Series D Senior
Redeemable Preferred Stock, no par value, and (b) certain Common Stock Purchase
Warrants;
WHEREAS, the Investors desire to purchase such Series D Senior
Redeemable Preferred Stock and Common Stock Purchase Warrants from the Company
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Acceptance Notice" has the meaning given such term in Section 8.14
hereof.
"ACS" means American Capital Strategies, Ltd.
"ACS Note Purchase Agreement" means that certain Note and Equity
Purchase Agreement dated as of November 1, 1999, by and between the Company,
Clear Operating, certain of their Subsidiaries and ACS.
"ACS Subordinate Debt" means all Debt (including interest and fees
thereon) of Clear Operating outstanding under the ACS Note Purchase Agreement,
including all renewals and extensions thereof; provided, however, the
outstanding principal amount of ACS Subordinate Debt shall not at any time
exceed $19,250,000.
"ACS Subordinate Debt Documents" means the ACS Note Purchase Agreement
and all promissory notes, security agreements, mortgages, deeds of trust,
assignments, guarantees and other documents, instruments and agreements executed
and delivered pursuant to the ACS Note Purchase Agreement evidencing, securing,
guaranteeing or otherwise pertaining to the ACS Subordinate Debt and other
obligations arising under the ACS Note Purchase Agreement, as the foregoing may
be amended, renewed, extended, supplemented, increased or otherwise modified
from time to time to the extent permitted hereunder.
<PAGE> 8
"Affiliate" means, as to any Person, any Subsidiary of such Person, or
any other Person which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person and, with respect to the Company, any
executive officer of any Subsidiary or any Person who holds ten percent (10%) or
more of the voting stock of any member of the Company. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, or
by contract or otherwise. Neither Investor shall be an Affiliate of the Company
for purposes of this Agreement or the other Transaction Documents.
"Agreement" means this Securities Purchase Agreement.
"Authorized Officer" means, as to any Person, its Chairman, its Chief
Executive Officer, its President, its Chief Operating Officer, its Financial
Officer and any Vice President elected by the board of directors.
"Ancillary Agreements" means (a) the MTG Acquisition Documents, (b) the
TWR Acquisition Documents, (c) the ACS Subordinate Debt Documents and (d) the
Wachovia Senior Debt Documents.
"Appraised Value" means the Fair Market Value of the Common Stock
determined in accordance with the following procedures. For a period of thirty
(30) days after the delivery of a Put Notice (the "Negotiation Period"), each
party to this Agreement agrees to negotiate in good faith to reach agreement
upon the Fair Market Value of the Common Stock. In the event that the parties
are unable to agree upon the Appraised Value of the Common Stock by the end of
the Negotiation Period, then the Appraised Value of such Common Stock will be
determined for purposes of this Agreement by any of (x) Houlihan, Lokey, Howard
& Zukin, (y) Duff & Phelps or (z) Willamette Management Associates, or any
successor to such firms, as the Company shall elect (the "Appraiser") to
determine the fair market value of such Common Stock on a Control Basis. Such
Appraiser shall be directed to determine Fair Market Value of such securities or
property as soon as practicable, but in no event later than thirty (30) days
from the date of its selection. The determination by an Appraiser of the Fair
Market Value will be conclusive and binding on all parties to this Agreement.
The costs of the Appraiser will be borne by the Company. In no event will the
Appraised Value of the Common Stock be less than the per share consideration
received or receivable with respect to the Common Stock in connection with a
pending transaction involving a sale, merger, recapitalization, reorganization,
consolidation, or share exchange, dissolution of the Company, sale or transfer
of all or a majority of its assets or revenue or income generating capacity, or
similar transaction. The prevailing market prices for the Common Stock will not
be dispositive of the Appraised Value thereof.
"Appraiser" has the meaning given such term in the definition of
Appraised Value.
"Business Day" means any day except a Saturday, Sunday or other day on
which national banks in Dallas, Texas are authorized by law to close.
"Capital Expenditure" means any expenditure by a Person for an asset
which will be used in a year or years subsequent to the year in which the
expenditure is made and which asset is properly classified in relevant financial
statements of such Person as equipment, real property or improvements, fixed
assets, or a similar type of capitalized asset in accordance with GAAP.
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"Capital Lease" means, for any Person as of any date, any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared as of such date in accordance with GAAP.
"Change of Control" means the occurrence of any of the following:
(a) any transaction or series of related transactions
resulting in the sale or issuance of securities or any rights to
acquire securities of the Company representing in the aggregate more
than 50% of the issued and outstanding equity securities on a fully
diluted basis, or any transaction or series of related transactions
resulting in the sale, transfer, assignment or other conveyance or
disposition of any securities or any rights to securities of the
Company by any holder or holders thereof representing in the aggregate
more than 50% of the issued and outstanding Common Stock on a Fully
Diluted Basis and the receipt of any consideration in connection
therewith;
(b) a merger, consolidation, reorganization, recapitalization
or share exchange in which the shareholders of the Company immediately
prior to such transaction receive, in exchange for securities of the
Company owned by them, cash, property or securities of the resulting or
surviving entity and as a result thereof the shareholders prior to such
transaction holding less than fifty percent (50%) of the voting
securities, calculated on a Fully Diluted Basis, of the resulting
Persons entitled to vote in the election of directors, managers or
similar functions;
(c) a sale, transfer or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries, on
a consolidated basis;
(d) any sale or issuance or series of sales or issuances of
Common Stock or any other voting security (or security convertible
into, exchangeable for, or exercisable for any other voting security)
of the Company within a 12-month period that results in a transfer of
more than 50% of the issued and outstanding Common Stock or a transfer
of more than 50% of the voting power of the Company;
(e) a Qualified Public Offering; and
(f) any member of Key Management shall cease to be employed by
the Company in the official capacity in which they serve as of the
Closing Date or shall cease to devote substantially all their time to
the business of the Company, unless a suitable replacement for such
departed member of Key Management is identified and elected by the
board of directors of the Company within the applicable Replacement
Time.
"Charter Documents" means, with respect to any Person, its certificate
of incorporation, articles of incorporation, bylaws, partnership agreement,
regulations, operating agreement and all other comparable charter documents.
"Clear Operating" means Clear Communications Group, Inc., a Georgia
corporation.
"Closing" has the meaning given such term in Section 2.2 hereof.
"Closing Date" means November 1, 1999.
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<PAGE> 10
"Closing Price" means (a) if the primary market for the security in
question is a national securities exchange registered under the Exchange Act,
the National Association of Securities Dealers Automated Quotation
System--National Market System, or other market or quotation system in which
last sale transactions are reported on a contemporaneous basis, the last
reported sales price, regular way, of such security for such day, or, if there
has not been a sale on such trading day, the highest closing or last bid
quotation therefor on such trading day (excluding, in any case, any price that
is not the result of bona fide arm's length trading); or (b) if the primary
market for such security is not an exchange or quotation system in which last
sale transactions are contemporaneously reported, the highest closing or last
bona fide bid quotation by disinterested Persons in the over-the-counter market
on such trading day as reported by the National Association of Securities
Dealers through its Automated Quotation System or its successor or such other
generally accepted source of publicly reported bid quotations.
"Closing Transactions" means the transactions which will occur on the
Closing Date pursuant to (a) the Ancillary Agreements and (b) the Transaction
Documents.
"COBRA" has the meaning given such term in Section 6.15 hereof.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to any or all of its functions under the Securities Act or the
Exchange Act.
"Common Stock" means the Company's common stock, par value $.0001 per
share.
"Company" has the meaning given such term in the preamble hereto.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
as of such date in accordance with GAAP.
"Control Basis" means the valuation of the Common Stock by determining
on an aggregate basis the fair market value of all Common Stock on the basis of
the Common Stock being sold in the aggregate to a third party buyer in an arm's
length transaction with conveyance of control, without discount for minority
interests, illiquidity or restrictions on transfer, and then dividing such
amount by the number of all securities of such type on a Fully Diluted Basis.
"Debt" means, for any Person, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all indebtedness
of such Person on which interest charges are customarily paid or accrued, (d)
all Guarantees by such Person, (e) the unfunded or unreimbursed portion of all
letters of credit issued for the account of such Person, (f) the present value
(discounted at the implicit rate, if known, or eight percent (8%) per annum
otherwise) of all obligations in respect of Capital Leases of such Person, (g)
any obligation of such Person representing the deferred purchase price of
property or services purchased by such Person other than trade payables incurred
in the ordinary course of business and which are not more than one hundred and
twenty (120) days past invoice date unless being contested in good faith and
adequate reserves have been set up by the Company or its Subsidiaries, and (h)
all liability of such Person as a general partner or joint venturer for
obligations of the nature described in (a) through (g) preceding.
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<PAGE> 11
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Distribution" by any Person means (a) with respect to any stock issued
by such Person or any partnership, joint venture or limited liability company
interest of such Person, the retirement, redemption, purchase, or other
acquisition for value of any such stock, partnership, joint venture or limited
liability company interest, (b) the declaration or payment of any dividend or
other distribution on or with respect to any stock, partnership, joint venture
or limited liability company interest of any Person, (c) any other payment by
such Person with respect to such stock, partnership, joint venture or limited
liability company interest of such Person, or (d) any payment, loan or advance
of any type to any officer, director, shareholder, partner or member of such
Person or any of its Affiliates; provided, that, Distributions shall not
include, in the case of the Company or any of its Subsidiaries, (i) payment of
compensation to officers and employees in the ordinary course of business which
is not in violation of Section 9.14 hereof, and (ii) reimbursement of, and
advances for, reasonable travel, entertainment and similar expenses incurred in
the ordinary course of business.
"Environmental Complaint" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any federal, state, municipal or
other Governmental Authority or any other party involving a Hazardous Discharge,
Environmental Contamination or any violation of any order, permit or
Environmental Law and Laws.
"Environmental Contamination" means the presence of any Hazardous
Substances, which presence results from a Hazardous Discharge.
"Environmental Law and Laws" means any law, common law, ordinance,
regulation or policy of any Governmental Authority, as well as any order,
decree, permit, judgment or injunction issued, promulgated, approved, or entered
thereunder, relating to the environment, health and safety, Hazardous Substances
(including, without limitation, the use, handling, transportation, production,
disposal, discharge or storage thereof), industrial hygiene, the environmental
conditions on, under, or about any real property owned, leased or operated at
any time by the Company or any of its Subsidiaries or any real property owned,
leased or operated by any other party, including, without limitation, soil,
groundwater, and indoor and ambient air conditions or the reporting or
remediation of Environmental Contamination. Environmental Law and Laws include,
without limitation, the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the
Safe Drinking Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, the Superfund Amendments
and Reauthorization Act of 1986 ("SARA"), as amended, the Resource Conservation
and Recovery Act of 1976 ("RCRA"), as amended, the Hazardous and Solid Waste
Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act ("OSHA"), as amended, the
Hazardous Materials Transportation Act, as amended, and any other federal, state
and local law whose purpose is to conserve or protect health, the environment,
wildlife or natural resources.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Affiliate" means the Company or any of its Subsidiaries and any
other corporation or trade or business under common control with the Company or
any of its Subsidiaries or treated as a single
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<PAGE> 12
employer with the Company or any of its Subsidiaries as determined under
sections 414(b), (c), (m) or (o) of the IRC.
"Event of Default" has the meaning set forth in Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute.
"Exempt Shares" means (a) the Warrant Shares, (b) options to purchase
up to 630,000 shares of Common Stock and the Common Stock issued upon exercise
thereof pursuant to the Company's Stock Option Plan and certain employment
agreements, (c) securities of the Company issuable upon exercise of any options,
warrants or other rights to acquire securities or upon conversion of any
convertible securities, in each case which are outstanding as of the Closing
Date and set forth on Schedule 6.4 hereto, (d) securities issued pursuant to
payment in kind of Distributions to holders of the Preferred Stock and Junior
Preferred Stock and (e) additional warrants issued to ACS pursuant to the ACS
Note Purchase Agreement in connection with the purchase of the Tranche B Notes
(as defined in the ACS Note Purchase Agreement) and the issuance of Common Stock
upon the exercise of such warrants.
"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided otherwise.
"Financial Officer" means, as to any Person, its Chief Financial
Officer, or if no Person serves in such capacity, the highest ranking executive
officer of such Person with responsibility for accounting, financial reporting,
financial compliance and similar functions.
"Fully Diluted Basis" means, with reference to outstanding Common
Stock, the shares of Common Stock that would be outstanding assuming that all
outstanding options, warrants and other rights to acquire Common Stock had been
exercised (regardless of whether such rights are then exercisable) and all
securities convertible into Common Stock had then been converted (regardless of
whether such securities are then convertible) and had been issued. Any reference
in this Agreement or any of the other Transaction Documents to "holder(s) of
outstanding Common Stock on a Fully Diluted Basis" or words of similar import
shall be deemed to include holder(s) of outstanding options, warrants or similar
rights to acquire Common Stock or securities convertible into Common Stock.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question; and the requirement
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"Governmental Authority" means any government, any state or other
political subdivision thereof, or any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the
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<PAGE> 13
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions, by "comfort letter" or other similar undertaking of
support of otherwise), or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided, that, the term "Guaranty" shall not include endorsements for
collection or deposit in the ordinary course of business. For purposes of this
Agreement, the amount of any Guaranty shall be the maximum amount that the
guarantor could be legally required to pay under such Guaranty.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of a Hazardous Substance at, from, onto, under or within
any real property owned, leased or operated at any time by the Company or any of
its Subsidiaries or any real property owned, leased or operated by any other
Person.
"Hazardous Substance" means any pollutant, toxic substance, hazardous
waste, compound, element or chemical that is defined as hazardous, toxic,
noxious, dangerous or infectious pursuant to any Environmental Law and Laws or
which is otherwise regulated by any Environmental Law and Laws.
"Holder" with respect to any security of a Person shall mean the record
or beneficial owner of such security.
"Investment" in any Person means any investment, whether by means of
securities purchase (whether by direct purchase from such Person or from an
existing holder of securities of such Person), loan, advance, extension of
credit, capital contribution or otherwise, in or to such Person, the Guaranty of
any Debt or other obligation of such Person, or the subordination of any claim
against such Person to other Debt or other obligation of such Person; provided,
that, "Investments" shall not include advances made to employees of such Person
for reasonable travel, entertainment and similar expenses incurred in the
ordinary course of business.
"Investors" has the meaning given such term in the preamble hereto.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any regulation promulgated thereunder.
"Junior Preferred Stock" means the Company's Class A Convertible
Preferred Stock and the Company's Series C Convertible Preferred Stock.
"Key Management" means, as of the Closing Date, Stephen Johnston Sr.
and Michael Riley and any substitutions, additions or deletions approved by the
Investors.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality, or Governmental
Authority.
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<PAGE> 14
"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
including, without limitation, the rights of a lessor under a Capital Lease to
the asset which is the subject of such Capital Lease. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
"Majority Warrant Holder" means a Warrant Holder or Warrant Holders who
hold more than fifty percent (50%) of the outstanding Warrant Shares (for
purposes of this definition, all Warrants will be deemed to have been
exercised); provided, that in the event all Warrant Holders are not required to
participate in the exercise of the right in question and less then all Warrant
Holders elect to participate in the exercise of the right in question, "Majority
Warrant Holder" shall mean a Warrant Holder or Warrant Holders participating in
the exercise of such right who holds more than fifty percent (50%) of all
Warrant Shares held by all Warrant Holders participating in the exercise of such
right.
"Mandatory Redemption Event" means any event which, pursuant to the
terms of this Agreement and the Series D Stock Designation, permits the Holders
of the Preferred Shares to redeem the Preferred Shares.
"Material Adverse Effect" means, with respect to a Person, a material
adverse effect on the business, financial condition, operations, assets or
prospects of such Person or any of its Subsidiaries, and shall also mean, with
respect to the Company or any of its Subsidiaries, a material adverse effect on
such Person's ability to pay and perform its obligations under the Transaction
Documents.
"Material Agreement" means any written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such Person
is directly or indirectly bound, or to which any assets of such Person may be
subject (a) pursuant to which such Person acquires any material portion of the
raw materials, supplies or services used or consumed by such Person in the
operation of its business (unless such raw materials, supplies or services are
readily available to such Person from other sources on comparable terms) which
are not incurred in the ordinary course of business, (b) pursuant to which such
Person derives any material part of its revenues, or (c) pursuant to which the
Company is required to make annual expenditures in excess of $100,000, and
without limiting the foregoing, Material Agreement shall include each of the
Ancillary Agreements.
"Material Event of Default" means an Event of Default under (a)
Sections 10.1(a), (b), (g) or (h), (b) Section 10.1(c) if such Event of Default
arose as a result of a violation of Section 8.9 or (c) Section 10.1(d) if such
Event of Default arose as a result of a violation of Section 8.1 or Section 8.8.
"MTG" means McKenzie Telecommunications Group, Inc., an Arizona
corporation.
"MTG Acquisition" means the purchase by Clear Operating and the sale by
MTG to Clear Program Management, Inc. of substantially all of the assets of MTG
pursuant to the MTG Asset Purchase Agreement.
"MTG Acquisition Documents" means the MTG Asset Purchase Agreement, and
all other documents, instruments and agreements now or hereafter executed by or
among the Company, Clear Program Management, Inc., any of their Subsidiaries or
MTG pertaining to the MTG Acquisition.
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<PAGE> 15
"MTG Asset Purchase Agreement" means that certain Asset Purchase
Agreement dated as of November 1, 1999, by and between Clear Program Management,
Inc. and MTG, pursuant to which Clear Program Management, Inc. will purchase
from MTG and MTG will sell to Clear Program Management, Inc.
substantially all of the assets of MTG.
"Offer" has the meaning given such term in Section 8.14 hereof.
"Offer Notice" has the meaning given such term in Section 8.14 hereof.
"Operating Lease" means any lease, sublease, license or similar
arrangement (other than a Capital Lease), pursuant to which a Person leases,
subleases or otherwise is granted the right to occupy, take possession of, or
use property whether real, personal or mixed.
"Pension Plan" means any employee benefit plan within the meaning of
section 3(3) of ERISA maintained by the Company, any Subsidiary of the Company
or any ERISA Affiliate that is or was previously covered by Title IV of ERISA or
subject to the minimum funding standards under section 412 of the IRC, including
a "multiemployer plan" as such term is defined in section 3(37) of ERISA.
"Permitted Acquisition" means "Approved Acquisition" as defined in the
ACS Agreement in effect on the date hereof.
"Permitted Debt" means (a) the Wachovia Senior Debt, (b) the ACS
Subordinate Debt, (c) intercompany Debt among or between the Company and its
Subsidiaries to the extent permitted by the Wachovia Senior Credit Agreement,
(d) Debt not to exceed $1,250,000 in the aggregate at any time outstanding
secured by purchased money Liens or incurred with respect to Capital Leases, (e)
Debt issued to sellers in connection with Permitted Acquisitions, (f) Debt
issued on the Closing Date in connection with the TWR Acquisition and MTG
Acquisition, (g) Debt outstanding on the Closing Date and set forth on Schedule
1.1(a) hereto and (h) performance and payment bonds posted in the ordinary
course of business and which have been properly reported to the Preferred
Shareholders in accordance with Section 8.1(b).
"Permitted Encumbrances" means with respect to any asset:
(a) Liens securing the Obligations;
(b) Liens securing Permitted Debt;
(c) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of real property, or other minor
irregularities in title to properties, whether real or personal, which do not
secure the payment of Debt or other liability or obligation and do not
materially impair the use of such property for the purposes for which the same
is held by the owner thereof;
(d) mechanics', materialmen's, warehousemen's,
journeymen's, landlord's, vendor's and carrier's Liens and other similar Liens
arising by operation of law or statute in the ordinary course of business and
are not delinquent or, if delinquent, is being contested in good faith and
adequate reserves have been set up by the Company or its Subsidiaries; and
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<PAGE> 16
(e) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are being contested in good faith in the
normal course of business by appropriate action, as permitted by Section 8.4
hereof.
"Permitted Investments" means (a) readily marketable direct obligations
of the United States of America, (b) fully insured time deposits and
certificates of deposit with maturities of one (1) year or less of any
commercial bank operating in the United States having capital and surplus in
excess of $50,000,000.00, (c) commercial paper of a domestic issuer if at the
time of purchase such paper is rated in one of the two highest ratings
categories of Standard and Poor's Corporation or Moody's Investors Service, and
(d) Permitted Acquisitions.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof and shall also
mean the Company.
"Plan" means an employee benefit plan within the meaning of Section
3(3) of ERISA, under which the Company or any Subsidiary of the Company has any
current or future obligation or liability and under which any present or former
employee of the Company or any Subsidiary of the Company, or such present or
former employee's dependents or beneficiaries, has any current or future right
to benefits.
"Preferred Shareholder" means any Holder of Preferred Shares.
"Preferred Shares" means the shares of Preferred Stock to be issued and
sold by the Company to the Investors pursuant to Section 2.1 hereof.
"Preferred Stock" means the Company's Series D Senior Redeemable
Preferred Stock, no par value per share having the rights and preferences set
forth in the Series D Stock Designation.
"Pro Forma Opening Balance Sheet" means a consolidated and
consolidating balance sheet of the Company which shall consist of the Company's
actual consolidated and consolidating balance sheet as of September 30, 1999
referenced in Section 6.6(e) hereof, adjusted to give effect to the Closing
Transactions and is attached hereto as Schedule 1.1(b).
"Projections" means the projections of the Company's future financial
condition and results of operation attached hereto as Schedule 6.6 and
incorporated herein by reference for all purposes.
"Purchase Price" has the meaning given such term in Section 2.1.
"Put" means the right of any Holder to require the Company to
repurchase the Preferred Shares, Warrants and Warrant Shares pursuant to Section
3.4 hereof.
"Put Closing Date" has the meaning given such term in Section 3.4
hereof.
"Put Exercise Date" means (a) with respect to the Warrants and Warrant
Shares, the earliest of (i) November 1, 2005, (ii) the date of any Material
Event of Default or (iii) the date on which all of the Preferred Shares have
been redeemed, and (b) with respect to the Preferred Shares, the date of any
Mandatory Redemption Event.
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<PAGE> 17
"Put Note" means a promissory note substantially in the form of Exhibit
A attached hereto.
"Put Notice" has the meaning given such term in Section 3.4 hereof.
"Put Price" means (a) with respect to the Common Stock, (i) if the
Common Stock is regularly traded in the organized securities markets, the
average of the Closing Price for the security in question for the thirty (30)
trading days immediately preceding the date of determination; and (ii) if the
Common Stock is not regularly traded in the securities markets, the fair market
value on a Control Basis as of the date of the Put Notice (unless some other
date of valuation is provided herein) as determined in good faith by the board
of directors of the Company; provided, however, that, at the election of the
Holders exercising the Put, either before or after the determination of Put
Price by the board of directors (a "Valuation Event Election") the Put Price of
such Common Stock shall be determined pursuant to the procedures set forth in
the definition of Appraised Value and (b) with respect to the Preferred Shares,
the Liquidation Value (as defined in the Series D Stock Designation) of such
Preferred Shares.
"Qualified Public Offering" means the consummation of an underwritten
public offering of Common Stock by the Company to the general public in which
the aggregate net cash proceeds received by the Company at the public offering
price is at least $30,000,000 and which results in a market capitalization of
the Company of at least $80,000,000.
"Redemption Date" means the date on which the Preferred Shares have
been redeemed in full.
"Registration Rights Agreement" means a Registration Rights Agreement
of even date herewith to be entered into by and among the Company, the Investors
and ACS.
"Rentals" means amounts payable by a lessee under an Operating Lease.
"Replacement Time" means 75 days until such time as the Company shall
have hired a Vice President of Operations or Chief Operating Officer and a
Controller; then such Replacement Time shall be 120 days.
"Sale" means any transaction described in clauses (a) through (c) of
the definition of Change of Control.
"Schedule" means a "schedule" attached to this Agreement and
incorporated herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
"Securities" means the Preferred Shares and the Warrants to be issued
to the Investors hereunder.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute.
"Series D Stock Designation" means the Certificate of Designation of
Series D Senior Redeemable Preferred Stock of the Company in the form of Exhibit
B attached hereto.
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<PAGE> 18
"Shareholders Agreement" means a Second Amended and Restated Voting and
Co-Sale Agreement of even date herewith to be entered into by and among the
Company, the Investors, DFW Capital Partners, L.P., ACS, Stephen F. Johnston,
Sr., Clear Investors, LLC and certain other shareholders of the Company.
"Stratford Capital" has the meaning given such term in the preamble
hereto.
"Stratford Equity" has the meaning given such term in the preamble
hereto.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges of any
nature whatsoever, from time to time or at any time imposed by law or any
federal, state or local governmental agency. "Tax" means any one of the
foregoing.
"Transaction Documents" means this Agreement, the Warrant Certificate,
the Registration Rights Agreement, the Shareholders Agreement, the Series D
Stock Designation and all other agreements, certificates, documents or
instruments now or at any time hereafter delivered in connection with this
Agreement, as the foregoing may be renewed, extended, modified, amended or
restated from time to time.
"Triggering Holder" means (a) with respect to any exercise of the Put
with respect to Warrants and Warrant Shares, the Majority Warrant Holder and (b)
with respect to any exercise of the Put with respect to Preferred Shares, the
Holders of a majority of the outstanding Preferred Shares.
"TWR" means TWR Telecom, Inc., a Texas corporation.
"TWR Acquisition" means the purchase by Clear Operating and the sale by
George Jackson to Clear Operating of all of the outstanding capital stock of TWR
pursuant to the TWR Stock Purchase Agreement.
"TWR Acquisition Documents" means the TWR Stock Purchase Agreement, and
all other documents, instruments and agreements now or hereafter executed by or
among the Company, Clear Operating, any of their Subsidiaries, George Jackson or
TWR pertaining to the TWR Acquisition.
"TWR Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of August 20, 1999, as amended, by and between Clear
Operating and George Jackson, pursuant to which Clear Operating will purchase
from George Jackson and George Jackson will sell to Clear Operating
substantially all of the outstanding capital stock of TWR.
"Unlocking Price" means the sum of the following to the extent owned by
any Holder who delivers an Acceptance Notice: (a) with respect to the Preferred
Shares, the Liquidation Value (as defined in the Series D Stock Designation) of
such Preferred Shares and (b) with respect to the Warrants and Warrant Shares,
the per share consideration which would be received or is receivable with
respect to the Common
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Stock in connection with the Offer times the number of Warrants and Warrant
Shares owned by such Holder less the Warrant Exercise Price applicable to such
Warrants.
"Wachovia" means Wachovia Bank, N.A.
"Wachovia Senior Credit Agreement" means that certain Credit Agreement
dated as of November 1, 1999, by and among the Company, Clear Operating, their
respective Subsidiaries, Wachovia, as Agent and Lender, and the other banks
party thereto.
"Wachovia Senior Debt" means all Debt of Clear Operating outstanding
under the Wachovia Senior Credit Agreement, including all renewals and
extensions thereof; provided, however, the outstanding principal amount of the
Wachovia Senior Debt shall not at any time exceed the Wachovia Senior Debt Limit
in effect at such time.
"Wachovia Senior Debt Documents" means the Wachovia Senior Credit
Agreement and all promissory notes, security agreements, mortgages, deeds of
trust, assignments, guarantees and other documents, instruments and agreements
executed and delivered pursuant to the Wachovia Senior Credit Agreement
evidencing, securing, guaranteeing or otherwise pertaining to the Wachovia
Senior Debt and other obligations arising under the Wachovia Senior Credit
Agreement, as the foregoing may be amended, renewed, extended, supplemented,
increased or otherwise modified from time to time to the extent permitted
hereunder.
"Wachovia Senior Debt Limit" means $27,000,000; provided, however, if
another lender becomes a party to the Wachovia Senior Credit Agreement as a
lender thereunder, within thirty (30) days of the Closing Date, the maximum
amount of the senior debt shall increase by the amount of the additional
principal lent or committed to by such new lender, but is in no event to exceed
$37,000,000 and shall not include an increase of the term debt portion thereof.
"Warrant Certificate" means the Warrant Certificates to be issued by
the Company evidencing Warrants issued to the Investors hereunder which shall be
in the form of Exhibit C attached hereto.
"Warrant Exercise Price" means $0.01 per share (subject to adjustment
as provided in Section 3.2).
"Warrant Expiration Date" means November 1, 2009.
"Warrant Holder" means any Person (i) in whose name any Warrant is
registered on the Warrant Register, or (ii) in whose name any Warrant Shares are
registered on the books and records of the Company.
"Warrant Register" means a register maintained by the Company setting
forth the name and address of each Warrant Holder, the number of Warrants held
by such Warrant Holder and the certificate number of each Warrant Certificate
held by such Warrant Holder.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrants" means 1,491,755 Common Stock Purchase Warrants to be issued
by the Company to the Investors, pursuant to Section 2.1 of this Agreement, each
of which shall entitle the holder thereof to
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purchase one (1) share of Common Stock at the Warrant Exercise Price (subject to
adjustment as provided in Section 4.2).
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time, applied on a basis consistent with the most recent
annual audited, consolidated financial statements of the Company delivered to
the Investors prior to the date hereof.
SECTION 1.3. Gender and Number. Words of any gender used in this
Agreement shall be held and construed to include any other gender and words in
the singular number shall be held to include the plural, and vice versa, unless
the context requires otherwise.
SECTION 1.4. References to Agreement. Use of the words "herein",
"hereof", "hereinabove", and the like are and shall be construed as references
to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Purchase and Sale. Subject to the satisfaction of the
terms and conditions set forth herein and in reliance upon the representations
and warranties of the parties set forth herein and in the other Transaction
Documents (a) Stratford Capital agrees to purchase from the Company and the
Company agrees to issue and sell to Stratford Capital 39,000 shares of Preferred
Stock and 775,713 Warrants for the aggregate purchase price for $3,900,000 (the
"Stratford Capital Purchase Price"), and (b) Stratford Equity agrees to purchase
from the Company and the Company agrees to issue and sell to Stratford Equity
36,000 shares of Preferred Stock and 716,042 Warrants for the aggregate purchase
price for $3,600,000 (the "Stratford Equity Purchase Price" and together with
the Stratford Equity Purchase Price, the "Purchase Price").
SECTION 2.2. Closing. Closing of the purchase and sale of the
Securities (the "Closing") shall take place at the offices of Smith, Gambrell &
Russell, LLP, 1230 Peachtree Street, NE, Atlanta, Georgia 30309- 3952 at 10:00
a.m. on the Closing Date, or at such other time, date and place as may be agreed
upon in writing by the Company and the Investors.
SECTION 2.3. Delivery. At the Closing, the Company shall deliver to the
Investors, against payment therefor, certificates evidencing the Preferred
Shares and the Warrant Certificates evidencing the Warrants purchased by the
Investors, in each case duly issued and in form sufficient to vest title thereto
fully, free and clear of all Liens, claims and encumbrances.
SECTION 2.4. Payment. At the Closing, (a) Stratford Capital and
Stratford Equity shall pay to the Company by wire transfer of immediately
available funds in accordance with the instructions set forth in the Closing
Statement, the Stratford Capital Purchase Price and Stratford Equity Purchase
Price, respectively, and (b) the Company shall pay to Stratford Capital and
Stratford Equity, by wire transfer of immediately available funds in accordance
with the instructions set forth in the Closing Statement, closing fees equal to
$97,500 and $90,000, respectively.
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ARTICLE III
CERTAIN TERMS APPLICABLE TO WARRANTS
SECTION 3.1. Exercise of Warrants. (a) The Warrants may be exercised in
whole or in part at any time until the Warrant Expiration Date at which time the
Warrants shall expire and shall thereafter no longer be exercisable. The
Warrants shall be exercised by presentation of the Warrant Certificate
evidencing the Warrants to be exercised, with the form of election to purchase
on the reverse thereof duly completed and signed, to the Company at the offices
of the Company as set forth on the signature page of this Agreement, together
with payment of the aggregate Warrant Exercise Price for the number of Warrant
Shares in respect of which such Warrants are being exercised in lawful money of
the United States of America; provided, that, to the extent the Warrant Holder
exercising such Warrants is also the holder of Preferred Shares, such Warrant
Holder may elect, by written notice to the Company delivered with such
presentation, to elect to pay the applicable Warrant Exercise Price by
offsetting accrued dividends on the Preferred Shares by an amount equal to the
aggregate Warrant Exercise Price payable in connection with such exercise of
Warrants. Upon such presentation, the Company shall issue and cause to be
delivered to or upon the written order of the registered Holder of such Warrants
and in such name or names as such registered Holder may designate, a certificate
or certificates for the aggregate number of Warrant Shares issued upon such
exercise of such Warrants. Any Person so designated to be named therein shall be
deemed to have become holder of record of such Warrant Shares as of the date of
exercise of such Warrants; provided, that, no Warrant Holder will be permitted
to designate that such Warrant Shares be issued to any Person other than such
Warrant Holder unless each condition to transfer contained in Article V hereof
which would be applicable to a transfer of Warrants or Warrant Shares has been
satisfied.
(b) If less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such Warrant
Certificate. All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled.
(c) the Company shall not be required to issue fractional
shares of Common Stock upon exercise of any Warrants issued by it, but shall pay
for any such fraction of a share an amount in cash equal to the value of such
fractional share determined by the Company's board of directors in good faith.
(d) the Company will pay all Taxes attributable to the initial
issuance of Warrant Shares upon the exercise of the Warrants issued by it;
provided, that, each Warrant Holder shall use its reasonable efforts to avoid
any such Tax on the issuance of Warrant Shares; and provided, further that, the
Company shall not be required to pay any income Tax or any other Tax which may
be payable in respect of the exercise and the sale of the Warrants and Warrant
Shares by any Warrant Holder or any transfer involved in the issue of any
Warrant Certificate or any certificate for Warrant Shares in a name other than
that of the registered holder of a Warrant Certificate surrendered upon the
exercise of such a Warrant, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such Tax or shall
have established to the satisfaction of the Company that such Tax has been paid.
SECTION 3.2. Adjustment of Number of Warrant Shares Purchasable. The
number of Warrant Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated in this Section 3.2.
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(a) In the event that the Company shall at any time after the
date of this Agreement (i) declare a dividend on the Common Stock in shares of
its capital stock (whether shares of such Common Stock or of capital stock of
any other class of the Company), (ii) split or subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, the number of Warrant Shares purchasable upon an exercise of each
Warrant after the time of the record date for such dividend or of the effective
date of such split, subdivision or combination shall be adjusted to equal the
number of shares of Common Stock which a Holder having the same number of shares
of Common Stock as the number of Warrant Shares into which each Warrant is
exercisable immediately prior to such record date or effective date, as the case
may be, would own or be entitled to receive after such record date or effective
date.
(b) In the event that the Company shall at any time after the
date of this Warrant Agreement (other than Exempt Shares) (i) issue any shares
of Common Stock without consideration or at a price per share less than the
Stipulated Equity Value, or (ii) issue options, rights or warrants to subscribe
for or purchase such Common Stock (or securities convertible into such Common
Stock) without consideration or at a price per share (or having a conversion
price per share, if a security convertible into such Common Stock) less than the
Stipulated Equity Value immediately prior to such issuance, the number of
Warrant Shares purchasable upon an exercise of each Warrant after the date of
such issuance shall be adjusted to equal the product obtained by multiplying the
number of Warrant Shares into which each Warrant is exercisable immediately
prior to the date of such issuance by a fraction, the numerator shall be the
number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately after such issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately prior to such issuance plus the number of shares of such Common
Stock which the aggregate offering price of the total number of shares of such
Common Stock so to be issued or to be offered for subscription or purchase (or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at the Stipulated Equity Value immediately prior to such
issuance. In case such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the board of directors of the Company.
Shares of such Common Stock owned by or held for the account of the Company or
any Subsidiary thereof shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever the date
of such issuance is fixed (which date of issuance shall be the record date for
such issuance if a record date therefor is fixed); and, in the event that such
shares or options, rights or warrants are not so issued, the number of Warrant
Shares into which each Warrant is exercisable shall again be adjusted to be such
number of Warrant Shares into which each Warrant is exercisable if the date of
such issuance had not been fixed.
(c) In case the Company shall make a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation but
excluding any Distribution permitted by Section 9.1 hereof) of evidences of its
indebtedness or assets, the number of Warrant Shares into which each Warrant is
exercisable after such date of distribution shall be adjusted to equal the
product obtained by multiplying the number of Warrant Shares purchasable upon an
exercise of each Warrant immediately prior to such date by a fraction, the
numerator of which shall be the Stipulated Equity Value immediately prior to
such distribution, and the denominator of which shall be the Stipulated Equity
Value immediately prior to such distribution less the fair market value as
determined in good faith by the board of directors of the Company of the portion
of the assets or evidences of indebtedness so to be distributed applicable to
one share of Common Stock. Such adjustment shall be made successively whenever a
date for such distribution is fixed (which date of
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distribution shall be the record date for such issuance if a record date
therefor is fixed); and, if such distribution is not so made, the number of
Warrant Shares into which each Warrant is exercisable shall again be adjusted to
be such number of Warrant Shares which would then be in effect if the date of
such distribution had not been fixed.
(d) No adjustment in the number of Warrant Shares purchasable
upon an exercise of each Warrant shall be required unless such adjustment would
require an increase or decrease of at least one-tenth of one percent (.1%) in
such number of Warrant Shares; provided that any adjustments which by reason of
this Section 3.2(d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.2 shall be made to the nearest hundredth of one percent.
(e) The Warrant Exercise Price in effect immediately prior to
any adjustment of the number of Warrant Shares into which each Warrant is
exercisable shall be simultaneously adjusted (but not below the par value of the
Common Stock) by multiplying the Warrant Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares into which each Warrant is exercisable immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
into which each Warrant is exercisable immediately after such adjustment.
(f) In the event of any capital reorganization of the Company,
or of any reclassification of any Common Stock for which any Warrant is
exercisable (other than a subdivision or combination of outstanding shares of
such Common Stock), or in case of the consolidation of the Company with or the
merger of the Company with or into any other corporation or of the sale of the
properties and assets of the Company as, or substantially as, an entirety to any
other Person, each Warrant shall after such capital reorganization,
reclassification of such Common Stock, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Agreement, for the
number of shares of stock or other securities or assets to which a holder of the
number of Warrant Shares purchasable (at the time of such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale) upon exercise of such Warrant would have been entitled upon such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Section 3 with respect to the rights thereafter of such Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter deliverable on
the exercise of such Warrants. The Company shall not effect any such
consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to each Warrant Holder the shares of
stock, securities or assets to which, in accordance with the foregoing
provisions, such Warrant Holder may be entitled pursuant to this Section 3.2(f).
(g) If any question shall at any time arise with respect to
the adjusted number of Warrant Shares, such question shall be determined by the
independent firm of certified public accountants of recognized national standing
selected by the Majority Warrant Holders.
(h) Notwithstanding anything in this Section 3.2 to the
contrary, the Company shall not be permitted to take any action described in
this Section 3.2 (such as, but not by way of limitation, any dividend,
consolidation merger or reorganization) if such action is prohibited under any
other provision of this Agreement, including, without limitation, any provision
of Article IX hereof.
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(i) As used in this Section 3.2, "Stipulated Equity Value"
initially means $3.02 per share; provided that (A) after giving effect to any
event described in Section 3.2(a) or (b) hereof, the Stipulated Equity Value
shall be adjusted to an amount equal to the quotient obtained by dividing (1)
the product of the number of outstanding shares of Common Stock of the Company
on a Fully Diluted Basis immediately prior to the occurrence of such event times
the Stipulated Equity Value immediately prior to the occurrence of such event,
by (2) the number of outstanding shares of Common Stock of the Company on a
Fully Diluted Basis immediately after giving effect to such event, and (B) after
giving effect to any event described in Section 3.2(c) hereof, the Stipulated
Equity Value shall be adjusted to an amount equal to the quotient obtained by
dividing (1) the remainder of (a) the product of the number of outstanding
shares of Common Stock of the Company on a Fully Diluted Basis times the
Stipulated Equity Value immediately prior to the occurrence of such event, minus
(b) the fair market value of the aggregate evidence of the Company's
indebtedness and assets distributed to the holders of Common Stock, by (2) the
number of outstanding shares of Common Stock of the Company on a Fully Diluted
Basis.
SECTION 3.3. Notices to Warrant Holders. Upon any adjustment of the
number of Warrant Shares issuable upon an exercise of the Warrants or any
adjustment of the Warrant Exercise Price pursuant to Section 3.2, the Company
shall promptly, but in any event within thirty (30) days thereafter, cause to be
given to each Warrant Holder, at its address appearing on the Warrant Register,
by first class mail, postage prepaid, a certificate signed by the Company's
Financial Officer setting forth the number of Warrant Shares issuable upon the
exercise of each Warrant as so adjusted and the Warrant Exercise Price as so
adjusted, and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. Where appropriate, such
certificate may be given in advance and included as part of the notice required
to be mailed under the other provisions of this Section 3.3.
In the event:
(a) that the Company shall authorize the issuance to all
holders of its Common Stock of rights or warrants to subscribe for or purchase
capital stock of the Company or of any other subscription rights or warrants; or
(b) that the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets; or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination); or
(d) of the voluntary dissolution, liquidation or winding up of
the Company; or
(e) that the Company proposes to take any other action which
would require an adjustment of the Warrant Exercise Price of the Warrants issued
by it pursuant to Section 3.3;
then the Company shall cause to be given to each Warrant Holder at such Warrant
Holder's address appearing on the Warrant Register, at least ten (10) days prior
to the applicable date hereinafter specified, by first class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of
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Common Stock to be entitled to receive any such rights, warrants or distribution
are to be determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that the holders of
record of Common Stock shall be entitled to exchange their shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up.
SECTION 3.4. Put Rights. (a) At any time on or after the applicable Put
Exercise Date, an appropriate Triggering Holder may, by written notice of such
intent to the Company (the "Put Notice"), require the Company to purchase all of
the Preferred Shares or the Warrants and Warrant Shares, as applicable, then
outstanding at the Put Price determined as of the date of the Put Notice. An
exercise of the Put by the Triggering Holder shall be binding upon all Preferred
Shareholders or all Warrant Holders, as applicable, all of whom shall be
obligated to sell all of their Preferred Shares or Warrants and Warrant Shares
to the Company at such time in accordance with and subject to this Section 3.4.
The Put Notice shall set forth a date (which shall be not less than sixty 60
days, nor more than ninety 90 days after the date of the Put Notice and which
shall be a Business Day) (the "Put Closing Date") for the purchase and sale of
the Preferred Shares or Warrants and Warrant Shares with respect to which the
Put is exercised (the "Put Securities"). Promptly upon the receipt by the
Company of a Put Notice, the Company shall deliver a notice to each other
Preferred Shareholder or Warrant Holder setting forth (1) that a Triggering
Holder has exercised the Put on behalf of all Preferred Shareholders or Warrant
Holders, as applicable, (2) the Put Closing Date and (3) to the extent
determined, the Put Price. If the Put Price has not been determined at such
time, the Company shall promptly notify all Preferred Shareholders or Warrant
Holders of the amount of the Put Price as soon as such Put Price is determined.
On the Put Closing Date, each Preferred Shareholder or Warrant Holder, as
applicable, shall deliver the certificates evidencing the Put Securities held by
such Person to the Company duly endorsed, free and clear of all Liens (other
than any arising under this Agreement or under applicable securities Laws), and
the Company shall pay to such Preferred Shareholder or Warrant Holder an amount
equal to the sum of (i) the Put Price with respect to the Preferred Shares and
(ii) the sum of (A) the Put Price with respect to the Common Stock multiplied by
the number of Warrant Shares included in such Put Securities, plus (B) (1) the
Put Price with respect to the Common Stock multiplied by the number of Warrant
Shares which would be purchased upon an exercise of all Warrants included in
such Put Securities, less (B) the aggregate Warrant Exercise Price which would
be required to be paid by such Holder to exercise all Warrants held by such
Holder ("Put Purchase Price"). The amount payable by the Company to any
Preferred Shareholder or Warrant Holder upon exercise of the Put shall be paid
by certified or cashier's check, by wire transfer or other immediately available
funds. In the event that the Company defaults on its obligation to purchase all
of the Put Securities upon exercise of the Put by any Triggering Holder because
the Company does not have cash available to honor such Put, or because the Put
is exercised as a result of a Material Event of Default or Mandatory Redemption
Event and restrictions contained in the Wachovia Senior Debt Documents which
have not been waived by Wachovia after the reasonable best efforts of the
Company to obtain such waiver, the Triggering Holder may elect on behalf of all
Preferred Shareholders or Warrant Holders, as applicable, in addition to any
other rights or remedies of such Triggering Holder, either to (x) rescind the
exercise of the Put, in which case the Put will remain in full force and effect,
(y) accept partial payment of the Put Purchase Price (pro rata among all
Preferred Shareholders or Warrant Holders, as applicable) in an amount equal to
the amount of cash which the Company has available for payment of the Put
Purchase Price on the Put Closing Date and either (I) rescind the exercise of
the Put with respect to the Put Securities which could not be purchased in cash,
in which case the Put will remain in full force and effect with respect to such
unpurchased Put Securities or (II) receive a Put Note in a principal amount
equal to the amount of the Put Purchase Price which could not be paid in cash on
the Put Closing Date or (z) to receive
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a Put Note in a principal amount equal to the applicable Put Purchase Price. In
the event the Put Notice is delivered prior to the Warrant Expiration Date, the
Put shall remain enforceable with respect to the applicable Put Securities
notwithstanding that the Warrant Expiration Date may occur prior to the Put
Closing Date. The failure of any Holder to deliver the certificates evidencing
Put Securities held by such Holder to the Company shall not limit or impair the
right of such Holder to receive the consideration to be paid to such Holder upon
exercise of the Put. However, the Company may withhold payment of such
consideration pending receipt from such Holder of such certificates or evidence
that such certificates have been mutilated, lost, stolen or destroyed as
contemplated by Section 4.3 hereof. Pending delivery of such certificate(s) (or
other evidence), the consideration to be paid to such Holder shall be held in
trust by the Company for such Holder and shall be set aside in a separate
account for the benefit of such Holder, segregated from the other assets of the
Company.
(b) If the Company is unable to purchase all Put Securities on
the applicable Put Closing Date due to state law restrictions, the Company shall
purchase all Put Securities which it is then permitted to purchase without
violating such state law restrictions (on a pro rata basis from each Holder
exercising the Put), and the Company shall purchase the remaining Put Securities
as soon thereafter as possible without violating such state law restrictions;
provided, that in the event the purchase of such remaining securities is
postponed for more than ninety (90) days following the original Put Closing
Date, the Holders exercising the Put shall have the right to have the Put Price
redetermined as of such date and may elect to have the Put Price be the higher
of the original Put Price or the Put Price determined at such later date.
SECTION 3.5. Reservation and Issuance of Warrant Shares. (a) the
Company will at all times have authorized, and reserve and keep available, free
from preemptive rights, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon the exercise of the Warrants, the number of shares
of Common Stock deliverable upon exercise of all outstanding Warrants.
(b) the Company covenants that all Warrant Shares issued by it
will, upon issuance in accordance with the terms of this Agreement, be fully
paid and nonassessable and free from all Taxes with respect to the issuance
thereof and free from all Liens other than Liens arising by, through or under
the Warrant Holder to whom such Warrant Shares were issued.
ARTICLE IV
TRANSFER OF SECURITIES
SECTION 4.1. Restrictions on Transfer. The Investors understand and
agree that the Securities and the Warrant Shares have not been registered under
the Securities Act or any state securities Laws, and that accordingly, they will
not be fully transferable except as permitted under various exemptions contained
in the Securities Act and applicable state securities Laws, or upon satisfaction
of the registration and prospectus delivery requirements of the Securities Act
and applicable state securities Laws. The Investors acknowledge that they must
bear the economic risk of their investment in the Securities and the Warrant
Shares for an indefinite period of time (subject, however, to the redemption
obligations applicable to the Preferred Shares, the Company's obligations with
respect to the Put and to register the Warrant Shares pursuant to the
Registration Rights Agreement) since they have not been registered under the
Securities Act and applicable state securities Laws and therefore cannot be sold
unless they are subsequently registered or an exemption from registration is
available. Absent an effective notification under Regulation A or a registration
statement under the Securities Act and applicable state securities Laws covering
the disposition
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of the Securities and Warrant Shares and, the Investors will not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any or all of the Securities
or the Warrant Shares absent a valid exemption from the registration and
prospectus delivery requirements of the Securities Act and the registration or
qualification requirements of any applicable state securities Laws.
SECTION 4.2. Registration, Transfer and Exchange of Warrants. (a) The
Company shall maintain at the offices of the Company as set forth on the
signature pages of this Agreement, the Warrant Register for registration of the
Warrants and Warrant Certificates and transfers thereof. On the Closing Date,
the Company shall register the outstanding Warrants and Warrant Certificates
issued to the Investors. The Company may deem and treat the registered Warrant
Holders as the absolute owners of the Warrants registered to such holders and
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by any Person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders, and for all other purposes.
(b) Upon satisfaction of each condition set forth in Section
4.1 hereof, the Company shall register the transfer of any outstanding Warrants
in the Warrant Register upon surrender of the Warrant Certificate(s) evidencing
such Warrants to the Company at the offices of the Company as set forth on the
signature pages of this Agreement, accompanied (if so required by it) by a
written instrument or instruments of transfer in form satisfactory to it, duly
executed by the registered Warrant Holder or by the duly appointed legal
representative thereof. Upon any such registration of transfer, new Warrant
Certificate(s) evidencing such transferred Warrants shall be issued to the
transferee(s) and the surrendered Warrant Certificate(s) shall be canceled. If
less than all the Warrants evidenced by a Warrant Certificate(s) surrendered for
transfer are to be transferred, a new Warrant Certificate(s) shall be issued to
the Warrant Holder surrendering such Warrant Certificate(s) evidencing such
remaining number of Warrants.
(c) Warrant Certificates may be exchanged at the option of the
Warrant Holder(s) thereof, when surrendered to the Company at the offices of the
Company as set forth on the signature pages of this Agreement, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange
except for any Tax or other governmental charge imposed in connection therewith.
SECTION 4.3. Mutilated or Missing Warrant Certificates. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and, if requested, indemnity satisfactory to it. No service charge
shall be made for any such substitution, but all expenses and reasonable charges
associated with procuring such indemnity and all stamp, Tax and other
governmental duties that may be imposed in relation thereto shall be borne by
the holder of such Warrant Certificate.
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ARTICLE V
CONDITIONS
SECTION 5.1. Conditions Precedent to Closing. The obligations of the
Investors to purchase the Securities pursuant to Section 2.1 are subject to the
satisfaction of each of the conditions precedent set forth in this Section 5.1
on or before 10:00 a.m. (Dallas, Texas time) on the Closing Date. In the event
all of the conditions precedent set forth in this Section 5.1 are not satisfied
by such time, the Investors may, at their option, terminate this Agreement and
the other Transaction Documents and all obligations of the Investors hereunder
and thereunder.
(a) Closing Deliveries. The Company shall have delivered to the
Investors, in form and substance satisfactory to the Investors each of the
following:
(i) certificates issued to each of the Investors by
the Company evidencing the Preferred Shares to be purchased by such
Investors pursuant to Section 2.1;
(ii) Warrant Certificates issued to each of the
Investors by the Company evidencing the Warrants to be purchased by
such Investors pursuant to Section 2.1;
(iii) the Registration Rights Agreement duly
executed and delivered by the Company, the Investors and the other
parties thereto;
(iv) the Shareholders Agreement duly executed and
delivered by the Company, the Investors and the other parties thereto;
(v) each of the Ancillary Agreements, accompanied by
a certificate from an Authorized Officer stating that (A) except as
expressly disclosed therein, none of such Ancillary Agreements have
been amended or modified in any respect and no rights of any party
thereunder have been waived, (B) no other party to any of the Ancillary
Agreements is in default of its obligations thereunder, and (C) the
Ancillary Agreements are valid, binding and enforceable obligations of
each party thereto in accordance with the terms and are in full force
and effect;
(vi) a favorable opinion of Smith, Gambrell &
Russell, LLP, counsel to the Company, in form and substance
satisfactory to the Investors;
(vii) all resolutions, certificates and documents
the Investors may request relating to (A) the organization, existence,
good standing and foreign qualification of the Company and each of its
Subsidiaries, (B) the corporate authority for the execution, delivery
and enforceability of this Agreement, the other Transaction Documents,
the Ancillary Agreements and the consummation of the Closing
Transactions, (C) the stock ownership of the Company and each of its
Subsidiaries, and (D) such other matters relevant to the foregoing as
the Investors shall reasonably request, all of which shall be in form
and substance satisfactory to the Investors;
(viii) the Pro Forma Opening Balance Sheet in form
and substance satisfactory to each Investor;
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(ix) complete and accurate Assurance of Compliance
and Size Status Declaration Forms promulgated by the Small Business
Administration duly executed by the Company and the information
necessary to complete the Small Business Administration Portfolio
Financing Report (Form 1031);
(x) evidence satisfactory to each Investor that all
Closing Transactions have been consummated;
(xi) a certificate from an Authorized Officer of the
Company certifying that (A) neither a Default nor an Event of Default
has occurred, (B) each and every representation and warranty of the
Company in the Transaction Documents is true and correct in all
respects and (C) all conditions precedent to the consummation of the
Transactions contemplated herein have been satisfied in all respects;
and
(xii) such other documents, instruments and
agreements as each Investor shall reasonably request.
The documents, certificates and opinions referred to in this Section 5.1(a)
shall be delivered to the Investors no later than the Closing Date and shall,
except as expressly provided otherwise, be dated the Closing Date.
(b) Acquisitions. The TWR Acquisition and the MTG Acquisition shall
have been consummated on terms and conditions acceptable to the Investors.
(c) Wachovia Senior Credit Agreement. The transactions contemplated by
the Wachovia Senior Credit Agreement have been consummated on terms and
conditions acceptable to the Investors.
(d) ACS Note Purchase Agreement. The transactions contemplated by the
ACS Note Purchase Agreement have been consummated on terms and conditions
acceptable to the Investors.
(e) Legal Matters. All legal matters with respect to the Company and
its Subsidiaries, the Transaction Documents and the Closing Transactions shall
be acceptable to each Investor in its sole and absolute discretion.
(f) Absence of Default. No Default or Event of Default shall have
occurred which is continuing.
(g) Representations and Warranties. The representations and warranties
contained in this Agreement and in the other Transaction Documents shall be true
and correct in all respects.
(h) No Material Adverse Change. There shall not have occurred, in the
sole and absolute discretion of the Investors, any material adverse change in
(i) the business, operations, assets, financial condition or prospects of the
Company from that reflected in the financial statements referenced in Sections
6.6(a), (b) and (f) hereof, (ii) TWR and MTG or (iii) any other facts,
conditions or circumstances which could have a Material Adverse Effect on the
Company.
(i) Payment of Expenses. The Company shall have paid in full all
reasonable out of pocket fees, expenses and disbursements incurred by the
Investors in connection with their investigation, underwriting, negotiation and
closing of the transactions contemplated hereby, including, without limitation,
all reasonable
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fees and expenses of Vinson & Elkins L.L.P., counsel to the Investors, to the
extent incurred through the Closing Date, in connection with the preparation and
negotiation of the Transaction Documents and closing of the transactions
contemplated hereby. The Investors acknowledge that they have received a $30,000
deposit from the Company to cover a portion of such expenses.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Investors to purchase the Securities to be
purchased by it hereunder, the Company hereby represents and warrants to the
Investors that each of the following statements (a) is true and correct on the
date hereof, and (b) will be true and correct after giving effect to the Closing
Transactions.
SECTION 6.1. Corporate Existence and Power. Each of the Company and
each of its Subsidiaries (a) is a corporation, duly organized, validly existing
and in good standing under the Laws of its jurisdiction of incorporation set
forth on Schedule 6.1 attached hereto, (b) has all corporate power and authority
necessary to carry on its business as now conducted and as proposed to be
conducted, and (c) is duly qualified as a foreign corporation in each
jurisdiction set forth on Schedule 6.1 which constitutes all jurisdictions where
a failure to be so qualified could have a Material Adverse Effect on the Company
or such Subsidiary.
SECTION 6.2. Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company are within its corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any Governmental Authority (other than filings with
any applicable securities regulatory authorities to perfect exemptions from the
registration or qualification requirements of applicable securities Laws and
which will be made immediately following the Closing Date), and, except for
matters which have been waived in writing by the appropriate Person, do not
contravene, or constitute a default under, any provision of applicable Law or of
the Charter Documents or of any material judgment, injunction, order, decree or
Material Agreement binding upon the Company or any of its Subsidiaries or its
respective assets, or result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries.
SECTION 6.3. Binding Effect. This Agreement constitutes the valid and
binding agreement of the Company; each other Transaction Document when executed
and delivered in accordance with this Agreement, will constitute the valid and
binding obligation of the Company, in each case enforceable in accordance with
its terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar Laws affecting creditors rights generally, and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 6.4. Capitalization. Schedule 6.4 attached hereto accurately
and completely sets forth for each of the Company and its Subsidiaries (a) its
jurisdiction of incorporation and current existence, (b) each jurisdiction in
which it is qualified to transact business as a foreign corporation, (c) its
authorized, issued and outstanding capital stock of every class, and (d) the
names of the record, and to the Company's knowledge, beneficial owner, of its
capital stock of every class, including the number and class of shares held by
each such stockholder. Except as set forth on Schedule 6.4 hereto and except for
the Warrants and preemptive rights expressly set forth in the Shareholders
Agreement and registration rights provided in
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Registration Rights Agreement, (x) there are not outstanding any options,
warrants or other rights to acquire capital stock of any class of the Company or
any of its Subsidiaries or securities convertible into capital stock of the
Company or any of its Subsidiaries of any class, (y) no Person has any
preemptive or similar rights with respect to any subsequent issue of stock by
the Company or any of its Subsidiaries, and (z) no Person has any right to
require the Company or any of its Subsidiaries to register any securities of the
Company or any of its Subsidiaries under the Securities Act.
SECTION 6.5. Issuance of Securities. The Securities, when issued upon
payment of the applicable Purchase Price in accordance with Section 2.1, will be
duly authorized, validly issued, fully paid and non-assessable and will be free
and clear of all Liens, claims and encumbrances including pre-emptive rights.
The Warrant Shares, when issued upon an exercise of the Warrants, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all Liens, claims and encumbrances, including, without limitation, all
preemptive rights.
SECTION 6.6. Financial Information. (a) The consolidated balance sheets
of the Company as of December 31, 1997 and 1998, and the related consolidated
statements of income and changes in financial position for the Company's fiscal
year then ended (or portion thereof with respect to 1997), reported on by KPMG
Peat Marwick LLP fairly present, in conformity with GAAP, the consolidated and
consolidating financial position of the Company as of such date and its
consolidated and consolidating results of operations and changes in financial
position for the fiscal year then ended (or portion thereof with respect to
1997).
(b) The consolidated balance sheet of the Company as of
September 30, 1999, and the related consolidated statement of income and cash
flow for the portion of the Company's fiscal year then ended fairly presents, in
conformity with GAAP, the consolidated and consolidating financial position of
the Company as of such date and its consolidated and consolidating results of
operations and changes in financial position for the portion of the Company's
fiscal year then ended.
(c) Except as set forth on Schedule 6.6(c), neither the
Company nor any of its Subsidiaries has incurred, and there is not outstanding
with respect to the Company or any of its Subsidiaries, any Debt, material
liability or material obligation (whether accrued, absolute, contingent,
liquidated or otherwise) other than (i) obligations under Material Agreements
described in Schedule 6.7 attached hereto, (ii) trade payables incurred in the
ordinary course of business, none of which are more than one hundred twenty
(120) days past the invoice date, (iii) obligations under the Operating Leases
described on Schedule 6.13 attached hereto, (iv) the Obligations, and (v) other
liabilities set forth in the Pro Forma Opening Balance Sheet.
(d) Since September 30, 1999, there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Company or any of its Subsidiaries.
(e) The Pro Forma Opening Balance Sheet fairly presents what
the consolidated financial position of the Company and its Subsidiaries will be
immediately after giving effect to the Closing Transactions.
(f) Except as set forth on Schedule 6.6(f), all financial
statements concerning TWR and MTG which have been delivered to the Investors as
of the date hereof fairly present in conformity with
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GAAP the financial position of the Person covered thereby as of dates thereof
and the results of operations of the Persons covered thereby for the periods
then ended.
(g) The Projections set forth a reasonable estimate as of the
date hereof of the Company's consolidated financial condition and results of
operations for the dates and periods covered thereby. The assumptions disclosed
in the Projections were reasonable when the Projections were prepared. The
Company believes such assumptions continue to be reasonable on the date hereof.
SECTION 6.7. Material Agreements. Schedule 6.7 attached hereto contains
a complete and accurate description of every Material Agreement to which the
Company or any of its Subsidiaries is a party (other than the Transaction
Documents) or by which the Company or any of its Subsidiaries or any of their
respective assets are bound (including all amendments and modifications
thereto). The Company has provided each Investor with a true and correct copy of
all such Material Agreements, including all amendments and modifications
thereof. No rights or obligations of any party to any of such Material
Agreements has been waived, and no party to any of such Material Agreements is
in default of its obligations thereunder. Each of such Material Agreements is a
valid, binding and enforceable obligation of the parties thereto in accordance
with its terms and is in full force and effect.
SECTION 6.8. Ancillary Agreements. The Company has provided each
Investor with a true and correct copy of all of the Ancillary Agreements
including all amendments and modifications thereto. No rights or obligations of
any party to any of such Ancillary Agreements have been waived, and no party to
any of such Ancillary Agreements is in default of its obligations thereunder.
Each of such Ancillary Agreements is a valid, binding and enforceable obligation
of the parties thereto in accordance with its terms and is in full force and
affect. Each representation and warranty of all parties to the Ancillary
Agreements are true and correct in all respects.
SECTION 6.9. Investments. Neither the Company nor any of its
Subsidiaries has any outstanding Investments other than Permitted Investments.
SECTION 6.10. Outstanding Debt. Schedule 6.10 attached hereto contains
a complete and accurate description of all Debt of the Company and each of its
Subsidiaries outstanding on the date hereof. Neither the Company nor any of its
Subsidiaries is in default in payment of any Debt with respect to which it is an
obligor or in default of any covenant, agreement, representation, warranty or
other term of any document, instrument or agreement evidencing, securing or
otherwise pertaining to any such Debt.
SECTION 6.11. Transactions with Affiliates. Schedule 6.11 attached
hereto contains a complete and accurate description of all contracts, agreements
and other arrangements (whether written, oral, express or implied) between the
Company or any of its Subsidiaries and any Affiliate of the Company and its
Subsidiaries in existence on the date hereof, including, without limitation, a
complete and accurate description of all Investments of any the Company or any
of its Subsidiaries in any Affiliate of the Company or any of its Subsidiaries.
SECTION 6.12. Employment Matters. Schedule 6.12 attached hereto
contains a complete and accurate list as of the date hereof of all employees of
the Company and each of its Subsidiaries who either (a) have been, or will be
paid cash compensation in the twelve month period ending December 31, 1998 of
$100,000 or more, or (b) are projected to earn in cash compensation $100,000 or
more in the twelve (12) month period ending December 31, 1999. Such schedule
also sets forth for the current fiscal year the annual
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salary (including projected bonuses and other cash compensation) of all such
employees and all benefits (other than health insurance benefits and other
similar benefits which are both customary in the industry in which the Company
or any of its Subsidiaries is engaged and provided to all full time employees of
the Company or any of its Subsidiaries generally) provided to such employees.
Schedule 6.12 also contains a complete and accurate description of all
employment contracts, consulting agreements, management agreements, non-compete
and similar agreements to which the Company or any of its Subsidiaries is a
party on the date hereof.
SECTION 6.13. Operating Leases. Schedule 6.13 attached hereto contains
a complete and accurate description of all Operating Leases to which the Company
or any of its Subsidiaries is a party as of the date hereof which require Rental
payments of $50,000 or more per year. The aggregate amount of all Rental
payments under all Operating Leases to which the Company and its Subsidiaries
are parties on the date hereof does not exceed $1,800,000 per year.
SECTION 6.14. Litigation. Except as set forth on Schedule 6.14, there
is no action, suit or proceeding pending against, or to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
before any court or arbitrator or any Governmental Authority.
SECTION 6.15. ERISA. Neither the Company nor any of its Subsidiaries
nor any ERISA Affiliate maintains or contributes to any Plan or any Pension Plan
other than those disclosed on Schedule 6.15 attached hereto. Each such Plan is
in compliance in all material respects with its terms and the applicable
provisions of ERISA and the IRC. Except as required by law, none of the Company
or any of its Subsidiaries nor any ERISA Affiliate has any commitment to create
any additional Plan. Neither the Company nor any of its Subsidiaries nor any
ERISA Affiliate has ever sponsored, adopted, maintained or been obligated to
contribute to, or had any liability under, any Pension Plan. There is no
material violation of ERISA with respect to the filing of applicable reports,
documents and notices regarding the Plans with the Secretary of the Treasury or
the furnishing of such documents to the participants and beneficiaries of the
Plans, and, to the best of the Company's knowledge, with respect to each Plan
all other reports required under ERISA or the IRC to be filed with any
Governmental Authority have been duly filed and all such reports are true and
correct in all material respects as of the dates given. Each Plan that is
intended to be "qualified" within the meaning of section 401(a) of the IRC is,
and has been during the period from its adoption to date, so qualified, both as
to form and, to the best of the Company's knowledge, has been qualified
operation, and all necessary governmental approvals, including a favorable
determination as to the qualification under the IRC of each of such Plans and
each amendment thereto, have been timely obtained or application for a favorable
determination will be filed prior to the applicable filing deadlines. Except as
disclosed on Schedule 6.15 attached hereto, each trust created under any such
Plan intended to be qualified within the meaning of section 401(a) of the IRC
and each trust described in section 501(c)(9) of the IRC is exempt from federal
income taxation under section 501(a) of the IRC and has been so exempt during
the period from creation to date. The Company has no pending or, to the best of
the Company's knowledge, threatened claims, lawsuits or actions (other than
routine claims for benefits in the ordinary course) asserted or instituted
against, and the Company has no knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any fiduciary of
a Plan with respect to the operation of such Plan. Neither the Company nor any
of its Subsidiaries has received notice of any pending investigations, inquires
or audits with respect to any Plan by any regulatory agency. Neither the Company
nor any of its Subsidiaries has engaged in any prohibited transactions, within
the meaning of section 406 of ERISA or section 4975 of the IRC, in connection
with any Plan. Neither the Company nor any of its Subsidiaries maintains or has
established any Plan which is a welfare benefit plan within the meaning of
section 3(1) of ERISA which
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provides for retiree medical liabilities or continuing benefits or coverage for
any participant or any beneficiary of any participant after such participant's
termination of employment except as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA") and the regulations
thereunder, and at the expense of the participant or the beneficiary of the
participant. The Company and each of its Subsidiaries that maintains a Plan that
is a welfare benefit plan within the meaning of section 3(1) of ERISA has
complied with any applicable notice and continuation requirements of COBRA and
the regulations thereunder. To the best of the Company's knowledge, none of the
Company or any of its Subsidiaries maintains, has established, or has ever
participated in, a multiple employer welfare benefit arrangement within the
meaning of section 3(40)(A) of ERISA.
SECTION 6.16. Taxes and Filing of Tax Returns. The Company and each of
its Subsidiaries has filed all Tax returns required to have been filed by it and
has paid all Taxes shown to be due and payable on such returns, including
interest and penalties, and all other Taxes which are payable by the Company or
any of its Subsidiaries. The Company does not know of any proposed Tax
assessment against the Company or any of its Subsidiaries and all Tax
liabilities of the Company and each of its Subsidiaries are adequately provided
for and no Tax liability of the Company or any of its Subsidiaries has been
asserted by the Internal Revenue Service or any other Governmental Authority for
Taxes in excess of those already paid.
SECTION 6.17. Ownership of Properties; Liens. The Company and each of
its Subsidiaries has good and marketable fee simple or leasehold title to their
respective properties and assets, real and personal, including, without
limitation, all assets reflected in the Pro Forma Opening Balance Sheet and all
assets which are used by the Company and its Subsidiaries in the operation of
their respective businesses, and none of such properties or assets is subject to
any Lien of any kind, other than Permitted Encumbrances. Schedule 6.17 attached
hereto contains an accurate and complete description of all real property owned,
leased or otherwise utilized by the Company or any of its Subsidiaries,
including the name of the owner or lessee of such real property and a complete
description of leases related thereto.
SECTION 6.18. Licenses, Permits, Etc. The Company and each of its
Subsidiaries possess all franchises, certificates, licenses, permits, consents,
authorizations, exemptions and orders of Governmental Authorities as are
necessary to carry on their respective businesses as now being conducted and as
proposed to be conducted, except to the extent a failure to have such
franchises, certificates, licenses, permits, consents, authorizations,
exemptions and orders could not have a Material Adverse Effect.
SECTION 6.19. Proprietary Rights. The Company and each of its
Subsidiaries has ownership of, or valid licenses to use, all trademarks,
copyrights, patents and other proprietary rights used in their respective
businesses. To the best of the Company's knowledge, the operation of the
businesses of the Company and its Subsidiaries does not infringe any patent,
copyright, trademark or other proprietary rights of others, and, neither the
Company nor any of its Subsidiaries has received any notice from any third party
of any such alleged infringement by the Company or any of its Subsidiaries. The
Company and each of its Subsidiaries has taken reasonable steps to establish and
preserve its respective ownership of all patents, copyrights, trademarks, trade
secrets and other proprietary rights. The Company is not aware of any
infringement by others of its or any its Subsidiaries' patents, copyrights,
trademarks or other proprietary rights.
SECTION 6.20. Compliance with Laws. The business and operations of the
Company and each of its Subsidiaries have been and are being conducted in all
material respects in accordance with all applicable Laws.
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SECTION 6.21. Environmental Matters. Except with respect to matters
that individually or in the aggregate could not reasonably be expected to result
in a Material Adverse Effect, (a) No part of the Company or any of its
Subsidiaries' assets, including, without limitation, any real property owned or
leased by the Company or any of its Subsidiaries contains Environmental
Contamination, (b) none of the Company or any of its Subsidiaries has caused or
suffered to occur any Hazardous Discharge, (c) none of the Company or any of its
Subsidiaries has been and such Persons are not currently involved in operations
at or near any real property owned, operated or leased by the Company or any of
its Subsidiaries which could reasonably be expected to lead to the imposition on
the Company or any of its Subsidiaries of liability or creation of a Lien on the
Company or any of its Subsidiaries's assets under any Environmental Law and
Laws, (d) none of the Company or any of its Subsidiaries has any knowledge of
any Environmental Complaint relating to past or present operations of the
Company or any of its Subsidiaries, (e) no Environmental Complaint has been
received by the Company or any of its Subsidiaries in connection with any
Hazardous Discharge at any properties or assets owned or leased by other Persons
except with respect to matters which have been fully and finally resolved to the
satisfaction of such Persons and the parties making the Environmental Complaint,
(f) all activities of the Company and its Subsidiaries are being and have been
and will at all times in the future be conducted in compliance with all
applicable Environmental Law and Laws, and (g) there are no facts, conditions or
circumstances, which if discovered by a Governmental Authority or other party,
could form the basis for or could cause such Governmental Authority or other
party to assert an Environmental Complaint.
SECTION 6.22. Burdensome Obligations. Neither the Company nor any of
its Subsidiaries nor any of their respective properties or assets is subject to
any Law, rule, regulation, order or decree of any Governmental Authority or any
pending or threatened change of Law, rule, regulation, order or decree of any
Governmental Authority, or is subject to any restriction under its Charter
Documents or under any agreement or instrument to which it is a party or by
which it or any of its properties (now owned or hereafter acquired) may be
subject or bound, which is so unusual or burdensome as to be likely in the
foreseeable future to have a Material Adverse Effect on the business, operations
or financial condition of the Company or any of its Subsidiaries.
SECTION 6.23. Fiscal Year. The Company's fiscal year is from January 1
to December 31.
SECTION 6.24. No Default. Neither a Default nor an Event of Default has
occurred.
SECTION 6.25. Insurance. Schedule 6.25 attached hereto contains a
complete and accurate list and description of all insurance policies maintained
by the Company as of the date hereof.
SECTION 6.26. Government Regulation. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding the
Company Act of 1935, the Interstate Commerce Act (as either of the preceding
acts have been amended), or any other Law which regulates the incurring by the
Company or any of its Subsidiaries of Debt, including, but not limited to, Laws
relating to common contract carriers of the sale of electricity, gas, steam,
water or other public utility services.
SECTION 6.27. Casualties. Neither the businesses nor the properties of
the Company or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or other casualty (whether or not covered by
insurance).
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SECTION 6.28. Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" registered or required to be
registered under the Investment Company Act of 1940 as amended. Neither the
Company nor any of its Subsidiaries is controlled by such a company.
SECTION 6.29. Securities Laws. The offer, issuance and sale of the
Securities and the Warrant Shares (a) are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act, (b)
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities Laws, and (c) are and will be accomplished in
conformity with all other federal and applicable state securities Laws.
SECTION 6.30. Brokers and Finders. Schedule 6.30 attached hereto sets
forth all arrangements (including amounts payable by the Company or any of its
Subsidiaries in connection therewith) pursuant to which any Person has, or as a
result of the Closing Transactions will have, any right or valid claim against
the Company or any of its Subsidiaries for any commission, fee or other
compensation as an investment banker, finder or broker, or in any similar
capacity, other than fees payable to the Investors. No Person has or will have
any right or valid claim against either Investor for any such commission, fee or
other compensation. The Company will indemnify and hold each Investor harmless
against any liability or expense arising out of, or in connection with, any such
right or claim (including, without limitation, claims arising out of the matters
disclosed on Schedule 6.30).
SECTION 6.31. Full Disclosure. No information heretofore furnished by
or on behalf of the Company or any of its Subsidiaries to either Investor for
the purposes of this Agreement or any other Transaction Document or any
transaction contemplated hereby or thereby, contained, and no written
information hereafter furnished by or on behalf of the Company or any of its
Subsidiaries to either Investor for purposes of this Agreement or any other
Transaction Document or any transaction contemplated hereby or thereby will
contain, any untrue statement of a material fact or omit a material fact
necessary to make the statements therein not misleading. There is no fact or
circumstance known to the Company which may have a Material Adverse Effect on
the Company or any of its Subsidiaries which has not been disclosed to each
Investor.
SECTION 6.32. Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Title 13, United States Code of Federal
Regulations Section 121.103) is a "small business concern" within the meaning of
Section 107.50 of Title 13 of the United States Code of Federal Regulations. The
information to be included in the forms referred to in Section 5.1(a)(ix)
hereof, when such forms are completed and executed by the Company, will be
accurate and complete in all respects.
SECTION 6.33. Year 2000. Any reprogramming required to permit the
proper functioning in and following the year 2000 of computer systems and other
equipment containing embedded microchips, in either case owned or operated by
the Company or any of its Subsidiaries or used or relied upon in the conduct of
their business (including any such systems and other equipment supplied by
others or with which the computer systems of the Company or any of its
Subsidiaries interface), and the testing of all such systems and other equipment
as so reprogrammed, will be completed on or prior to November 30, 1999. Except
for any reprogramming referred to above, the computer systems of the Company and
its Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue to be sufficient for the conduct of their business as currently
conducted.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
In order to induce the Company to issue and sell the Securities to the
Investors hereunder, each Investor hereby severally (but not jointly) represents
and warrants to the Company, with respect to itself only, as follows:
SECTION 7.1. Due Authorization; No Conflicts. The execution, delivery
and performance by each of the Investors of this Agreement and the Shareholders
Agreement (a) are within each Investor's partnership powers, (b) have been duly
authorized by all necessary partnership or corporate action on the part of each
of the Investor, and (c) do not conflict with or violate any law, rule or
regulation applicable to each Investors, including, without limitation,
applicable regulations of the Small Business Administration.
SECTION 7.2. Securities Representations.
(a) No Intended Distribution. Each Investor is acquiring the
Securities to be purchased by it (and, if the Warrants are exercised, the
Warrant Shares) for investment purposes only, for its own account, and not as
nominee or agent for any other Person, and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act.
(b) Accredited Investor. Each Investor is an "accredited
investor" within the meaning of Rule 501 under the Securities Act. Neither
Investor was organized for the specific purpose of acquiring the Securities.
(c) Investment Experience. Each Investor has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company, and each Investor is able
financially to bear the risks thereof.
(d) Access to Books and Records; Opportunity to Ask Questions.
(i) Each Investor has been given full and adequate access
to, and an opportunity to inspect and review, the financial statements of the
Company and to all such other books an records of the Company relating to the
business, finances and operations of the Company.
(ii) Each Investor has been given the opportunity to ask
questions of, or receive answers from, the executive officers and directors
of the Company concerning the business, financial condition and prospects of the
Company.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company agrees to comply in every respect with each covenant
contained in this Article VIII; provided, that, to the extent specifically
indicated in any section of this Article VIII, the Company shall not be
obligated to comply with the covenants contained in such section after the
Redemption Date; and, provided, further, that, the Company shall not be required
to comply with any covenant contained in this Article VIII (a) after the
Redemption Date to the extent the Warrants and Warrant Shares then outstanding
represent less than five percent (5%) of the issued and outstanding Common Stock
of the Company on a Fully Diluted Basis or (b) after the Redemption Date and
after the consummation of a Qualified Public Offering so long as the Company
complies with all applicable reporting requirements under the Exchange Act.
SECTION 8.1. Information. The Company will deliver, or cause to be
delivered, to each Preferred Shareholder and Warrant Holder:
(a) Annual Statements. As soon as available, and in any event
within ninety (90) days after the end of each fiscal year of the Company, a
consolidated and consolidating balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income and cash flow for such fiscal year, setting forth in each
case (i) in comparative form the figures for the previous fiscal year, and (ii)
comparative figures with respect to the operating budget required to be
delivered pursuant to Section 8.1(d) hereof, all reported by the Company in
accordance with GAAP and audited by independent public accountants of nationally
recognized standing;
(b) Monthly Statements. As soon as available, and in any event
within thirty (30) days after the end of each calendar month, a listing of all
outstanding performance and payment bonds (which only needs to be delivered
every third month), a consolidated and consolidating balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such month and the
related consolidated statements of income and cash flow for such month, setting
forth in each case (i) in comparative form the figures for the corresponding
month of the Company's previous fiscal year, and (ii) comparative figures with
respect to the operating budget required to be delivered pursuant to Section
8.1(d) hereof, all certified as to fairness of presentation, GAAP and
consistency by the Financial Officer of the Company; provided, that, such
financial statements are subject to normal year end audit adjustments, which in
the aggregate will not be material, and such financial statements may not
conform to GAAP to the extent they do not contain footnotes;
(c) Financial Officer's Certificate. Together with the
financial statements and related information required to be delivered to the
holders of Securities pursuant to Sections 8.1(a) and (b) hereof, a certificate
of the Financial Officer of the Company which shall, (i) until the Redemption
Date, set forth in reasonable detail the calculations required to establish
whether the Company were in compliance with the requirements of Article X hereof
on the date of such financial statements, (ii) state whether there exists on the
date of such certificate any Default or Event of Default and, if any Default or
Event of Default then exists, setting forth the details thereof and the action
which the Company is taking or propose to take with respect thereto, and (iii)
state whether or not such financial statements fairly reflect the consolidated
business and financial condition of the Company and its Consolidated
Subsidiaries as of the date of the delivery of such financial statements;
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(d) Budget. On or before fifteen (15) days before the
commencement of each fiscal year of the Company, an operating budget for the
Company for such fiscal year which shall be prepared in the form of the monthly
financial statements required to be delivered pursuant to Section 8.1(b) hereof,
and shall set forth projected revenues, operating expenses, income, cash flow,
Capital Expenditures, Debt and balance sheet conditions of the Company for such
fiscal year. Such budget shall (i) be based on assumptions set forth therein
which the Company believes to be reasonable at the time such budget is delivered
to the holders of the Securities, (ii) be prepared based on sound financial
planning practices, (iii) represent the Company's best estimate based on then
existing circumstances of the financial condition and results of operation for
the Company for such fiscal year, and (iv) be accompanied by a certificate of
the Financial Officer of the Company certifying as to the matters set forth in
(i), (ii) and (iii) preceding;
(e) Accountant's Letters. In addition to the audit report
required by Section 8.1(a) hereof, copies of all "management letters", reports
or other material information or correspondence provided to the Company by its
auditors;
(f) Defaults. Immediately upon any Authorized Officer of the
Company becoming aware of the occurrence of any Default hereunder, a certificate
of an Authorized Officer of the Company setting forth the details thereof and
the action which the Company is taking or proposes to take with respect thereto;
(g) Shareholder Information. Promptly upon the mailing thereof
to the shareholders of the Company generally, copies of all financial
statements, reports and proxy statements so mailed;
(h) SEC Reports. Promptly upon the filing thereof, copies of
all registration statements, amendments and supplements thereto and annual,
quarterly or special reports and amendments thereto which the Company may file
with the Commission;
(i) Litigation. Promptly upon any Authorized Officer of the
Company becoming aware thereof, notice (i) of the commencement of any
litigation, arbitration or similar proceeding by or against the Company or any
of its Subsidiaries in which the amount in controversy is in excess of $100,000,
(ii) of the occurrence of any event or existence of any condition which could
reasonably be anticipated to have a Material Adverse Effect on the Company or
any of its Subsidiaries, or (iii) of the occurrence of a default under any Debt
owing by the Company or any of its Subsidiaries or any default under any
Material Agreement to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their properties is
bound; and
(j) Other Information. From time to time such additional
information regarding the financial position or businesses of the Company or any
of its Subsidiaries as any holder of Securities may reasonably request.
SECTION 8.2. Right of Inspection. The Company will, and will cause each
of its Subsidiaries to, permit any officer, employee or agent of any holder of
Securities or any of its Affiliates upon reasonable notice and during normal
business hours to visit and inspect any of the assets of the Company or any of
its Subsidiaries, to examine the Company's or any its Subsidiaries' books,
records, accounts and correspondence, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of the Company or any of its
Subsidiaries with their respective officers, accountants, auditors and
customers, including the review of any assets of the Company or any its
Subsidiaries located at third-party locations.
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SECTION 8.3. Maintenance of Insurance. The Company will, and will cause
each of its Subsidiaries to, at all times maintain or cause to be maintained
insurance issued by insurers of recognized responsibility covering such risks
and in such amounts as are customary in the case of companies of established
reputation engaged in the same or similar business and similarly situated.
SECTION 8.4. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, pay when due (a) all Taxes imposed upon it or
its respective assets and, with respect to its respective franchises, business,
income or profits, pay such Taxes before any material penalty or interest
accrues thereon, and (b) all material claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable; provided, however, no payment of Taxes or claims shall be
required if (i) the amount, applicability or validity thereof is being contested
in good faith by appropriate action promptly initiated and diligently conducted
in accordance with good business practices and no material part of the property
or assets of each holder of Securities is the subject of any pending levy or
execution, and (ii) the Company has notified each holder of Securities of such
circumstances in reasonable detail.
SECTION 8.5. Compliance with Laws and Documents. The Company will, and
will cause each of its Subsidiaries to, comply in all material respects with the
provisions of (a) all Laws, (b) its Charter Documents, and (c) every Material
Agreement to which the Company or any of its Subsidiaries is a party or by which
the Company's or any of its Subsidiaries' properties are bound.
SECTION 8.6. Operation of Properties and Equipment. The Company will,
and will cause each of its Subsidiaries to, at all times, maintain, preserve and
keep all operating equipment used or useful in the operation of their respective
businesses in proper repair, working order and condition, and make all necessary
or appropriate repairs, renewals, replacements, additions and improvements
thereto so that the efficiency of such equipment shall at all times be properly
preserved and maintained; provided, that, no item of operating equipment need be
so repaired, renewed, replaced, added to or improved, if the Company shall in
good faith determine that such action is not necessary or desirable for the
continued efficient and profitable operation of the Company's and its
Subsidiaries' businesses.
SECTION 8.7. Additional Documents. The Company will, and will cause
each of its Subsidiaries to, cure promptly any defects in the creation and
issuance of the Securities, and the execution and delivery of this Agreement and
the other Transaction Documents, and, at the Company's sole expense, promptly
and duly execute and deliver, and cause each of its Subsidiaries to promptly
execute and deliver, to the holders of the Securities, upon reasonable request,
all such other and further documents, agreements and instruments in compliance
with or accomplishment of the covenants and agreements of the Company and each
of its Subsidiaries in this Agreement and the other Transaction Documents, all
as may be reasonably necessary or appropriate in connection therewith.
SECTION 8.8. ERISA. Within thirty (30) days after receipt thereof, the
Company shall furnish to each holder of Securities (a) a copy of any notice,
determination letter, ruling or opinion the Company or any of its Subsidiaries
or any ERISA Affiliate receives from the United States Department of Labor or
the Internal Revenue Service with respect to any Plan, (b) notification of any
material increases in the benefits of any existing Plan or the establishment of
any new Plan, or the commencement of contributions to any Plan to which the or
any of its Subsidiaries or any ERISA Affiliate was not previously contributing,
and (c) notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality
affecting the Company or any of its Subsidiaries or any ERISA Affiliate
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with respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
SECTION 8.9. Election as Director; Directors Meetings; Representation.
(a) As provided in the Series D Stock Designation, the Preferred Shareholders
(or the Warrant Holders after the Redemption Date) shall have the right to elect
one (1) person to the Company's board of directors. After the Redemption Date,
the Warrant Holders shall have the right to designate one person to be elected
to the Company's board of directors and the Company shall cause its shareholders
to elect such person designated by the Warrant Holders. At any time when either
of the Preferred Shareholders or the Warrant Holders, as the case may be, have
not made such designation, the Company shall permit a representative of the
Preferred Shareholders or the Warrant Holders, as the case may be, to attend as
an observer all meetings of the Company's board of directors. At any time when
the Preferred Shareholders or the Warrant Holders, as the case may be, have the
right to require its designee to be elected to the board of directors of the
Company pursuant to the Series D Stock Designation or this Section 8.9, the
Company shall hold a meeting of its board of directors not less often than
quarterly and will provide the Preferred Shareholders' or the Warrant Holders',
as the case may be, designee on the board (or its representative observer) the
same notice of meetings provided to other directors generally; provided, that,
in no event will the Company provide such designee or representative observer
less than five (5) Business Days' notice of any meeting of the board of
directors (or less than two (2) Business Days' notice in the case of any
telephonic meeting of the board of directors).
(b) In the event the Company proposes to take any action by written
consent of directors in lieu of a meeting, the Company shall provide a copy of
the proposed written consent to the Preferred Shareholders' or Warrant Holders'
designee or representative observer not less than one (1) Business Day prior to
the date such consent is to be executed. The Company will provide to the
Preferred Shareholders' or the Warrant Holders' designee or representative
observer all other written information provided to directors of the Company
generally.
(c) The Company will reimburse the Preferred Shareholders' or the
Warrant Holders', as the case may be, designee or representative observer of all
reasonable costs incurred in connection with attending any meeting of the board
of directors or otherwise incurred in connection with fulfilling its duties as a
director of the Company. All directors designated or elected by the Preferred
Shareholders or Warrant Holders shall be paid the same board of directors fees
paid to all other non-employee directors of the Company.
SECTION 8.10. Maintenance of Books and Records. The Company will, and
will cause each of its Subsidiaries to, maintain proper books of record and
account in which true and correct entries in conformity with GAAP shall be made
on a timely basis of all dealings and transactions in relation to the Company's
and its Subsidiaries' businesses and activities.
SECTION 8.11. Environmental Matters.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Law and Laws applicable to their respective
properties and operations, including, without limitation, all Hazardous
Substances transportation, storage, disposal, remediation and similar
requirements of applicable Environmental Law and Laws.
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(b) Notwithstanding any other provision contained within this Agreement
or the other Transaction Documents, the Company shall immediately orally notify
each holder of Securities of any Hazardous Discharge or the receipt of any
Environmental Complaint relating to any property or assets owned by the Company
or any of its Subsidiaries or affecting any properties or assets owned or leased
by other Persons and shall furnish each holder of Securities with written notice
of such Hazardous Discharge or Environmental Complaint within five (5) days of
the oral notification.
SECTION 8.12 Additional Subscription Rights. In the event that the
Company determines to issue or sell additional, unissued or treasury shares of
its capital stock (or securities convertible into or having a right to acquire
or subscribe for such additional shares), subject to the limitation herein, the
Company shall notify each Warrant Holder in writing of such determination and
shall afford each of them the opportunity to subscribe for their respective
ratable portion of such additional shares or securities, as the case may be, at
the price and on the terms that such shares or securities, as the case may be,
are proposed to be issued or sold by the Company in order that each Warrant
Holder may maintain their respective proportionate interests in the Company.
Each Warrant Holder shall have 15 calendar days from the date of such notice to
notify the Company in writing of their respective intentions to purchase their
respective ratable share of such shares or securities, as the case may be. The
failure by a Warrant Holder to so notify the Company during such time period
shall be deemed a waiver of such Warrant Holder's rights hereunder. If any
issuance or sale of capital stock described in this section has not been
completed within 150 days following the date that the Company delivers its
notice to each Warrant Holder pursuant to this section, the Company shall not
thereafter issue or sell any additional shares or securities described in this
section without first offering such securities to each Warrant Holder in the
manner provided above. Notwithstanding the foregoing, pursuant to this section,
no Warrant Holder shall have the right to acquire (a) any shares of Common Stock
to be sold in a Qualified Public Offering or (b) any Exempt Shares.
SECTION 8.13 Year 2000. The Company shall, and shall cause each of its
Subsidiaries to, take all actions reasonably necessary to assure that the
Company's and its Subsidiaries' computer based systems are able to operate and
effectively process data which includes dates on and after January 1, 2000. At
the request of either Investor, the Company shall provide reasonable assurances
satisfactory to the Investors of the Company's and its Subsidiaries' Year 2000
compatibility.
SECTION 8.14 Unlocking Right. If at any time after November 1, 2004,
the Company receives a bona fide, unsolicited offer from any Person to
consummate a transaction which would result in a Sale and in which the
consideration to be received by the Company's shareholders consist solely of
cash or publicly traded securities (the "Offer"), then the Company shall provide
within one (1) Business Day of the receipt of such Offer by the Company written
notice to each Holder of the Offer which shall contain the material terms of the
Offer ("Offer Notice"). For a period of thirty (30) days from the date of the
Offer Notice, the Holders by written notice to the Company ("Acceptance Notice")
shall have the right to elect to accept the Offer and sell the Securities owned
by it on the terms and conditions set forth in the Offer. Upon receipt of any
Acceptance Notice, the Company shall have the right to either (a) accept the
Offer and consummate the transaction proposed in the Offer or (b) purchase all
of the Securities held by such Holders at the Unlocking Price. If the Company
elects to purchase all of the Securities held by such Holders at the Unlocking
Price, the Company shall make payment for such Securities in cash within thirty
(30) days of the date of the Acceptance Notice.
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ARTICLE IX
NEGATIVE COVENANTS
Until the Redemption Date, the Company will comply in every respect
with each covenant contained in this Article IX; provided, however, the Company
shall not be required to comply with any covenant contained in this Article IX
to the extent such non-compliance has been consented to in writing by the
holders of a majority of the outstanding Preferred Shares.
SECTION 9.1. Distributions. The Company will not, nor will it permit
any of its Subsidiaries to, make any Distribution other than (a) Distributions
to the Investors required hereunder, (b) the Subsidiaries of the Company may
make Distributions to the Company and to wholly owned Subsidiaries of the
Company (c) so long as no Default or Event of Default exists or would result
from payment thereof and all accrued dividends on the Preferred Stock have been
paid in full in cash, regularly scheduled cash Distributions in respect of the
Junior Preferred Stock, and (d) regularly scheduled Distributions in respect of
Junior Preferred Stock paid solely in shares of such class of Junior Preferred
Stock for which such Distribution is being paid.
SECTION 9.2. Business of the Company. The Company and its Subsidiaries
will not engage in any business other than the business conducted as of the
Closing Date.
SECTION 9.3. Liens. The Company will not, and will not permit any of
its Subsidiaries to, create, assume or permit to exist any Lien of any kind
against any of the assets of any character of the Company or any of its
Subsidiaries, whether owned as of the date of this Agreement or hereafter
acquired, except Permitted Encumbrances.
SECTION 9.4. Incurrence of Debt and Guarantees. The Company will not,
and will not permit any of its Subsidiaries to, incur, become or remain liable
for any Debt other than Permitted Debt.
SECTION 9.5. Modification of Capitalization Documents; Ancillary
Agreements. The Company will not, nor will it permit any of its Subsidiaries to,
enter into any amendment or modification of its Charter Documents or the
Ancillary Agreements or waive or fail to enforce any material right of the
Company or any of its Subsidiaries thereunder; provided, however, the Company
and its Subsidiaries shall be permitted to amend the Wachovia Senior Debt
Documents and the ACS Subordinate Debt Documents so long as such amendments do
not (a) accelerate the date on which payments are due under the Wachovia Senior
Debt Documents or the ACS Subordinate Debt Documents, (b) increase the interest
rate applicable to the Wachovia Senior Debt or ACS Subordinate Debt, or (c) make
more restrictive any covenant in the Wachovia Senior Debt Documents or the ACS
Subordinate Debt Documents.
SECTION 9.6. Consolidations, Mergers, Sales of Assets, and Maintenance.
The Company will not, nor will it permit any of its Subsidiaries to, (a)
consolidate or merge with or into any other Person, (b) sell, lease, transfer or
otherwise dispose of, in one or more transactions or series of transactions,
assets of the Company and its Subsidiaries which represent five percent (5%) or
more of the fair market value of all of the assets of the Company and its
Subsidiaries, taken as whole (other than the sale of Inventory in the ordinary
course of business or the sale or exchange of trade equipment), (c) terminate,
or fail to maintain its existence in its jurisdiction of incorporation, or (d)
terminate, or fail to maintain its good standing and qualification to transact
business in all jurisdictions where the failure to maintain its good standing or
qualification to transact business could have a Material Adverse Effect.
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SECTION 9.7. Use of Proceeds. The proceeds of the issuance and sale of
the Securities hereunder will be used by the Company solely (a) to fund a
portion of the purchase prices of the TWR Acquisition and the MTG Acquisition,
(b) to pay the fees and closing expenses directly related to the Closing
Transactions and (c) for general corporate purposes including but not limited to
the repayment of debt and funding working capital requirements.
SECTION 9.8. Investments. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, make any Investment other than
Permitted Investments.
SECTION 9.9. Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into any transaction with an
Affiliate or make any payment to an Affiliate (whether in cash or property) of
any type other than (a) compensation paid to the executive officers of the
Company or any of its Subsidiaries which is permitted pursuant to Section 9.14
hereof and (b) advances for, and reimbursement of, reasonable travel,
entertainment and similar expenses.
SECTION 9.10. ERISA. The Company will not, and will not permit any of
its Subsidiaries or any ERISA Affiliate to, directly or indirectly, (a)
terminate any Pension Plan so as to result in any material liability to the
Company or any of its Subsidiaries or any ERISA Affiliate, (b) establish, or
become obligated to contribute to or provide benefits under, any Pension Plan,
(c) incur any obligation to provide post-employment health care benefits to any
of their current or former employees, except as required by COBRA and except as
required by the employment agreements described on Schedule 7.12 attached
hereto, (d) enter into any new Plan or modify any existing Plan so as to
increase its obligations thereunder except in the ordinary course of business
consistent with past practice which could result in any material liability to
the Company or any of its Subsidiaries or any ERISA Affiliate, or (e) permit to
exist any circumstances with respect to any Pension Plan that would have a
Material Adverse Effect.
SECTION 9.11. Fiscal Year. The Company will not change its fiscal year.
SECTION 9.12. Capital Expenditures. The Company will not, and will not
permit any of its Subsidiaries to, make Capital Expenditures in any fiscal year
in excess of $1,500,000.
SECTION 9.13. Lease Obligations. The Company will not, and will not
permit any of its Subsidiaries to, enter into or become or remain liable as
lessee under any Operating Leases which require aggregate annual Rentals in
excess of $1,800,000.
SECTION 9.14. Executive Compensation. The Company will not, and will
not permit any of its Subsidiaries to, make payments of salary or bonus or
otherwise provide compensation (including benefits) to its principal executive
officers or employees which are in excess of those customarily paid by companies
engaged in the industry in which the Company and its Subsidiaries is engaged and
which have been approved by the compensation committee of the Company's board of
directors.
SECTION 9.15. Acquisitions. The Company will not, and will not permit
any of its Subsidiaries to, acquire all or substantially all of the assets of
any Person or any operating division of any Person other than Permitted
Acquisitions.
SECTION 9.16. Equity Issuances. The Company will not, and will not
permit any of its Subsidiaries, to issue any shares of Common Stock or any
options, rights or warrants to subscribe for or
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purchase such Common Stock (or securities convertible into such Common Stock)
other than (a) Exempt Shares or (b) securities issued in connection with
Permitted Acquisitions.
ARTICLE X
DEFAULTS
SECTION 10.1. Events of Default. If one or more of the following events
(collectively, "Events of Default" and individually, an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall fail to pay when due any redemption
obligation with respect to the Preferred Shares or the Company shall fail to pay
any amount payable upon an exercise of the Put; provided, however, the issuance
of a Put Note shall not be deemed a failure to pay under this subsection;
(b) the Company shall fail to pay when due any fees, expenses,
reimbursements, indemnification payments or other monetary obligations in an
aggregate amount in excess of $25,000 when due under any of the Transaction
Documents (other than amounts referenced in Section 10(a) or (b)) and such
failure shall continue for ten (10) days following the notice of such
non-payment;
(c) the Company shall fail to observe or perform any covenant
or agreement contained in Section 8.9 or Article IX hereof;
(d) the Company shall fail to observe or perform any covenant
or agreement contained in this Agreement or any other Transaction Document
(other than those covenants referenced in Sections 10.1(a), (b) and (c)) and
such failure shall continue for a period of thirty (30) days following the
earlier of (i) the discovery of such failure by an Authorized Officer of the
Company, or (ii) the date notice of such failure is given by the Investors to
the Company;
(e) any representation, warranty, certification or statement
made or deemed to have been made by the Company in this Agreement or any of the
other Transaction Documents or the Company or any other Person on behalf of the
Company in any certificate, financial statement or other document delivered
pursuant to this Agreement or any of the other Transaction Documents, shall
prove to have been incorrect in any material respect when made;
(f) a default or event which, with the giving of notice, lapse
of time or both could (unless cured or waived) become a default, shall occur
under the terms of the ACS Subordinate Debt or Wachovia Senior Debt;
(g) the Company or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
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(h) an involuntary case or other proceeding shall be commenced
against the Company or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be entered against the
Company under the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more final, non-appealable judgments or orders
for the payment of money aggregating in excess of $250,000 which is not fully
covered by insurance shall be rendered against any member of the Company or any
of its Subsidiaries and such judgment or order (i) shall continue unsatisfied
and unstayed for a period of thirty (30) days, or (ii) is not fully paid and
satisfied at least ten (10) days prior to the date on which any of its assets
may be lawfully sold to satisfy such judgment or order; or
(j) any Change of Control;
then, so long as any such event is continuing, (i) the Preferred Shareholders
may exercise all rights provided in the Series D Stock Designation, including,
without limitation, the right to require the redemption of the Preferred Shares
at the Liquidation Value as defined and specified herein and in the Series D
Stock Designation, and (ii) the Holders of the Securities and any outstanding
Warrant Shares may take such other actions as may be permitted by the
Transaction Documents or applicable Law.
ARTICLE XII
MISCELLANEOUS
SECTION 11.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex, telecopy
or similar writing) and shall be given to such party at its address, telex or
telecopy number set forth on the signature pages hereof or such other address,
telex or telecopy number as such party may hereafter specify for the purpose by
notice to the other party. Each such notice, request or other communication
shall be effective (i) if given by telex or telecopy, when such telex or
telecopy is transmitted to the telex or telecopy number specified in this
Section 11.1 and the appropriate answer back is received or receipt is otherwise
confirmed, (ii) if given by mail, three (3) Business Days after deposit in the
mails with first class postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered at the address specified in this
Section 11.1.
SECTION 11.2. No Waivers. No failure or delay by any holder of
Securities in exercising any right, power or privilege hereunder or under any
other Transaction Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law or in any of the other Transaction Documents.
SECTION 11.3. Expenses; Indemnification. (a) The Company shall pay on
demand (i) all out-of-pocket expenses incurred by the Investors, including
reasonable fees and disbursements of counsel for the Investors, in connection
with (A) the Investors' due diligence investigation and analysis of the Company
and the Closing Transactions, (B) the preparation and negotiation of this
Agreement and the other Transaction Documents and the closing of the
transactions contemplated hereby and thereby, and (C) any
40
<PAGE> 47
waiver or consent which may be granted in connection herewith, or any amendment
hereof or of any other Transaction Document, and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by each holder of Securities,
including (A) reasonable fees and disbursements of counsel to each holder of
Securities in connection with such Event of Default and collection and other
enforcement proceedings resulting therefrom, and (B) reasonable fees of auditors
and consultants incurred by each holder of Securities in connection therewith.
(b) The Company agrees to indemnify and hold harmless, each
Investor and each subsequent holder of Securities and their respective
directors, officers, employees, agents, successors and assigns (collectively,
the "Indemnified Parties") from and against any and all liabilities, losses,
damages, costs and expenses of any kind (including, without limitation, the
reasonable fees and disbursements of counsel for the Indemnified Parties in
connection with any investigative, administrative or judicial proceeding,
whether or not any such Indemnified Party shall be designated a party thereto)
which may be incurred by any Indemnified Party relating to or arising out of (a)
this Agreement, the other Transaction Documents, the Closing Transactions and
all other transactions contemplated hereby or thereby and (b) any actual or
proposed use of proceeds of the issuance and sale of the Securities hereunder,
including without limitation, any liability, loss, damage, cost or expense
incurred by any Indemnified Party with respect to, or resulting from any failure
to comply with any or all Laws applicable to the Company or any of its
Subsidiaries; provided, that, no Indemnified Party shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct, IT
BEING THE INTENTION HEREBY THAT THE INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR
THE CONSEQUENCES OF THEIR OWN NEGLIGENCE.
SECTION 11.4. Amendments and Waivers; Sale of Interest. Any provision
of this Agreement and the other Transaction Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Company and (a) prior to the Redemption Date, the Holders of a majority of the
outstanding Preferred Shares, and (b) thereafter, the Majority Warrant Holder.
The Company hereby consents to any participation, sale, assignment, transfer or
other disposition which complies with Article IV, at any time or times
hereafter, of any Securities or Warrant Shares, this Agreement and any of the
other Transaction Documents, or of any portion hereof or thereof, including,
without limitation, any Investor's rights, title, interests, remedies, powers,
and duties hereunder or thereunder.
SECTION 11.5. Survival. All representations, warranties and covenants
made by the Company herein or in any certificate or other instrument delivered
by it or in its behalf under the Transaction Documents shall be considered to
have been relied upon by the Investors and shall survive the delivery to the
Investors of such Transaction Documents and the purchase of the Securities,
regardless of any investigation made by or on behalf of either Investor.
SECTION 11.6. Invalid Provisions. If any provision of the Transaction
Documents is held to be illegal, invalid, or unenforceable under present or
future Laws effective during the term thereof, such provision shall be fully
severable, the Transaction Documents shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part thereof,
and the remaining provisions thereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of the
Transaction Documents a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid and
enforceable.
41
<PAGE> 48
SECTION 11.7. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
otherwise transfer any of its rights or obligations under this Agreement.
SECTION 11.8. GOVERNING LAW. THIS AGREEMENT AND THE TRANSACTION
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.
SECTION 11.9. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Investors shall have received
counterparts hereof signed by all of the parties hereto.
SECTION 11.10. No Third Party Beneficiaries. It is expressly
intended that there shall be no third party beneficiaries of the covenants,
agreements, representations or warranties herein contained other than
transferees or assignees of all or any part of the Investors' interest
hereunder.
SECTION 11.11. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE. ANY SUIT, ACTION OR PROCEEDING BROUGHT BY INVESTORS WITH RESPECT TO THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE FEDERAL COURTS LOCATED IN THE
NORTHERN DISTRICT OF TEXAS, AS THE INVESTORS MAY SELECT IN ITS SOLE DISCRETION.
THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT BROUGHT IN THE COURTS LOCATED
IN THE STATE OF TEXAS, COUNTY OF DALLAS, AND HEREBY WAIVES ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
ANY INCONVENIENT FORUM.
SECTION 11.13. WAIVER OF RIGHT TO TRIAL BY JURY. EACH INVESTOR AND
THE COMPANY EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT, ANY
TRANSACTION DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT. THE INVESTORS AND THE
COMPANY EACH AGREE THAT THE OTHER MAY FILE A COPY OF THIS AGREEMENT WITH
42
<PAGE> 49
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 11.14 Issue Price. The Company and the Investors hereby
agree that for purposes of IRC Treasury Regulations Section 1.305-5(b), (a) the
"issue price" of the Preferred Shares is $7,000,000 and (b) the fair market
value of the Warrants is $500,000. The Company and the Investors agree to use
the foregoing issue price and fair market value for U.S. federal tax purposes
with respect to the transactions contemplated by this Agreement (unless
otherwise required by a final determination by the Internal Revenue Service or a
court of competent jurisdiction).
43
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
COMPANY:
CLEAR HOLDINGS, INC. Address for Notice:
Clear Holdings, Inc.
440 Interstate North Parkway
By: /s/ Stephen F. Johnston Atlanta, Georgia 30339
------------------------------------ Fax No. (770) 763-5635
Its: Chairman and Chief Executive Officer Attn: Stephen Johnston, Sr.
------------------------------------
STRATFORD CAPITAL:
STRATFORD CAPITAL PARTNERS, L.P. Address for Notice:
By: Stratford Capital GP Associates, L.P.,
its General Partner Stratford Capital Partners, L.P.
300 Crescent Court, Suite 500
By: Stratford Capital Corporation, Fax No. (214)740-7393
its General Partner Attn: John G. Farmer
By: /s/ John G. Farmer
----------------------------------
John G. Farmer,
Managing Director
STRATFORD EQUITY:
STRATFORD EQUITY PARTNERS, L.P. Address for Notice:
By: Stratford Capital GP Associates, L.P.,
its General Partner Stratford Equity Partners, L.P.
300 Crescent Court, Suite 500
By: Stratford Capital Corporation, Fax No. (214) 740-7393
its General Partner Attn: John G. Farmer
By: /s/ John G. Farmer
----------------------------------
John G. Farmer,
Managing Director
44
<PAGE> 51
EXHIBIT A
PROMISSORY NOTE
$ Dallas, Texas [Put Closing Date]
---------------
FOR VALUE RECEIVED, the undersigned, Clear Holdings, Inc., a Georgia
corporation ("Maker"), promises to pay to the order of [Name of Holder]
("Payee"), at its offices in Atlanta, Georgia the sum of
_________________________ and __/100 Dollars ($_________), together with
interest thereon from and after the Put Closing Date at a per annum rate equal
to the prime lending rate as reported daily in The Wall Street Journal as of the
Put Closing Date plus 3%. Interest shall accrue on past due amounts at the
maximum lawful rate. This Note may be prepaid at any time in whole or in part
without premium or penalty.
1. Put Note; Securities Agreement. This Note is issued pursuant to
Section 3.4 of a Securities Agreement dated November 1, 1999, as amended through
the date hereof (the "Agreement") and is a "Put Note" as defined therein. Unless
otherwise defined herein, all terms used herein with their initial letter
capitalized shall have the meaning set forth in the Agreement. This Note
evidences all or a part of the aggregate Put Price paid to Payee by Maker with
respect to Preferred Shares, Warrants and Warrant Shares held by Payee.
2. Terms of Payment. The outstanding principal balance of this Note
shall be payable in equal quarterly installments of $ [8.34% OF THE AGGREGATE
PRINCIPAL AMOUNT OF THE NOTE] on the last day of each ________, ________,
________, and ________ commencing ________ [THREE MONTHS FOLLOWING PUT CLOSING
DATE]. Interest shall be payable on this Note as it accrues on the first day of
each month. The entire outstanding principal balance of this Note and all
accrued but unpaid interest thereon shall be due and payable in full on [3 YEARS
FOLLOWING PUT CLOSING DATE]. This Note may be prepaid in whole or in part at any
time without premium or penalty.
3. Security. [ADDED AS AVAILABLE]
4. Events of Default and Remedies. Without notice or demand (which are
hereby waived), the entire unpaid principal balance of, and all accrued interest
on, this Note shall immediately become due and payable to the option of the
holder hereof upon the occurrence of any of the following events ("Put Note
Event of Default"):
(a) The failure or refusal of Maker to make any payment on this Note on
the date due in accordance with the terms hereof.
(b) The occurrence of an Event of Default (as defined in the
Agreement).
In the event a Put Note Event of Default shall occur, the holder of
this Note may (a) accelerate the maturity of this Note, (b) offset against this
Note any sum or sums owed by the holder hereof to Maker, or (c) proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
or by other appropriate proceedings, whether for the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of any
power or right granted by this Note or to enforce any other legal or equitable
right of the holder of this Note.
45
<PAGE> 52
5. Cumulative Rights. No delay on the part of the holder of this Note
in the exercise of any power or right under this Note or any document,
installment or agreement executed in connection herewith shall operate as a
waiver thereof, nor shall a single or partial exercise of any such power or
right. Enforcement by the holder of this Note of any security for the payment
hereof shall not constitute any election by it of remedies so as to preclude the
exercise of any other remedy available to it.
6. Waiver. Maker, and each surety, endorser, guarantor, and other party
ever liable for the payment of any sum of money payable on this Note, jointly
and severally waive presentment, protest, notice of nonpayment, notice of
intention to accelerate and of acceleration, notice of protest, and any and all
lack of diligence or any delay in collection or the filing of suit hereon which
may occur, and agree that their liability on this Note shall not be affected by
a renewal or extension in the time of payment hereof, by any indulgences, or by
any release or change in any security for the payment of this Note, and hereby
consent to any and all renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions, indulgences, releases or
changes.
7. Attorneys Fees and Costs. In the event an Event of Default shall
occur, and in the event that hereafter this Note is placed in the hands of an
attorney for collection, or in the event this Note is collected in whole or in
part through legal proceedings of any nature, then and in any such case Maker
promises to pay all costs of collection, including, but not limited to,
reasonable attorneys' fees incurred by the holder hereof on account of such
collection, whether or not suit is filed.
8. Successors and Assigns. All of the covenants, stipulations,
promises, and agreements contained in this Note by or on behalf of Maker shall
bind its successors and assigns, whether so expressed or not.
9. FINAL AGREEMENT. THIS NOTE, THE AGREEMENT AND THE OTHER WARRANT
DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
CLEAR HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
46
<PAGE> 53
FIRST AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
This First Amendment ("Amendment") to the Purchase Agreement, dated as
of November 1, 1999 (the "Purchase Agreement"), by and among Stratford Capital
Partners, L.P., a Texas limited partnership ("Stratford Capital"), Stratford
Equity Partners, L.P., a Texas limited partnership ("Stratford Equity", and
together with Stratford Capital, the "Investors") and Clear Holdings, Inc., a
Georgia corporation (the "Company"), is made and entered into as of May 9, 2000.
RECITALS
WHEREAS, the Company and the Investors entered into the Purchase
Agreement, pursuant to which (a) the Investors purchased shares of the Company's
Series D Senior Redeemable Preferred Stock and (b) the Investors purchased and
the Company sold and issued warrants to purchase shares of Common Stock of the
Company; and
WHEREAS, the Company and the Investors have agreed to amend the
Purchase Agreement as specifically set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise specified herein, all
capitalized terms herein shall have the same meaning as those terms have in the
Purchase Agreement.
2. Amendments.
(a) Section 1.1 of the Purchase Agreement is amended by deleting
the definition of "Put Exercise Date" and replacing it with the following new
definition of "Put Exercise Date":
"Put Exercise Date" means (a) with respect to the Warrants
and Warrant Shares, the earliest of (i) May 9, 2001, (ii) the date of
any Material Event of Default or (iii) the date on which all of the
Preferred Shares have been redeemed, and (b) with respect to the
Preferred Shares, the date of any Mandatory Redemption Event.
(b) Section 3.4(a) of the Purchase Agreement is amended by
adding the following sentence to the end of such section:
<PAGE> 54
Notwithstanding the foregoing, the right of any Triggering Holder to
exercise the Put shall terminate and have no further force or effect
from and after the date of the consummation of a Qualified Public
Offering.
(c) Section 3.4 of the Purchase Agreement is hereby further amended by
adding a clause (c) which shall read in full as follows:
(c) Notwithstanding anything to the contrary contained herein,
the Company shall not be required to pay more than $13,425,795 ("Put
Price Limit") in respect of any exercise of the Put with respect to the
Warrants and Warrant Shares. If the Put Purchase Price in respect of
the exercise of the Put with respect to the Warrants and Warrant Shares
("Warrant Put Purchase Price") exceeds the Put Price Limit, each
Warrant Holder shall receive upon exercise of the Put (i) an amount in
cash equal to the pro rata portion of the Put Price Limit (based on the
percentage that the number of Warrants and Warrant Shares owned by such
Warrant Holder bears to the aggregate number of Warrants and Warrant
Shares owned by all Warrants Holders ("Pro Rata Share")) and (ii) at
the option of such Warrant Holder, either (A) a new Warrant Certificate
evidencing the right to purchase such Warrant Holder's Pro Rata Share
of the Non-Put Shares (as defined below) or (B) a certificate
evidencing shares of Common Stock equal to such Warrant Holder's Pro
Rata Share of the Non-Put Shares. For purposes of this Section 3.4(c),
Non-Put Shares shall mean the quotient determined by dividing (x) the
remainder of (1) the Warrant Put Purchase Price minus (2) Put Price
Limit, by (y) the Put Price with respect to the Common Stock. After
payment to the Warrant Holders of the Put Price Limit in respect of the
exercise of the Put, there shall no longer exist any right to Put the
Non-Put Shares or the warrants to purchase Non-Put Shares by the
holders thereof.
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be considered an original for all purposes,
and all of which when taken together shall constitute a single counterpart
instrument. Executed signature pages to any counterpart instrument may be
detached and affixed to a single counterpart, with such single counterpart with
multiple executed signature pages affixed thereto constituting the original
counterpart instrument. All of those counterpart pages shall be read as though
one, and they shall have the same force and effect as if all the signers had
executed a single signature page.
4. Reaffirmation. Except as amended hereby, the Agreement shall remain
in full force and effect, the parties hereto hereby restate and reaffirm all of
the terms and provisions of the Agreement.
-2-
<PAGE> 55
The undersigned have executed this Amendment as of the date first set
forth above.
Stratford:
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates,
L.P., its General partner
By: Stratford Capital Corporation,
its General partner
By: /s/ John Farmer
------------------------------
John Farmer
Managing Director
STRATFORD EQUITY PARTNERS, L.P.
By: Stratford Capital GP Associates,
L.P., its General partner
By: Stratford Capital Corporation,
its General partner
By: /s/ John Farmer
---------------------------------
John Farmer
Managing Director
CLEAR HOLDINGS, INC.
By: /s/ Stephen F. Johnston, Sr.
----------------------------------
Name: Stephen F. Johnston, Sr.
Title: Chairman of the Board
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
AMONG
STRATFORD CAPITAL PARTNERS, L.P.,
STRATFORD EQUITY PARTNERS, L.P.,
RJB MANAGEMENT COMPANY,
DFW CAPITAL PARTNERS, L.P.,
LISA ROUMELL,
MARK ROSENTHAL,
DONALD DEMUTH,
MARK MALICK,
ANDREW ROSCOE,
HOFE FAMILY LIMITED PARTNERSHIP
CLEAR INVESTORS, LLC,
STEPHEN F. JOHNSTON, SR.
AND
CLEAR HOLDINGS, INC.
NOVEMBER 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I TERMS DEFINED...................................................................................1
SECTION 1.1. Definitions........................................................................1
SECTION 1.2. Forms..............................................................................2
SECTION 1.3. Gender and Number..................................................................3
SECTION 1.4. References to Agreement............................................................3
ARTICLE II REGISTRATION RIGHTS.............................................................................3
SECTION 2.1. Demand Registration................................................................3
SECTION 2.2. Piggyback Registration.............................................................6
SECTION 2.3. Registration Procedures............................................................7
SECTION 2.4. Underwritten Offerings.............................................................9
SECTION 2.5. Preparation; Reasonable Investigation.............................................10
SECTION 2.6. Other Registration Rights.........................................................10
ARTICLE III INDEMNIFICATION................................................................................11
SECTION 3.1. Indemnification...................................................................11
SECTION 3.2. Indemnification by the Sellers....................................................11
SECTION 3.3. Notices of Claims, etc............................................................12
SECTION 3.4. Other Indemnification.............................................................12
SECTION 3.5. Indemnification Payments..........................................................13
SECTION 3.6. Contribution......................................................................13
ARTICLE IV REPORTING REQUIREMENTS.........................................................................13
SECTION 4.1. Reporting Requirements Under Securities Exchange Act of 1934......................13
SECTION 4.2. Delivery of Company Information...................................................14
SECTION 4.3. Stockholder Information...........................................................14
ARTICLE V MISCELLANEOUS..................................................................................14
SECTION 5.1. Notices...........................................................................14
SECTION 5.2. Modification of Agreement.........................................................15
SECTION 5.3. Successors and Assigns............................................................15
SECTION 5.4. TEXAS LAW.........................................................................15
SECTION 5.5. Counterparts; Effectiveness.......................................................15
SECTION 5.6. FINAL AGREEMENT...................................................................15
SECTION 5.7. WAIVER OF JURY TRIAL..............................................................15
SECTION 5.8. CONSENT TO JURISDICTION/VENUE.....................................................15
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into this 1st day of
November, 1999, by and among Stratford Capital Partners, L.P., a Texas limited
partnership and a federal licensee under the Small Business Investment Act of
1958 ("Stratford Capital"), Stratford Equity Partners, L.P., a Texas limited
partnership and a federal licensee under the Small Business Investment Act of
1958 ("Stratford Equity" and together with Stratford Capital, "Stratford"), RJB
Management Company ("RJB"), DFW Capital Partners, L.P. ("DFW"), Lisa Roumell
("Roumell"), Mark Rosenthal ("Rosenthal"), Donald DeMuth ("DuMuth"), Mark Malick
("Malick"), Andrew Roscoe ("Roscoe"), Hofe Family Limited Partnership ("Hofe"),
Stephen F. Johnston, Sr. ("Johnston"), Clear Investors, LLC ("Clear Investors"
and collectively with RJB, DFW, Roumell, Rosenthal, DeMuth, Malick, Roscoe, Hofe
and Johnston, the "Preferred Investors") and Clear Holdings, Inc., a Georgia
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Stratford and the Company are parties to that certain
Securities Purchase Agreement (the "Securities Purchase Agreement"), of even
date herewith, pursuant to which the Company will issue and sell to Stratford
shares of redeemable preferred stock and warrants to purchase shares of the
Company's common stock, $0.0001; and
WHEREAS, the Preferred Investors and the Company are parties to that
certain Registration Rights Agreement dated as of November 19, 1997 pursuant to
which the Company agreed to register all shares of Common Stock owned by the
Preferred Investors (as amended and supplemented "Prior Registration
Agreement"); and
WHEREAS, it is a condition precedent to the obligations of Stratford
under the Securities Purchase Agreement that the Company agrees to register all
shares of Common Stock owned by Stratford and the Company and the Preferred
Investors restate the Prior Registration Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. All terms used herein which are defined
in the preamble or recitals hereto shall have the meanings given to such terms
therein, and each of the following terms, as used herein, shall have the
following meanings:
"Authorized Officer" means, as to any Person, its Chairman, its Chief
Executive Officer, its President, its Chief Operating Officer, its Financial
Officer, any Vice President or its Secretary.
1
<PAGE> 4
"Business Day" means any day except a Saturday, Sunday or other day on
which national banks in Dallas, Texas are authorized by law to close.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to any or all of its functions under the Securities Act or the
Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute.
"Governmental Authority" means any government, any state or other
political subdivision thereof, or any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Holder" with respect to any security of a Person, shall mean the
record or beneficial owner of such security.
"Institutional Holder" means, collectively, Stratford, DFW, Clear
Investors and American Capital Strategies, Ltd.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity, organization or division, including a
government or political subdivision or an agency or instrumentality thereof and
shall also mean the Company.
"Preferred Investors Registrable Securities" means all Common Stock now
or at any time hereafter owned by the Preferred Investors.
"Registrable Securities" means all Common Stock now or at any time
hereafter owned by Stratford.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
"Short Form Registration" means any registration effected on a
Registration Statement on Form S-3 (or any successor similar form).
"Stratford Registrable Securities" means all Common Stock now or at any
time hereafter owned by Stratford.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges of any
nature whatsoever, from time to time or at any time imposed by law or any
federal, state or local governmental agency. "Tax" means any one of the
foregoing.
SECTION 1.2. Forms. All references in this Agreement to particular
forms of registration statements are intended to include, and shall be deemed to
include, references to all successor forms which are intended to replace, or to
apply to similar transactions as, the forms herein referenced.
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SECTION 1.3. Gender and Number. Words of any gender used in this
Agreement shall be held and construed to include any other gender and words in
the singular number shall be held to include the plural, and vice versa, unless
the context requires otherwise.
SECTION 1.4. References to Agreement. Use of the words "herein",
"hereof", "hereinabove", and the like are and shall be construed as references
to this Agreement.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registration. (a) Subject to the limitations
provided herein, at any time after an initial public offering of the Common
Stock, upon the written request (specifying that it is being made pursuant to
this Section 2.1) of either (i) one or more Holders of Stratford Registrable
Securities representing 50% or more of the Stratford Registrable Securities at
the time outstanding, or (ii) one or more Holders of Preferred Investors
Registrable Securities representing 50% or more of the Preferred Investors
Registrable Securities at the time outstanding, requesting that the Company
effect the registration under the Securities Act of all or part of such Holders'
Registrable Securities and the other Registrable Securities of the same class of
Registrable Securities (i.e., Stratford Registrable Securities or Preferred
Investors Registrable Securities) (collectively, the "Requested Registrable
Securities"), and specifying (x) the intended method of disposition thereof, (y)
whether or not such requested registration is to be an underwritten offering,
and (z) the price range (net of underwriting discount and commissions)
acceptable to such Holder or Holders to be received for such Requested
Registrable Securities, the Company will within ten (10) business days after the
Company receives such written request give written notice of such requested
registration to all other Holders of Registrable Securities and thereupon the
Company will use reasonable efforts to effect an effective registration under
the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Holders; and
(ii)all other Registrable Securities which the
Company has been requested to register by the other Holders thereof by written
request given to the Company within 30 days after the giving of such written
notice by the Company (which request shall specify the same information called
for by the original request to effect registration described above), all to the
extent requisite to permit the disposition (in accordance with Section 2.1(b)
hereof) of the Registrable Securities so to be registered. Notwithstanding the
foregoing, DFW shall have the ability to exercise its registration rights
pursuant to this Section 2.1 at any time whether or not the Company has
consummated an initial public offering of its Common Stock.
If the Company is required to effect a registration pursuant to this Section 2.1
and the Company furnishes to the Holders of Registrable Securities requesting
such registration a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors of the Company it
would be seriously detrimental to the Company and its stockholders for such
registration statement to be filed on or before the date such filing would
otherwise be required hereunder and it is therefore necessary to defer the
filing of such registration statement, the Company shall have the right to defer
such filing for a period of not more than ninety (90) days after receipt of the
request for such registration from the Holder or Holders of
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Requested Registrable Securities requesting such registration; provided that
during such time the Company may not file a registration statement for
securities to be issued and sold for its own account or that of anyone other
than the Holder or Holders of Requested Registrable Securities.
(b) The Holders of a majority of the Requested
Registrable Securities to be included in such registration statement shall
determine the method of distribution of the Registrable Securities so included;
provided, however, that if no agreement of Holders of a majority of the
Requested Registrable Securities to be included in such registration statement
is obtained, then if Holders of thirty percent (30%) of the Requested
Registrable Securities to be included in such registration statement request an
underwritten public offering, an underwritten public offering shall be the
method of distribution with other methods permitted to the extent the managing
underwriter for such offering, in its sole discretion, agrees to other methods
of distribution being covered by such registration statement.
(c) Whenever the Company shall effect a registration
pursuant to this Section 2.1 in connection with an underwritten offering, no
securities other than Requested Registrable Securities shall be included among
the securities covered by such registration unless the managing underwriter of
such offering shall have advised each Holder of Requested Registrable Securities
to be covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering.
(d) Registrations under this Section 2.1 shall be on
such appropriate registration form of the Commission (i) as shall be selected by
the Company and as shall be reasonably acceptable to the Holders of a majority
of the Requested Registrable Securities to be registered, and (ii) as shall
permit the disposition of such Registrable Securities in accordance with the
method or methods of disposition selected pursuant to Section 2.1(b).
(e) Except as otherwise provided in this Section 2.1 or
in Section 2.2, all expenses incurred in connection with each registration
requested pursuant to Section 2.1 and each registration requested pursuant to
Section 2.2 (excluding in each case underwriter's discounts and commissions
applicable to Registrable Securities), including, without limitation, in each
case, all registration, filing and National Association of Securities Dealer,
Inc. fees; all fees and expenses of complying with securities or blue sky laws;
all word processing, duplicating and printing expenses, messenger, delivery and
shipping expenses; fees and disbursements of the accountants and counsel for the
Company including the expenses of any special audits or "cold comfort" letters
or opinions required by or incident to such registrations; and the reasonable
fees and disbursements of one firm of counsel retained by Holders of such
Requested Registrable Securities, premiums and other costs of policies of
insurance against liabilities arising out of the public offering of the
Registrable Securities, any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts
and commissions, if any, shall be borne by the Company. In all cases, each
Holder of Registrable Securities shall pay the underwriter's discounts and
commissions applicable to the securities sold by such Holder.
(f) A registration requested pursuant to this Section 2.1
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective (unless a substantial cause of the
failure of such registration statement to become effective shall be attributable
to one or more Holders of Requested Registrable Securities whose Requested
Registrable Securities were to have been included in such registration
statement) and all Requested Registrable Securities originally requested
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to be registered (prior to any underwriter cutbacks) have been included in such
registration statement, (ii) if after it has become effective, such registration
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason,
resulting in a failure to consummate the offering of Requested Registrable
Securities offered thereby, (iii) if after a registration statement with respect
thereto has become effective, the offering of Requested Registrable Securities
offered thereby is not consummated due to factors beyond the control of the
Holders of such Requested Registrable Securities, including without limitation
in the context of a proposed firm commitment underwriting, the fact that the
underwriters have advised the Holders of such Requested Registrable Securities
that such Requested Registrable Securities cannot be sold at a net price equal
to or above the net price anticipated at the time of filing of the preliminary
prospectus or (iv) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied (unless a substantial cause of such conditions to
closing not being satisfied shall be attributable to one or more Holders of
Requested Registrable Securities whose Requested Registrable Securities were
included in such registration statement).
(g) If a requested registration pursuant to this Section
2.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the Company with the approval of the Holders of a majority
of the Requested Registrable Securities to be so registered.
(h) If a requested registration pursuant to this Section
2.1 involves an underwritten offering, and the managing underwriter shall advise
the Company in writing (with a copy to each Person requesting registration)
that, in its opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering within a
price range acceptable to the Holders of a majority or more of the Requested
Registrable Securities requested to be included in such registration, then the
Registrable Securities requested to be registered pursuant to this Section 2.1
shall be reduced to the number of Registrable Securities which the Company is so
advised can be sold in (or during the time of) such offering by (i) first
decreasing the other securities and Registrable Securities (other than Requested
Registrable Securities) requested to be registered (pro rata among such Persons
requesting such registration on the basis of the percentage of other securities
held by such Persons immediately prior to the filing of the registration
statement with respect to such registration), then (ii) by decreasing the
securities the Company intends to issue and sell for its own account pursuant to
the registration statement, and finally (iii) by decreasing the Requested
Registrable Securities to be registered (pro rata among such Holders of
Requested Registrable Securities on the basis of the percentage of Requested
Registrable Securities held by such Persons immediately prior to the filing of
the registration statement with respect to such registration). In connection
with any registration as to which the provisions of this clause (h) apply, no
securities other than Requested Registrable Securities shall be covered by such
registration, unless all Requested Registrable Securities requested to be
included in such registration have actually been included.
(i) Notwithstanding the other provisions of this Section
2.1, the Company shall not be required by this Section 2.1 to effect more than
one effective registration (other than Short Form Registrations) at the
Company's expense requested by each of the Holders of the Stratford Registrable
Securities and Preferred Investors Registrable Securities. The Company shall
also be required by this Section 2.1, at the Company's expense, to effect an
unlimited number of Short Form Registrations; provided, that, the Registrable
Securities to be registered thereon (A)(i) are expected to have an aggregate
disposition price (before deductions for underwriting discounts and commissions)
of at least $1,000,000 or (ii) constitute
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at least one percent (1%) of the outstanding Common Stock and (B) the Company
shall not have to effect more than two Short Form Registrations during any one
fiscal year.
SECTION 2.2. Piggyback Registration. (a) If the Company at any
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-8, S-4 or any successor similar forms or any
other form not available for registering the Registrable Securities) for sale to
the public and other than pursuant to Section 2.1, whether or not for sale for
its own account, it will each such time, at least 30 days prior to filing the
registration statement, give written notice to all Holders of Registrable
Securities of its intention to do so. Upon the written request of any such
Holder made within 15 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder and the intended method of disposition thereof), the Company will use
reasonable efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders of such Registrable Securities, to the extent requisite to permit
the disposition (determined pursuant to the provisions of Section 2.1(b)) of the
Registrable Securities so to be registered, provided that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay expenses in
accordance with Section 2.1(e)), without prejudice, however, subject to the
rights of any Holder or Holders of Registrable Securities entitled to do so, to
request that such registration be effected as a registration under Section 2.1,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 2.2, for the same period as the delay in registering such other
securities. No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration upon request under Section
2.1.
(b) If (i) a registration pursuant to this Section 2.2
involves an underwritten offering of the securities so being registered, whether
or not for sale for the account of the Company, to be distributed (on a firm
commitment basis) by or through one or more underwriters of recognized standing,
whether or not the Registrable Securities so requested to be registered for sale
for the account of Holders of Registrable Securities are also to be included in
such underwritten offering, and (ii) the managing underwriter of such
underwritten offering shall inform the Company and the Holders of the
Registrable Securities requesting such registration by letter of its belief that
the number of securities requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering, then the
Company and/or the Person who has requested the registration (the "Demanding
Holder") may include in such offering all securities proposed by the Company or
such Person to be sold for its own account and may first decrease (A) the
Registrable Securities and other securities of the Company requested to be
included in such registration by all Persons other than Institutional Holders
and the Demanding Holder (pro rata on the basis of the number of shares of such
securities held by such Person immediately prior to the filing of the
registration statement with respect to such registration) and then decrease (B)
the Registrable Securities and other securities of the Company requested to be
included in such registration by the Institutional Holders to the extent
necessary to reduce the number of securities to be included in the registration
to the level recommended by the managing underwriter.
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SECTION 2.3. Registration Procedures. If and whenever the Company
is required to use reasonable efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2, the Company will, subject to the limitations provided herein, as
expeditiously as possible:
(a) prepare and (as soon as possible thereafter or in
any event no later than 60 days after the end of the period within which
requests for registration may be given to the Company or such longer period as
the Company shall in good faith require to produce the financial statements
required in connection with such registration) file with the Commission the
requisite registration statement to effect such registration and thereafter use
reasonable efforts to cause such registration statement to become effective,
provided that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances specified in
Section 2.1(f)(iii) its securities which are Registrable Securities) at any time
prior to the effective date of the registration statement relating thereto;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, however, that the Company shall
not in any event be required to keep the registration statement effective for a
period of more than six months after such registration statement becomes
effective;
(c) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, and such other documents, as such seller may reasonably
request;
(d) use its reasonable best efforts to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as each seller thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect (provided, however, that the Company shall not in
any event be required to keep such registration or qualification in effect for a
period of more than nine months after such registration or qualification becomes
effective), and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subsection (d) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other United States Federal or state
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governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities a
copy, or, upon request, a signed counterpart, addressed to such seller (and the
underwriters, if any) of:
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have audited the
Company's financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion such other legal
matters, as such seller or such Holder (or the underwriters, if any) may
reasonably request;
(g) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(h) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the Commission, 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 full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and will furnish to each such seller, upon request of such
seller, at least five days prior to the filing thereof a copy of any amendment
or supplement to such registration statement or prospectus and shall not file
any thereof to which any such seller shall have delivered to the Company an
opinion of counsel that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
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(i) provide and cause to be maintained a transfer agent
for all Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration statement;
(j) use its reasonable best efforts to list all
Registrable Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities is then listed; and
(k) except with respect to registrations made pursuant
to Section 2.1(i), refrain from making any sale or distribution of any equity
securities of the Company, except pursuant to any employee stock option plan and
any preexisting agreement for the sale of such securities, for at least one
hundred (180) days after the closing of the public offering pursuant to such
registration.
It shall be a condition precedent to the obligations of the Company to
take any action with respect to registering a Holder's Registrable Securities
pursuant to this Section 2.3 that such seller of Registrable Securities as to
which any registration is being effected furnish the Company in writing such
information regarding such seller, the Registrable Securities and other
securities of the Company held by such seller, and the distribution of such
securities as the Company may from time to time reasonably request in writing.
If a Holder refuses to provide the Company with any of such information on the
grounds that it is not necessary to include such information in the registration
statement, the Company may exclude such Holder's Registrable Securities from the
registration statement if the Company provides such Holder with an opinion of
counsel to the effect that such information must be included in the registration
statement and such Holder thereafter continues to withhold such information. The
deletion of such Holder's Registrable Securities from a registration statement
shall not affect the registration of the other Registrable Securities to be
included in such registration statement.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(g), such Holder will
forthwith discontinue such Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2.3(g) and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
SECTION 2.4. Underwritten Offerings. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under Section 2.1 except the second sentence of Section
2.1(i), the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to each Holder of Registrable Securities being registered and
the underwriters and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to the extent
provided in Section 3.1. Each such Holder of Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement and
will give consideration to the reasonable requests of the Company regarding the
form thereof, provided, that nothing herein contained shall diminish the
foregoing obligations of the Company. The
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Holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such Holders and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holders. Any such Holder shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and other securities of the Company, such Holder's
intended method of distribution, and any representations, warranties or
agreements required by law.
(b) If the Company at any time proposes to register any
of its securities under the Securities Act as contemplated by Section 2.2 and
such securities are to be distributed by or through one or more underwriters,
the Company will, if requested by any Holder of Registrable Securities as
provided in Section 2.2 and subject to the provisions of Section 2.2(b), arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by such Holder owning the securities to be distributed by such
underwriters. In such event, the Holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such Holders and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holders. Any such Holder shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities or other securities of the Company, such Holder's
intended method of distribution and any representations, warranties or
agreements required by law.
SECTION 2.5. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the Holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and one counsel or firm of counsel and one accountant or
firm of accountants representing all the Holders of Registrable Securities to be
registered under such registration statement, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
SECTION 2.6. Other Registration Rights. Other than the
registration rights previously granted by the Company or which will be granted
simultaneously herewith, the Company will not grant to any other Persons the
right to request the Company to register any equity securities of the Company,
or any securities convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the Holders of a majority of
the Stratford Registrable Securities and Holders of a majority of the Preferred
Investors Registrable Securities at the time outstanding unless the rights
granted under the terms of such
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agreements are expressly subordinated to the registration rights granted
hereunder in all respects including priority.
ARTICLE III
INDEMNIFICATION
SECTION 3.1. Indemnification. In the event any Registrable
Securities are included in a registration statement under Section 2.1 or 2.2, to
the extent permitted by law, the Company will, and hereby does, indemnify and
hold harmless the seller of any Registrable Securities covered by such
registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, 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 the Company will
reimburse such seller and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises solely out of or is
based solely upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller expressly for use in the preparation thereof, and
provided further that the Company shall not be liable to any person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
underwriter or controlling person and shall survive the transfer of such
securities by such seller.
SECTION 3.2. Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.3, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such securities, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 3.1) each underwriter, each Person who
controls such underwriter within the meaning of the Securities Act, the Company,
each director of the Company, each officer of the Company and each other Person,
if any, who
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controls the Company within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in strict conformity with written information furnished to the
Company by such seller expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided that such prospective seller shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of any
underwriter, the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. In no event shall
the liability of any selling holder of Registrable Securities under this Section
3.2 be greater in amount than the dollar amount of the proceeds received by such
holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
SECTION 3.3. Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 3.1 or 3.2, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action, provided
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under Section 3.1 or
3.2, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties shall
exist in respect of such claim, the indemnifying parties shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
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.
SECTION 3.4. Other Indemnification. Indemnification similar to
that specified in Section 3.1 or 3.2 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority other than the
Securities Act.
12
<PAGE> 15
SECTION 3.5. Indemnification Payments. The indemnification
required by Section 3.1 and 3.2 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
SECTION 3.6. Contribution. If the indemnification provided for in
Section 3.1 and 3.2 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue statement of material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 3.3, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 3.6 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 3.6, no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, and no
selling holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
selling holder were offered to the public exceeds the amount of any damages
which such selling holder has otherwise been required to pay by reason of such
untrue statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Article III, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Article III without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 3.6.
ARTICLE IV
REPORTING REQUIREMENTS
SECTION 4.1. Reporting Requirements Under Securities Exchange Act
of 1934. When it is first legally required to do so, the Company shall register
its Common Stock under Section 12 of the
13
<PAGE> 16
Exchange Act (as hereinafter defined) and shall keep effective such registration
and shall timely file such information, documents and reports as the Commission
may require or prescribe under Section 13 of the Exchange Act. From and after
the effective date of the first registration statement filed by the Company
under the Securities Act, the Company shall (whether or not it shall then be
required to do so) timely file such information, documents and reports which a
corporation, partnership or other entity subject to Section 13 or 15(d)
(whichever is applicable) of the Exchange Act is required to file.
SECTION 4.2. Delivery of Company Information. Immediately upon
becoming subject to the reporting requirements of either Section 13 or 15(d) of
the Exchange Act, the Company shall forthwith upon request furnish any Holder of
Registrable Securities (a) a written statement by the Company that it has
complied with such reporting requirements, (b) a copy of the most recent annual
or quarterly report of the Company, and (c) such other reports and documents
filed by the Company with the Commission as such Holder may reasonably request
in availing itself of an exemption for the sale of Registrable Securities
without registration under the Securities Act. The Company acknowledges and
agrees that the purposes of the requirements contained in this Section 4.2 are
(i) to enable any such Holder to comply with the current public information
requirement contained in Paragraph (c) of Rule 144 under the Securities Act
should such Holder ever wish to dispose of any of the securities of the Company
acquired by it without registration under the Securities Act in reliance upon
Rule 144 (or any other similar exemptive provision) and (ii) to qualify the
Company for the use of registration statements on Form S-3. In addition, the
Company shall take such other measures and file such other information,
documents and reports, as shall hereafter be required by the Commission as a
condition to the availability of Rule 144 under the Securities Act (or any
similar exemptive provision hereafter in effect) and the use of Form S-3. The
Company also covenants to use its best efforts, to the extent that it is
reasonably within its power to do so, to qualify for the use of Form S-3.
SECTION 4.3. Stockholder Information. The Company may require
each Holder of Registrable Securities as to which any registration is to be
effected pursuant to this Article IV to furnish the Company such information in
writing with respect to such Holder and the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
and as shall be required by law or by the Commission in connection therewith.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, telecopy or similar writing) and shall be given to such party at its
address, telex or telecopy number set forth on the signature pages hereof or
such other address, telex or telecopy number as such party may hereafter specify
for the purpose by notice to the other party. Each such notice, request or other
communication shall be effective (i) if given by telex or telecopy, when such
telex or telecopy is transmitted to the telex or telecopy number specified in
this Section 5.1 and the appropriate answer back is received or receipt is
otherwise confirmed, (ii) if given by mail, three (3) Business Day after deposit
in the mails with first class postage prepaid, addressed as aforesaid, (iii) if
given by overnight courier service, one (1) Business Day after delivery to the
overnight courier service, or (iv) if given by any other means, when delivered
at the address specified in this Section 5.1.
14
<PAGE> 17
SECTION 5.2. Modification of Agreement. This Agreement may not be
modified, altered, amended, revised, waived, discharged, released or terminated,
except by an agreement in writing signed by the Company and Holders of the
majority of the Stratford Registrable Securities and Holders of the Preferred
Investors Registrable Securities at the time outstanding. Each Preferred
Investor agrees that this Agreement amends and restates in entirety the Prior
Registration Rights Agreement which shall have no further force or effect.
SECTION 5.3. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
each holder of Registrable Securities and their respective successors and
assigns, except that the Company may not assign or otherwise transfer any of its
rights under this Agreement.
SECTION 5.4. TEXAS LAW. THIS AGREEMENT AND THE TRANSACTION
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.
SECTION 5.5. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the parties hereto.
SECTION 5.6. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 5.7. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES TRIAL
BY JURY IN ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
SECTION 5.8. CONSENT TO JURISDICTION/VENUE. Any suit, action or
proceeding brought by any Holder of Registrable Securities with respect to this
Agreement may be brought in the courts of the State of Texas, County of Dallas,
or in the Federal courts located in the Northern District of Texas, as such
Holder may select in its sole discretion. The Company hereby submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. The Company hereby irrevocably waives any objections which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Transaction
Document brought in the courts located in the State of Texas, County of Dallas,
and hereby waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum.
15
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
<TABLE>
<S> <C>
COMPANY:
CLEAR HOLDINGS, INC. Address for Notice:
Clear Holdings, Inc.
440 Interstate North Parkway
By: /s/ Stephen Johnston, Sr. Atlanta, Georgia 30339
--------------------------------- Fax No. (770) 763-5635
Name: Stephen Johnston, Sr. Attn: Stephen Johnston Sr.
---------------------------------
Title: Chief Executive Officer
---------------------------------
STRATFORD EQUITY:
Address for Notice:
STRATFORD EQUITY PARTNERS, L.P.
Stratford Equity Partners, L.P.
By: Stratford Capital GP Associates, L.P., its 300 Crescent Court, Suite 500
General Partner Dallas, Texas 75201
Fax No. (214) 740-7393
By: Stratford Capital Corporation, its Attn: John G. Farmer
General Partner
By: /s/ John G. Farmer
-----------------------------
John G. Farmer,
Managing Director
STRATFORD CAPITAL:
STRATFORD CAPITAL PARTNERS, L.P. Address for Notice:
By: Stratford Capital GP Associates, L.P., Stratford Capital Partners, L.P.
its General Partner 300 Crescent Court, Suite 500
Dallas, Texas 75201
By: Stratford Capital Corporation, Fax No. (214) 740-7393
its General Partner Attn: John G. Farmer
By: /s/ John G. Farmer
-----------------------------
John G. Farmer,
Managing Director
</TABLE>
16
<PAGE> 19
<TABLE>
<S> <C>
RJB:
Address for Notice:
RJB MANAGEMENT COMPANY
RJB Management Company
4101 Buckboard Lane
Dunkirk, Maryland 20754
By: /s/ Andrew D. Roscoe
------------------------------------
Name: Andrew D. Roscoe
----------------------------------
Title: President
---------------------------------
DFW:
Address for Notice:
DFW CAPITAL PARTNERS, L.P.
DFW Capital Partners, L.P.
By: Capital Partners - GP, L.P. 300 Frank W. Burr Boulevard
its General Partner Glenpoint Centre East - 5th Floor
Teaneck, New Jersey 07666
Attn: Lisa Roumell
Fax No. (201) 836-5666
By: /s/ Lisa Roumell
---------------------------
Lisa Roumell
General Partner
ROUMELL: Address for Notice:
DFW Capital Partners, L.P.
30 Frank W. Burr Boulevard
/s/ Lisa Roumell Glenpoint Centre East - 5th Floor
- ---------------------------------------- Teaneck, New Jersey 07666
Lisa Roumell Attn: Lisa Roumell
Fax No. (201) 836-5666
ROSENTHAL: Address for Notice:
16 Hudson Street
/s/ Mark Rosenthal #6C
- ---------------------------------------- New York, New York 10013
Mark Rosenthal
</TABLE>
17
<PAGE> 20
<TABLE>
<S> <C>
DEMUTH: Address for Notice:
78 Essex Road
Summit, New Jersey 07901
/s/ Donald F. DeMuth
- ----------------------------------------
Donald DeMuth
MALICK: Address for Notice:
19 Whipporwill Road
Budd Lake, New Jersey 07828
/s/ Mark Malick
- ----------------------------------------
Mark Malick
ROSCOE: Address for Notice:
41 Buckboard Lane
/s/ Andrew Roscoe Dunkirk, Maryland 20754
- ----------------------------------------
Andrew Roscoe
HOFE: Address for Notice:
HOFE FAMILY LIMITED PARTNERSHIP Hofe Family Limited Liability Partnership
c/o Mike Hofe
20617 Bent Willow Road
By:/s/ Michael Hofe Rohrersville, Maryland 21779
-------------------------------------
Mike Hofe
CLEAR INVESTORS: Address for Notice:
CLEAR INVESTORS, LLC c/o Stephen Johnston, Sr.
550 River Valley Road
Atlanta, Georgia 30328
By: /s/ Stephen F. Johnston, Sr.
------------------------------------
Stephen F. Johnston
Managing Member
JOHNSTON: Address for Notice:
/s/ Stephen F. Johnston, Sr. 550 River Valley Road
- ---------------------------------------- Atlanta, Georgia 30328
Stephen F. Johnston, Sr.
</TABLE>
18
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CLEAR HOLDINGS, INC.
AS OF MAY 5, 2000
<TABLE>
<CAPTION>
NAME ORGANIZED UNDER THE
- ---- LAWS OF:
-------------------
<S> <C>
Clear Communications Group, Inc. Georgia
ISDC, Inc.(1) Georgia
Communications Development Systems, Inc.(1) New Jersey
Clear Tower Corporation(1) Georgia
Cellular Technology International, Inc.(1) Missouri
Clear Program Management, Inc.(1) Georgia
Specialty Drilling, Inc.(1) Texas
TWR Telecom, Inc.(1) Texas
Rooker Tower Company((2)) Tennessee
TWR Lighting, Inc.(2) Texas
</TABLE>
- -------------
(1) Subsidiary of Clear Communications Group, Inc.
(2) Subsidiary of TWR Telecom, Inc.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
o2wireless Solutions, Inc.:
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "Experts" in the prospectus. Our reports refer to a
change in the method of accounting for organization costs in 1999.
KPMG LLP
Atlanta, Georgia
May 8, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
o2wireless Solutions, Inc.:
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
KPMG LLP
Atlanta, Georgia
May 8, 2000
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
o2wireless Solutions, Inc.:
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
KPMG LLP
Atlanta, Georgia
May 8, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
o2wireless Solutions, Inc.:
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
KPMG LLP
Atlanta, Georgia
May 8, 2000
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Clear Holding, Inc.
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
Jain & Jain, P.C.
Houston, Texas
May 5, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF CLEAR COMMUNICATIONS FOR THE PERIOD ENDED DECEMBER 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 185,548
<SECURITIES> 0
<RECEIVABLES> 4,852,744
<ALLOWANCES> 105,770
<INVENTORY> 0
<CURRENT-ASSETS> 7,223,675
<PP&E> 2,896,633
<DEPRECIATION> 744,462
<TOTAL-ASSETS> 19,191,015
<CURRENT-LIABILITIES> 5,085,210
<BONDS> 0
4,875,046
1,550,000
<COMMON> 271
<OTHER-SE> (2,470,684)
<TOTAL-LIABILITY-AND-EQUITY> 19,191,015
<SALES> 24,485,078
<TOTAL-REVENUES> 24,485,078
<CGS> 19,722,764
<TOTAL-COSTS> 19,722,764
<OTHER-EXPENSES> 7,533,621
<LOSS-PROVISION> 105,770
<INTEREST-EXPENSE> 902,576
<INCOME-PRETAX> (2,771,307)
<INCOME-TAX> (46,941)
<INCOME-CONTINUING> (2,816,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,816,248)
<EPS-BASIC> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CLEAR COMMUNICATIONS FOR THE YEAR ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,509,270
<SECURITIES> 0
<RECEIVABLES> 20,751,162
<ALLOWANCES> 872,200
<INVENTORY> 1,081,143
<CURRENT-ASSETS> 30,036,275
<PP&E> 6,578,496
<DEPRECIATION> 1,576,637
<TOTAL-ASSETS> 59,472,851
<CURRENT-LIABILITIES> 18,026,988
<BONDS> 0
10,960,444
0
<COMMON> 271
<OTHER-SE> (3,004,675)
<TOTAL-LIABILITY-AND-EQUITY> 59,472,851
<SALES> 48,630,800
<TOTAL-REVENUES> 48,630,800
<CGS> 35,918,902
<TOTAL-COSTS> 35,918,902
<OTHER-EXPENSES> 14,510,431
<LOSS-PROVISION> 872,200
<INTEREST-EXPENSE> 2,342,808
<INCOME-PRETAX> (1,798,533)
<INCOME-TAX> 1,225,942
<INCOME-CONTINUING> (572,591)
<DISCONTINUED> 0
<EXTRAORDINARY> (256,918)
<CHANGES> (121,180)
<NET-INCOME> (949,689)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.35)
</TABLE>
