UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
(Rule 13d-101)
Information to be Included in Statements filed pursuant to
Rule 13d-1(a) and amendments thereto filed
pursuant to Rule 13d-2(a)
(Amendment No. )*
Chadmoore Wireless Group, Inc.
------------------------------
(Name of Issuer)
Common Stock, $0.001 par value
------------------------------
(Title of Class of Securities)
157259 10 2
-----------
(CUSIP Number)
Gilles S. Attia, Esq.
Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, California 95814
Tel. No.: 916-558-6700
----------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 4, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following
box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 157259 10 2 13D Page 2 of 7 pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert W. Moore
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada, USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER 1/
NUMBER OF 2,374,266
SHARES
BENEFICIALLY ---------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER 2/
EACH
REPORTING -0-
PERSON WITH ---------------------------------------------------------
9 SOLE DISPOSITIVE POWER 1/
2,374,266
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER 2/
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1/2/
2,374,266
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
1/ Includes 350,000 shares of Common Stock issuable upon exercise of
currently outstanding options. Does not include 750,000 shares of
Common Stock to be issued upon Exercise of Options which vest annually
at the rate of 187,500 shares per year beginning on May 1, 1999.
2/ Does not include any shares of Common Stock or shares of Common Stock
to be received by REI upon conversion or exercise of securities owned
by REI, with whom Moore may be deemed to be acting as a group
and with whom Moore has entered into a Shareholders Agreement which
requires REI and Moore to vote for directors in a certain manner and
which restricts certain dispositions of shares. In addition, the amount
shown does not include additional securities held by REI which are
subject to the Shareholders Agreement
<PAGE>
Page 3 of 7 pages
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer.
The class of equity securities to which this statement relates
is the common stock, par value $0.001 per share (the "Common Stock"), of
Chadmoore Wireless Group, Inc., a Colorado corporation ("Chadmoore"). The
principal executive offices of Chadmoore are located at 2875 East Patrick Lane,
Suite G, Las Vegas, Nevada 89120.
Item 2. Identity and Background.
This Schedule 13D is being filed by Robert W. Moore, the
President and Chief Executive Officer of Chadmoore ("Moore"). The address of
Moore's principal place of business and his principal office is 2875 East
Patrick Lane, Suite G, Las Vegas, Nevada 89120.
During the past five (5) years, Moore has not been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to Federal or
State securities laws or finding any violation with respect to such laws.
Item 3. ource and Amount of Funds or Other Consideration.
On May 4, 1998 (the "Closing Date"), pursuant to an Investment
Agreement, dated as of May 1, 1998 (the "Investment Agreement"), between
Chadmoore and Recovery Equity Investors II, L.P. ("REI"), REI purchased, for the
purchase price of $7,500,000 in cash, the following: (a) 8,854,662 shares of
Common Stock (the "Common Purchased Stock"); (b) 10,119,614 shares of Series C
Preferred Stock of Chadmoore (the "Preferred Purchased Stock"); (c) an
eleven-year warrant to purchase up to 14,612,796 shares of Common Stock at an
exercise price of $0.001 per share of Common Stock (the "Eleven-Year
<PAGE>
Page 4 of 7 pages
Warrant"), which number of shares of Common Stock and exercise price are subject
to adjustment as provided in the Eleven-Year Warrant; (d) a three-year warrant
to purchase up to 4,000,000 shares of Common Stock at an exercise price of $1.25
per share of Common Stock (the "Three-Year Warrant"), which number of shares of
Common Stock and exercise price are subject to adjustment as provided in the
Three-Year Warrant; and (e) a five and one-half year warrant to purchase up to
10,119,614 shares of Common Stock at an exercise price of $0.39 per share of
Common Stock (the "Five and One-Half Year Warrant," and, together with the
Three-Year Warrant and Eleven-Year Warrant, the "Warrants"), which number of
shares of Common Stock and exercise price are subject to adjustment as provided
in the Five and One-Half Year Warrant. The securities acquired by REI are
referred to herein as the "REI Securities."
In connection with the transactions between REI and
Chadmoore; Moore, Chadmoore, and REI entered into a Shareholders Agreement dated
as of the Closing Date (the "Shareholders Agreement"), under the terms of which
Moore may have acquired indirect voting power of the REI( Securities. Moore used
his personal funds to acquire the shares owned directly by him.
Item 4. Purpose of Transaction.
Moore entered into the Shareholders Agreement for the purpose
of assisting the execution of the Investment Agreement between Chadmoore and
REI. It is Moore's understanding that REI entered into the Investment Agreement
and the related agreements, and acquired the Common Purchased Stock, the
Preferred Purchased Stock and the Warrants for investment purposes. Except as
set forth in this Schedule 13D, Moore has no plan or proposals which relate to
or would result in any of the transactions described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
Under the Shareholders Agreement (the "Shareholders
Agreement"), REI and Moore agreed that each shall vote its or his shares, as the
case may be, such that the Board of Directors of Chadmoore shall consist of no
more than seven members and shall contain: (a) two individuals to be designated
by REI (the "REI Directors") and (b) two individuals to be designated by the
Chief Executive Officer of Chadmoore (the "Management Directors"). In addition,
two individuals, to be designated by a majority of the Board of Directors, each
of whom is not a direct or indirect affiliate, officer or director of Chadmoore
or of any subsidiary of Chadmoore or any direct or indirect affiliate or family
member of any of the foregoing (the "Independent Directors"), shall also be
Board members. At any time, either the REI Directors or Management Directors may
elect to increase the number of Independent Directors to three. REI's obligation
to vote for the Management Directors shall terminate in the event of a
Triggering Event, as defined in the Shareholders Agreement. In connection with
the transaction, Chadmoore's By-Laws were amended to increase the number of
directors to seven. On the Closing Date, the Board of Directors of Chadmoore
consisted of the following persons: (a) Joseph J. Finn-Egan and Jeffrey A.
Lipkin as REI Directors; (b) Moore and Jan Zwaik as Management Directors; and
(c) Mark Sullivan and Janice Pillar as Independent Directors. REI and Moore
agreed that, with certain exceptions, neither shall transfer its shares to any
person in the same line of business as Chadmoore.
Further, under a Registration Rights Agreement, dated as of
the Closing Date, by and between Chadmoore and REI (the "Registration Rights
Agreement"), Chadmoore granted to REI "demand" and "piggyback" registration
rights.
Moore understands that Chadmoore may present to its
shareholders, for their approval, an amendment to the Articles of Incorporation
that would require the approval by at least 60% of the holders of shares of
Common Stock in order to consummate a business combination by or sale of
substantially all of Chadmoore's assets. If such amendment is satisfactory to
Moore he anticipates that he will vote for such amendment.
Copies of the Investment Agreement, Three-Year Warrant,
Eleven-Year Warrant, the Five and One-Half Year Warrant, the Shareholders
Agreement, the Registration Rights Agreement and the
<PAGE>
Page 5 of 7 pages
Advisory Agreement are attached hereto as Exhibits 1, 2, 3, 4, 5, 6 and 7
respectively, and the foregoing descriptions of each such document are subject
to and qualified in their entirety by reference to each such document.
Item 5. Interest in Securities of the Issuer.
a. The aggregate number of shares of Common Stock beneficially
owned by Moore is 2,374,266 shares of Common Stock or
approximately 6.9% of such securities, including 350,000
shares of Common Stock to be acquired upon the exercise of
stock options and not including 750,000 shares of Common Stock
to be issued upon Exercise of Options which vest annually at
the rate of 187,500 shares per year beginning on May 1, 1999.
b. The responses of Moore to Items (7) through (11) of the
portions of the cover page of this Schedule 13D that relates
to shares of Common Stock beneficially owned by Moore are
incorporated herein by reference.
c. Other than as reported in this Schedule 13D, Moore has not
effected a transaction in shares of Common Stock during the
past 60 days.
d. No person other, other than REI as described above, has the
right to receive or the power to direct the receipt of
dividends from or the proceeds from the sale of the securities
to which this Schedule 13D relates.
e. Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of
the Issuer.
The responses to Item 4 above are incorporated herein by
reference.
Item 7. Material to be Filed as Exhibits.
The following are filed as Exhibits to this Schedule 13D:
Exhibit 1: Investment Agreement, dated as of May 1,
1998, by and between Chadmoore and REI (with
Exhibits attached thereto).
Exhibit 2: Stock Purchase Warrant, Certificate No.
1, dated May 1, 1998 (included as Exhibit
G-1 to Exhibit 1 hereto).
Exhibit 3: Stock Purchase Warrant, Certificate No.
2, dated May 1, 1998 (included as Exhibit
G-2 to Exhibit 1 hereto).
Exhibit 4: Stock Purchase Warrant, Certificate No.
3, dated May 1, 1998 (included as Exhibit
G-3 to Exhibit 1 hereto).
Exhibit 5: Shareholders Agreement, dated as of May
1, 1998, by and among Chadmoore, REI, and
Robert W. Moore (included as Exhibit F to
Exhibit 1 hereto).
Exhibit 6: Registration Rights Agreement, dated as
of May 1, 1998, by and between Chadmoore and
REI (included as Exhibit E to Exhibit 1
hereto.)
<PAGE>
Page 6 of 7 pages
Exhibit 7: Advisory Agreement, dated as of May 1,
1998, by and between REI and Chadmoore
(included as Exhibit C to Exhibit 1 hereto).
Exhibit 8: Certificate of Designation of Rights and
Preferences of Series C Preferred Stock of
Chadmoore Wireless Group, Inc. (included as
Exhibit D to Exhibit 1 hereto).
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete, and correct.
Dated: May 13, 1998
/s/Robert W. Moore
---------------------------
Robert W. Moore
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
1 Investment Agreement, dated as of May 1, 1998, by and between
Chadmoore and REI.
2 Stock Purchase Warrant, Certificate No. 1, dated May 1, 1998
3 Stock Purchase Warrant, Certificate No. 2, dated May 1, 1998
4 Stock Purchase Warrant, Certificate No. 3, dated May 1, 1998
5 Shareholders' Agreement, dated as of May 1, 1998, by and
among Chadmoore, REI, and Robert W. Moore.
6 Registration Rights Agreement, dated as of May 1, 1998, by
and between Chadmoore and REI.
7 Advisory Agreement, dated as of May 1 1998, by and between
REI and Chadmoore.
8 Certificate of Designation of Rights and Preferences of
Series C Preferred Stock of Chadmoore Wireless Group, Inc.
Exhibit 1
INVESTMENT AGREEMENT
dated as of May 1, 1998
between
RECOVERY EQUITY INVESTORS II, L.P.
and
CHADMOORE WIRELESS GROUP, INC.
<PAGE>
INVESTMENT AGREEMENT, dated as of May 1, 1998, between Recovery
Equity Investors II, L.P., a Delaware limited partnership ("Investor"), and
Chadmoore Wireless Group, Inc., a Colorado corporation (the "Company").
WHEREAS, Investor desires to purchase from the Company, and the
Company desires to sell to the Investor, (a) 8,854,662 shares of Common Stock
(the "Common Purchased Stock"), (b) 10,119,614 shares of Series C Preferred
Stock (the "Preferred Purchased Stock"), and (c) the Warrants; and
WHEREAS, capitalized terms used and not otherwise defined herein
have the meanings set forth in Section 10.1.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF COMMON PURCHASED STOCK, PREFERRED
PURCHASED STOCK AND WARRNTS; CLOSING
1.1 Purchase. The Company agrees to sell to Investor, and
Investor agrees to purchase from the Company, the Common Purchased Stock, the
Preferred Purchased Stock and the Warrants at the Closing on the terms and
subject to the conditions set forth in this Agreement.
1.2 Purchase Price. The aggregate purchase price for the Common
Purchased Stock being purchased hereunder is $ 3,500,000, for the Preferred
Purchased Stock being purchased hereunder is $3,950,000, and for the Warrants
being purchased hereunder is $50,000 (such sums, collectively, being the
"Purchase Price"), payable in cash in the manner provided in Section 1.3.
1.3 Closing. The Closing will take place at the offices of the
Company, 2875 East Patrick Lane, Suite G, Las Vegas, Nevada 89120, or at such
other place as Investor and the Company shall mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Investor shall pay the Purchase
Price by wire transfer of funds to such account as the Company may reasonably
direct by written notice delivered to Investor by the Company at least three
Business Days before the Closing Date. Simultaneously, the Company shall issue
to Investor the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants, in each case free and clear of all Liens, by delivering to Investor
certificates, registered in the name of Investor or any designee thereof,
evidencing the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants. At the Closing, there shall also be delivered to the Company and
Investor the opinions, certificates and other Contracts, documents and
instruments to be delivered under Article V.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Investor as
follows:
2.1 Organization and Qualification. Except as disclosed in
Section 2.1 of the Disclosure Schedule, the Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Colorado, and has full corporate power and authority to conduct its business as
now conducted and as proposed to be conducted under the Business Plan and to
own, use and lease its Assets and Properties. Except as disclosed in Section 2.1
of the Disclosure Schedule, the Company is duly qualified, licensed or admitted
to do business and is in good standing in each jurisdiction in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary.
2.2 Authority Relative to this Agreement and the Operative
Agreements. The Company has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the Operative Agreements and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action by the Board of Directors of the Company, and
no other action on the part of the Company or its shareholders is necessary to
authorize the execution, delivery and performance of this Agreement and the
Operative Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby. This Agreement and the Operative Agreements
have been duly and validly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
2.3 Capital Stock. As of the date hereof, the authorized capital
stock of the Company consists only of 100,000,000 shares of Common Stock, par
value $0.001 per share (the "Common Stock"), and 40,000,000 shares of Preferred
Stock, par value $0.001 per share (the "Preferred Stock"), of which 25,299,035
shares of Common Stock and 144,981 shares of Series B Preferred Stock are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
have been issued in compliance with all applicable federal, state and foreign
securities Laws. Immediately after giving effect to the Closing and the other
transactions contemplated hereby to occur on the Closing Date, (i) the
authorized capital stock of the Company will consist of 100,000,000 shares of
Common Stock, 40,000,000 shares of Preferred Stock, of which 750,000 shares of
Series A Preferred Stock are authorized, 225,000 shares of Series B Preferred
Stock are authorized and 11,000,000 shares of Series C Preferred Stock are
authorized, each having the terms and conditions specified in the Amended
Charter, and (ii) the outstanding capital stock of the
-2-
<PAGE>
Company will consist of 34,153,697 shares of Common Stock, 8,854,662 of which
will be owned by the Investor, 219,000 shares of Series B Preferred Stock, none
of which are owned by the Investor, and 10,119,614 shares of Series C Preferred
Stock, all of which will be owned by the Investor. Except for the Common
Purchased Stock, the Preferred Purchased Stock and the shares of Common Stock
issuable upon exercise of the Warrants or as disclosed in Section 2.3 (a) of the
Disclosure Schedule, no shares of Common Stock or Preferred Stock are held in
treasury or are reserved for issuance. Section 2.3 (b) of the Disclosure
Schedule lists the name of each record holder as of April 1, 1998 of more than
1% of the outstanding shares of Common Stock or Preferred Stock. Except as
disclosed in Section 2.3(c) of the Disclosure Schedule, (i) there are no
outstanding Options or agreements, arrangements or understandings to issue
Options with respect to the Company, (ii) there are no agreements, arrangements
or understandings pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Common Stock or Equity Equivalents (the
securities described in (i) and (ii) being, collectively, the "Identified
Securities") and (iii) there are no preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of the Company's capital stock. With respect to each Identified
Security, Section 2.3 (d) of the Disclosure Schedule sets forth a true, complete
and accurate description of the principal terms thereof, including the holder
thereof, the number and type of securities issuable thereunder, the exercise
price therefor or thereunder and the exercise period or term thereof. There are
no Identified Securities issued or outstanding other than as are listed in
Section 2.3 (e) of the Disclosure Schedule. There are no agreements,
arrangements or understandings (i) to pay any dividend or make any distribution
to the holders of any of the Identified Securities, (ii) to pay any dividend or
make any distribution on the capital stock of the Company which adjusts, in any
way, any of the Identified Securities, (iii) to grant, issue or sell any Options
or rights to purchase stock, warrants, securities or other property to the
holders of any of the Identified Securities or (iv) to grant, issue or sell any
Options or rights to purchase stock, warrants, securities or other property
which adjusts, in any manner, any of the Identified Securities. On the Closing
Date, the delivery of the certificate or certificates evidencing the Common
Purchased Stock, the Preferred Purchased Stock and the Warrants purchased
hereunder to the Investor will transfer to Investor good and valid title to the
Common Purchased Stock, the Preferred Purchased Stock and the Warrants, in each
case free and clear of all Liens, and the Common Purchased Stock and the
Preferred Purchased Stock will have been duly authorized, validly issued, fully
paid and nonassessable. The Company has taken all necessary corporate actions to
reserve the full number of shares of Common Stock issuable upon exercise of the
Warrants. The shares of Common Stock issuable upon exercise of the Warrants,
when issued upon such exercise, will be duly authorized, validly issued, fully
paid and nonassessable. The shares of New Preferred Stock, when issued, will be
duly authorized, validly issued and fully paid and nonassessable. Neither the
execution, delivery or performance by the Company of this Agreement or the
Operative Agreements, the issuance of the Common Purchased Stock, the Preferred
Purchased Stock, the New Preferred Stock and the Warrants as contemplated
hereby, nor the issuance of shares of Common Stock upon exercise of the
Warrants, the performance by the Company of its obligations under its
certificate of incorporation, its by-laws, the Amended Charter, the By-Laws
Amendment, hereunder or under the Operative Agreements, will give rise to or
result in (with or without notice, lapse of time or both) any antidilution
adjustment, acceleration of vesting or other change under or to any Option or
Identified Securities. Except for the Shareholders Agreement, the Company is not
-3-
<PAGE>
a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between or among any Persons
which affects or relates to the voting, or giving of written consents or
nominating directors, with respect to the Company, any of its Subsidiaries or
any of their respective securities. Except as set forth in Section 2.3 (f) of
the Disclosure Schedule, to the Company's knowledge, no holder of Common Stock
or Options of the Company are or have been, the subject of any investigation by
any Governmental or Regulatory Authority.
2.4 Subsidiaries; Company; Business. (a) Section 2.4 (a) of the
Disclosure Schedule lists the name of each Subsidiary and all lines of business
in which each Subsidiary is participating or engaged or has previously
participated or engaged. Except as set forth in Section 2.4(b) of the Disclosure
Schedule, each Subsidiary is a corporation or limited liability company, as the
case may be, duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation and has full power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. Except as set forth in Section 2.4(b) of the
Disclosure Schedule, each Subsidiary is duly qualified, licensed or admitted to
do business and is in good standing in those jurisdictions in which the
ownership, use or leasing of such Subsidiary's Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. Section 2.4(a) of the Disclosure Schedule lists for each
Subsidiary the amount of its authorized and outstanding equity interests. All of
the outstanding equity interests of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and, except for the
minority interests indicated on Section 2.4(a) of the Disclosure Schedule, are
owned, beneficially and of record, by the Company or by Subsidiaries wholly
owned, directly or indirectly, by the Company, in each case free and clear of
all Liens, except for Permitted Liens. Except as set forth on Section 2.4(a) of
the Disclosure Schedule, there are no outstanding Options with respect to any
Subsidiary or agreements, arrangements or understandings to issue Options with
respect to any Subsidiary and there are no preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of any Subsidiary's equity interests.
(b) The name of each director and officer of the Company and each
Subsidiary on the date hereof, and the position with the Company and such
Subsidiary held by each, are listed in Section 2.4(a) of the Disclosure
Schedule. The Company has prior to the execution of this Agreement delivered to
Investor true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable constitutive documents) of the
Company and each of its Subsidiaries. Except as set forth in Section 2.4 of the
Disclosure Schedule, the Company holds no equity, membership, partnership, joint
venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Company of
this Agreement do not, and the execution and delivery by the Company of the
Operative Agreements, the performance by the Company of its obligations under
this Agreement and the Operative Agreements and the consummation of the
transactions contemplated hereby and thereby (including the issuance of the
Common Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock
and the
-4-
<PAGE>
Warrants and the issuance of shares of Common Stock upon exercise of the
Warrants) do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation
(including the Amended Charter) or by-laws (including the By-Law Amendment) (or
other comparable constitutive documents) of the Company or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.6 of the
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to the Company, any of its
Subsidiaries or any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (vi) result
in the creation or imposition of any Lien upon the Company or any Subsidiary or
any of their respective Assets and Properties under, any Contract or License to
which the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound, except to the extent that the
occurrence of any of the events described in (i) through (vi) would either
individually or taken together with any or all of such other occurrences not be
deemed to have or could not reasonably be expected to have a material adverse
effect on the Business or Condition of the Company.
2.6 Governmental Approvals and Filings. Except as disclosed in
Section 2.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
the Company or any Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements or
the consummation of the transactions contemplated hereby or thereby.
2.7 Books and Records. The minute books, stock record books and
other similar records of the Company and its Subsidiaries have been provided to
Investor prior to the execution of this Agreement, are complete and correct in
all material respects and have been maintained in accordance with sound business
practices. Such minute books contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the directors, stockholders, managers, members and
committees of the boards of director (or similar governing bodies) of the
Company and the Subsidiaries.
2.8 SEC Documents; Financial Statements. Each SEC Document
required to be filed by the Company or any of its Subsidiaries with the SEC has
been filed and, as of its filing date,
-5-
<PAGE>
each such SEC Document, and any SEC Document that will be filed with the SEC
prior to or after the Closing, complied or will comply in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
none of the SEC Documents, except to the extent that information contained in
any SEC Document has been revised or superseded by a later-filed or later
declared effective, as the case may be, SEC Document, contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
material fact (x) necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or (y) required to
be stated therein or necessary to make the statements therein not misleading.
The financial statements of the Company included in the SEC Documents comply
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
2.9 Absence of Changes. Since the Audited Financial Statement
Date, except as set forth in Section 2.9 of the Disclosure Schedule or as
disclosed in the SEC Documents filed prior to the date hereof, there has not
been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected to
result in a material adverse change, in the Business or Condition of the
Company. None of the other representations or warranties set forth in this
Agreement shall be deemed to limit the foregoing. In addition, without limiting
the foregoing, except as expressly contemplated hereby and by the Operative
Agreements and except as disclosed in Section 2.9 of the Disclosure Schedule,
there has not occurred since the Audited Financial Statement Date:
(a) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or equity interests) of the
Company or any of its Subsidiaries, or any direct or indirect redemption,
purchase or other acquisition by the Company or any of its Subsidiaries of any
such capital stock (or equity interests) of or any Option with respect to the
Company or any of its Subsidiaries;
(b) except for the execution, delivery and performance by the
Company of this Agreement and the Operative Agreements, and the transactions
contemplated hereby or thereby, any authorization, issuance, sale or other
disposition by the Company or any Subsidiary of any shares of capital stock of,
or Option with respect to, the Company or any Subsidiary, or any modification or
amendment of any right of any holder of any outstanding shares of capital stock
of, or Option with respect to, the Company or any Subsidiary;
(c) (i) any increase in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, shareholder, manager, member, employee or consultant of the Company or
any Subsidiary; (ii) any payment of consideration of any nature whatsoever
(other than salary, commissions or consulting fees paid to any current or former
officer, director, shareholder, manager, member, employee or consultant of the
Company or any
-6-
<PAGE>
Subsidiary) to any current or former officer, director, stockholder, manager,
member, employee or consultant of the Company or any Subsidiary; (iii) any
establishment or modification of (A) targets, goals, pools or similar provisions
under any Benefit Plan, employment Contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan, employment Contract or other employee compensation
arrangement; or (iv) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Benefit Plan;
(d) (i) any incurrence by the Company or any Subsidiary of
Indebtedness in an amount exceeding $25,000 individually and $100,000 in the
aggregate or (ii) any voluntary purchase, cancellation, prepayment or complete
or partial discharge in advance of a scheduled payment date with respect to, or
waiver of any right of the Company or any Subsidiary under, any Indebtedness of
or owing to the Company or any Subsidiary;
(e) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or personal
property or equipment of the Company or any Subsidiary in an aggregate amount
exceeding $10,000;
(f) any write-off or write-down of or any determination to write
off or write-down any of the Assets and Properties of the Company or any
Subsidiary in an aggregate amount exceeding $50,000;
(g) any purchase of any Assets and Properties of any Person or
disposition of, or incurrence of a Lien (other than a Permitted Lien) on, any
Assets and Properties of the Company or any Subsidiary, other than acquisitions
or dispositions of inventory in the ordinary course of business of the Company
or any such Subsidiary consistent with past practice and other than acquisitions
of dispositions of Assets and Properties not exceeding $20,000 in any single
transaction and $100,000 in the aggregate;
(h) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.15(a) or 2.18(a), (ii) any License held by the Company or
any Subsidiary or (iii) any Intellectual Property;
(i) any capital expenditures or commitments for additions to
property, plant or equipment of the Company or any of its Subsidiaries (x) with
respect to any SMR System or (y) constituting capital assets in an aggregate
amount exceeding $25,000;
(j) any commencement, termination or change by the Company or any
Subsidiary of any line of business;
-7-
<PAGE>
(k) any transaction by the Company or any Subsidiary with any
officer, director, stockholder, manager, member, Affiliate or Associate of the
Company or any Subsidiary, other than pursuant to any Contract in effect on the
Audited Financial Statement Date and disclosed to Investor pursuant to Section
2.18(a)(viii) or other than pursuant to any contract of employment and listed
pursuant to Section 2.18(a)(i) of the Disclosure Schedule;
(l) any change in the accounting or Tax methods or procedures of
the Company or any Subsidiary or any other transaction involving or development
affecting the Company or any Subsidiary outside the ordinary course of business
consistent with past practice; or
(m) any entering into of an agreement to do or engage in any of
the foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the Audited Financial Statements or in the notes thereto or as
disclosed in Section 2.10 of the Disclosure Schedule, there are no Liabilities
of, relating to or affecting the Company or any Subsidiary or any of their
respective Assets and Properties, other than Liabilities incurred in the
ordinary course of business consistent with past practice since the Audited
Financial Statement Date and in accordance with the provisions of this Agreement
and the Operative Agreements which, in the aggregate, are not material to the
Business or Condition of the Company and are not for tort or for breach of
contract.
2.11 Taxes. Except as disclosed in Section 2.11 of the Disclosure
Schedule:
(a) All Tax Returns required to have been filed by or with
respect to the Company or any Subsidiary or any affiliated, consolidated,
combined, unitary or similar group of which the Company or any Subsidiary is or
was a member (a "Relevant Group") have been duly and timely filed or properly
extended, and each such Tax Return is correct and complete in all material
respects and correctly and completely reflects Tax liability and all other
material information required to be reported thereon. All Taxes due and payable
by the Company or any Subsidiary or any member of a Relevant Group, whether or
not shown on any Tax Return, have been paid or adequately reserved for.
(b) The provisions for Taxes dur by the Company or any Subsidiary
in the Audited Financial statements are sufficient for all unpaid Taxes, being
current Taxes not yet due and payable, of the Company or any Subsidiary.
(c) Neither the Company nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by a jurisdiction in which the Company or any Subsidiary does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
-8-
<PAGE>
(d) The Company and its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(e) To the knowledge of the Company, it does not expect any
Taxing Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. There is no dispute or claim concerning any Tax
liability of the Company or any Subsidiary either (i) to the knowledge of the
Company, threatened, claimed or raised by any Taxing Authority or (ii) of which
the Company or any Subsidiary is or reasonably should be aware. There are no
Liens for Taxes upon the Assets or Properties of the Company or any Subsidiary
(except for inchoate Liens for Taxes not yet due and payable). Section 2.11 of
the Disclosure Schedule indicates those Tax Returns, if any, of the Company or
any Subsidiary that have been audited, and indicates those Tax Returns of the
Company or any Subsidiary that currently are the subject of audit. The Company
has delivered to Investor complete and correct copies of all federal, state,
local and foreign income Tax Returns filed by, and all Tax examination reports
and statements of deficiencies assessed against or agreed to by, the Company or
any Subsidiary since December 31, 1993.
(f) Neither the Company nor any Subsidiary has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency.
(g) Neither the Company nor any Subsidiary has received any
written ruling related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(h) Neither the Company nor any Subsidiary has any liability for
Taxes of any Person other than the Company or such Subsidiary (i) under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign Law), (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
(i) Neither the Company nor any Subsidiary (i) has agreed to, is
required to, or reasonably expects that it might have to, make any adjustment
under Section 481 of the Code (or any comparable provision of state, local or
foreign Law) by reason of a change in accounting method or (ii) is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code or comparable
provisions of any state statutes, and none of the Assets and Properties of the
Company or any Subsidiary is subject to an election under Section 341(f) of the
Code or comparable provisions of any state, local or foreign Law.
(j) Neither the Company nor any Subsidiary is a party to or is
bound by any obligations under any tax sharing, tax allocation, tax indemnify or
similar agreement or arrangement.
(k) Neither the Company nor any Subsidiary is a party to any
joint venture, partnership or other arrangement that is treated as a partnership
for federal income Tax purposes.
-9-
<PAGE>
(l) No Taxing Authority has proposed Tax adjustments with respect
to the Company or any Subsidiary directly or indirectly in respect of an
intercompany transaction or arrangement between or among the Company or any
Subsidiary, or a transaction or arrangement between or among the Company or any
Subsidiary, on the one hand, and any Affiliate of the Company or Affiliate of
such Affiliate, on the other hand, for any period ending on or prior to the
Closing Date, including (i) any Tax arising from an adjustment in respect of
such transaction or arrangement under Section 482 of the Code, the Treasury
regulations thereunder, any related provision or any similar provision of state,
local or foreign Law and (ii) any Tax arising from a failure fully to comply
with applicable documentation, record keeping and filing requirements in respect
of such transaction or arrangement.
(m) Neither the Company nor any Subsidiary has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(n) There is currently no limitation on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or other
similar items of the Company or any Subsidiary under (i) Section 382 of the
Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv) Section
269 of the Code and (v) Section 1502 of the Code and Treasury regulations
promulgated thereunder, except to the extent of any ownership change, equity
structure shift, or ownership shift as defined in Section 382 of the Code as a
result of the transaction contemplated by this Agreement.
(o) Neither the Company nor any Subsidiary has been a United
States real property holding corporation within the meaning of Section
897(c)(1)(A)(ii) of the Code.
2.12 Legal Proceedings. (a) . Except as set forth in SEC
Documents filed with the SEC prior to the date of this Agreement and Section
2.12(b) of the Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to the
knowledge of the Company and the Subsidiaries, threatened against, relating
to or affecting the Company or any Subsidiary or any of their respective
Assets and Properties;
(ii) there are no facts or circumstances known to the
Company or any Subsidiary that could reasonably be expected to give rise to
any Action or Proceeding against, relating to or affecting the Company or
any Subsidiary;
(iii) neither the Company nor any Subsidiary has received
notice or knows of any Orders outstanding against the Company or any
Subsidiary; and
(iv) neither the Company nor any Subsidiary has received
notice or knows of any defects, dangerous or substandard conditions in the
products or materials sold, distributed, or to be sold or distributed by
the Company or any Subsidiary that could cause bodily injury, sickness,
disease, death, or damage to property, or result in loss of use
-10-
<PAGE>
of property, or any claim, suit, demand for arbitration or notice seeking
damages for bodily injury, sickness, disease, death, or damage to property,
or loss of use of property.
(b) Prior to the execution of this Agreement, the Company has
delivered to Investor all responses of counsel for the Company and the
Subsidiaries to auditor's requests for information for the preceding five years
(together with any updates provided by such counsel) regarding Actions or
Proceedings pending or threatened against, relating to or affecting the Company
or any Subsidiary. Except as set forth in SEC Documents filed with the SEC prior
to the date of this Agreement, Section 2.12(b) of the Disclosure Schedule sets
forth all material Actions or Proceedings relating to or affecting the Company,
any Subsidiary, or any of their respective Assets and Properties during the
five-year period prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in
Section 2.13 of the Disclosure Schedule, neither the Company nor any Subsidiary
is or has been at any time in violation of or in default under, any Law or Order
applicable to the Company or any Subsidiary or any of their respective Assets
and Properties, the violation of which or default under either individually or
taken together with any or all such violations or defaults would be deemed to
have or could reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. In furtherance of the foregoing:
(a) Neither the Company nor any Subsidiary has violated any
federal, state or, to the knowledge of the Company and any Subsidiary foreign
securities Law in connection with the offer, sale or purchase of any securities;
(b) None of the processes followed, results obtained, services
provided or products made, modified or installed by the Company or any
Subsidiary, or by any managers, to the knowledge of the Company and any
Subsidiary, with respect to SMR Licenses held by the Company or any Subsidiary
(pursuant to Third Party Management Agreements or otherwise) or by the Company
or any Subsidiary in the management or operation of SMR Licenses managed by any
of them (pursuant to Company Management Agreements or otherwise), violate any
material Law or Order applicable thereto; and
(c) the Company, its Subsidiaries, each of the managers with
respect to SMR Licenses held by the Company or a Subsidiary, and the Company and
its Subsidiaries in their capacities as managers under Company Management
Agreements, has each timely obtained all licenses and permits and timely filed
all reports required to be filed under any applicable Laws.
2.14 BenefiT Plans; ERISA. All Benefit Plans of the Company and
each Subsidiary are listed in Section 2.14 of the Disclosure Schedule, and
copies of all documentation relating to such Benefit Plans (including all plan
documents, written descriptions of plans, actuarial reports and governmental
filings and determinations with respect to such Benefit Plans) have been
delivered or made available to Investor. None of the Benefit Plans are Defined
Benefit Plans. Except as disclosed in Section 2.14 of the Disclosure Schedule:
-11-
<PAGE>
(a) each Benefit Plan has at all times been maintained and
administered in accordance with its terms in all material respects, and each
such Benefit Plan and the administration thereof complies, and has at all times
complied, in all material respects with the requirements of all applicable Law,
including ERISA and the Code;
(b) each Benefit Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been tax
exempt under Section 501(a) of the Code;
(c) neither the Company nor any Subsidiary is now, nor at any
time has been, a member of a controlled group, as defined in Section
412(n)(6)(B) of the Code, with any other company, entity or enterprise;
(d) neither the Company nor any Subsidiary presently maintains or
contributes to, nor any time has maintained or contributed to, any
single-employer plan (within the meaning of Section 3(41) of ERISA) subject to
Title IV of ERISA, and neither the Company nor any Subsidiary is aware of any
circumstances pursuant to which the Company or any Subsidiary could have a
material liability to any party under Title IV of ERISA;
(e) no Benefit Plan is a "multiemployer" plan within the meaning
of Section 3(37) of ERISA;
(f) neither the Company nor any Subsidiary has incurred, or
reasonably expects to incur, any liability for any tax imposed under Sections
4971 through 4980B of the Code or civil liability under Section 502(I) or (l) of
ERISA;
(g) no benefit under any Benefit Plan, including any severance or
parachute payment plan or agreement, will be established or become accelerated,
vested or payable by reason of any transaction contemplated under this
Agreement;
(h) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or Section 4980B of the Code;
(i) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of the Company and Subsidiaries, threatened against or with
respect to any Benefit Plan and there are no facts or circumstances known to the
Company or any Subsidiary that could reasonably be expected to give rise to any
such suit, action or other litigation;
(j) no tax has been incurred under Section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto); and
-12-
<PAGE>
(k) all contributions to Benefit Plans that were required to be
made under such Benefit Plans have been made; and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, and each of the Company and each Subsidiary has
performed all material obligations required to be performed as of such date
under all Benefit Plans.
2.15 Real Property. (a) Section 2.15(a) of the Disclosure
Schedule contains a true and correct list of (i) each parcel of real property
owned (the "Owned Real Property") by the Company or any Subsidiary, (ii) each
parcel of real property leased by the Company or any Subsidiary (as lessor or
lessee) (the "Leased Real Property") and (iii) all Liens (other than Permitted
Liens) relating to or affecting any parcel of real property referred to in
clauses (i) and (ii).
(b) Each of the Company and the Subsidiaries has good and
marketable title to the Owned Real Property, free and clear of all Liens, other
than as specifically referred to in the Audited Financial Statements or in
Section 2.15(b) of the Disclosure Schedule.
(c) Subject to the terms of their respective leases, the Company
or a Subsidiary has a valid and subsisting leasehold estate in and the right to
quiet enjoyment of the Leased Real Properties for the full term of the lease
thereof. Each lease referred to in clause (ii) of paragraph (a) above is a
legal, valid and binding agreement, enforceable in accordance with its terms, of
the Company or a Subsidiary and of each other Person that is a party thereto,
and except as set forth in Section 2.15(c) of the Disclosure Schedule, there is
no, and neither the Company nor any Subsidiary has received notice of any,
default (or any condition or event which, after notice or lapse of time or both,
would constitute a default) thereunder. Neither the Company nor any Subsidiary
owes brokerage commissions or finders fees with respect to any such Leased Real
Property, except to the extent that the Company or any Subsidiary may renew the
term of any such lease, in which case, any such commissions and fees would be in
amounts that are reasonable and customary for the spaces so leased, given their
intended use and terms.
(d) Except as disclosed in Section 2.15(d) of the Disclosure
Schedule, the improvements on the Owned Real Property and the Leased Real
Property are in good operating condition and in a state of good maintenance and
repair, ordinary wear and tear excepted, are adequate and suitable for the
purposes for which they are presently being used and, to the knowledge of the
Company and the Subsidiaries, there are no condemnation or appropriation
proceedings pending or threatened against any of such real property or the
improvements thereon.
(e) Neither the Company nor any of its Subsidiaries has any
knowledge, nor has the Company or any of its Subsidiaries received any notice,
of any claim, action or proceeding, actual or threatened, against the Company,
any of its Subsidiaries, or the Owned Real Property or the Leased Real Property
by any Person which would materially affect the future use, occupancy or value
of the Owned Real Property or the Leased Real Property or any part thereof.
-13-
<PAGE>
2.16 Tangible Personal Property. The Company or a Subsidiary is
in possession of and has good and marketable title to, or has valid leasehold
interests in or valid rights under Contract to use, all tangible personal
property used in the conduct of its business as currently conducted, including
all tangible personal property reflected on the Audited Financial Statements and
tangible personal property acquired since the Audited Financial Statement Date,
other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement and the
Operative Agreements. All such tangible personal property is free and clear of
all Liens, other than Permitted Liens, and is adequate and suitable for the
conduct by the Company and its Subsidiaries of the business presently conducted
by them, and is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
2.17 Intellectual Property Rights. The only Intellectual Property
owned or licensed for use by the Company or the Subsidiaries is disclosed in
Section 2.17(i) of the Disclosure Schedule. The Company and the Subsidiaries
have all right, title and interest in each item of Intellectual Property
disclosed in Section 2.17(i) of the Disclosure Schedule, and except as disclosed
in Section 2.17(ii) of the Disclosure Schedule, such Intellectual Property is
free and clear of all Liens, other than Permitted Liens. No other Intellectual
Property is used or necessary in the conduct of the business of the Company and
the Subsidiaries as currently conducted. Except as disclosed in Section
2.17(iii) of the Disclosure Schedule, (a) the Company and the Subsidiaries have
all necessary rights to use the Intellectual Property disclosed therein, (b) all
registrations, on behalf of the Company and the Subsidiaries, with and
applications to Governmental or Regulatory Authorities in respect of such
Intellectual Property are valid and in full force and effect and are not subject
to the payment of any Taxes or maintenance fees or the taking of any other
actions by the Company and the Subsidiaries to maintain their validity or
effectiveness, (c) there are no restrictions on the direct or indirect transfer
of any such Intellectual Property, (d) the Company has delivered to Investor
prior to the execution of this Agreement documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in such Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such invention, process, design, computer program or other know-how
or trade secret, (e) the Company and the Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
trade secrets, (f) neither the Company nor any Subsidiary has granted any
license, agreement or other permission to use such Intellectual Property and (g)
neither the Company nor any Subsidiary has any knowledge that such Intellectual
Property is being infringed by any other Person. To the knowledge of the Company
and any Subsidiary, neither the Company nor any Subsidiary is infringing any
Intellectual Property of any other Person. No claim is pending or, to the
knowledge of the Company and any Subsidiary, has been threatened alleging any
such infringement or with respect to the ownership, validity, license or use of,
or any infringement resulting from, either the Company's or any Subsidiary's
Intellectual Property or the sale of any products or services by the Company or
any Subsidiary.
2.18 Contracts. (a) Section 2.18(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below) contains a
true and complete list of each of the
-14-
<PAGE>
following Contracts or other arrangements (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto and all waivers of any terms thereof,
have been delivered to Investor prior to the execution of this Agreement), to
which the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing
for a commitment of employment or consultant services for a specified or
unspecified term, the name, position and rate of compensation of each
Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of
the Company or any Subsidiary to make payments (with or without notice,
passage of time or both) to any Person in connection with, or as a
consequence of, the transactions contemplated hereby (including the
exercise of the Warrants) or by the Operative Agreements or to any employee
who is disclosed in Section 2.22(a) of the Disclosure Schedule, other than
with respect to salary or incentive compensation payments in the ordinary
course of business consistent with past practice;
(ii) all Contracts with any Person containing any provision
or covenant prohibiting or limiting the ability of the Company or any
Subsidiary to engage in any business activity or compete with any Person or
prohibiting or limiting the ability of any Person to compete with the
Company or any Subsidiary or prohibiting or limiting disclosure of
confidential or proprietary information;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company
or any Subsidiary;
(v) all Contracts (A) with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees, (B) with aggregators, manufacturers and equipment vendors, and
(C) with respect to the sale of services, products or both, to customers;
(vi) all guarantees of any Indebtedness or other obligations
of the Company, any Subsidiary or any third Person;
(vii) all Contracts relating to (A) the future disposition
or acquisition of any Assets and Properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice and the provisions of this Agreement and the Operative Agreements,
and (B) any Business Combination;
-15-
<PAGE>
(viii) all executory Contracts between or among the Company
or any Subsidiary, on the one hand, and any current or former officer,
director, stockholder, manager, member, Affiliate or Associate of the
Company or any Subsidiary or any Associate of any such officer, director,
stockholder or Affiliate (other than the Company or any Subsidiary), on the
other hand, other than contracts disclosed pursuant to Section 2.18(a)(i);
(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts that (A) limit or contain restrictions on
the ability of the Company or any Subsidiary to declare or pay dividends
on, to make any other distribution in respect of or to issue or purchase,
redeem or otherwise acquire its capital stock, to incur Indebtedness, to
incur or suffer to exist any Lien, to purchase or sell any Assets and
Properties, to change the lines of business in which it participates or
engages or to engage in any Business Combination, (B) require the Company
or any Subsidiary to maintain specified financial ratios or levels of net
worth or other indicia of financial condition or (C) require the Company or
any Subsidiary to maintain insurance in certain amounts or with certain
coverages;
(xi) all powers of attorney and comparable delegations of
authority;
(xii) all Company Management Agreements and Third Party
Management Agreements; and
(xiii) all other Contracts not otherwise required to be
disclosed in Section 2.18(a) of the Disclosure Schedule which are material
to the Business or Condition of the Company.
(b) Each Contract required to be disclosed in Section 2.18(a) of
the Disclosure Schedule, including each Company Management Agreement and each
Third Party Management Agreement is in full force and effect (except for
breaches and defaults of which neither the Company nor any Subsidiary has any
knowledge) and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto; and, except as disclosed in
Section 2.18(b) of the Disclosure Schedule, neither the Company, any Subsidiary
nor, to the knowledge of the Company and the Subsidiaries, any other party to
such Contract is, nor has received notice that it is, in violation or breach of
or default under any such Contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such Contract).
(c) Neither the Company nor any Subsidiary has knowledge of any
Contract to which either is a party that could give rise to a material Loss to
the Company or any Subsidiary by reason of the pricing terms or any other terms
contained therein.
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a
true and complete list of all Licenses used in and material to the business or
operations of the Company or any
-16-
<PAGE>
Subsidiary, setting forth the owner, the function and the expiration and renewal
date of each. Except as disclosed in Section 2.19 of the Disclosure Schedule:
(a) the Company and its Subsidiaries own or validly hold all
Licenses that are material to their respective business or operations;
(b) each License listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect; and
(c) neither the Company nor any Subsidiary is, or has received
any notice that it is, in default (or with the giving of notice or lapse of time
or both, would be in default) under any such License.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains
a true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business, operations or employees of the Company and its Subsidiaries or
affect or relate to the ownership, use or operation of any of the Assets and
Properties of the Company or any Subsidiary and that (a) have been issued to the
Company or any Subsidiary or (b) have been issued to any Person (other than the
Company or any Subsidiary) for the benefit of the Company or any Subsidiary. The
insurance coverage provided by the policies described in clause (a) above will
not terminate or lapse by reason of any of the transactions contemplated by this
Agreement or the Operative Agreements. Each policy listed in Section 2.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and neither the Company, any
Subsidiary nor the Person to whom such policy has been issued has received any
notice of cancellation or termination in respect of any such policy or is in
default thereunder, and neither the Company nor any Subsidiary knows of any
reason or state of facts that could lead to the cancellation of such policies.
The insurance policies listed in Section 2.20 of the Disclosure Schedule, (i) in
light of the business, operations and Assets and Properties of the Company and
the Subsidiaries are in amounts and have coverages that are reasonable and
customary for Persons engaged in such businesses and operations and having such
Assets and Properties and (ii) are in amounts and types of coverage as required
by any Contract to which the Company or any Subsidiary is a party or by which
any of its Assets and Properties is bound. Section 2.20 of the Disclosure
Schedule contains a list of all claims made under any insurance policies
covering the Company and its Subsidiaries. Neither the Company nor any
Subsidiary has received notice that any insurer under any policy referred to in
this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. The Company and the Subsidiaries
have, in light of their business, location, operations, Assets and Properties,
maintained, at all times, without interruption, insurance in scope and types of
coverage that the failure to maintain such amount or types of coverage would not
have a material adverse effect on either any of the Assets and Properties or the
Business or Condition of the Company, in either case either individually or
taken together with any or all of such failures.
-17-
<PAGE>
2.21 Affiliates Transactions. (a) Except as disclosed in Section
2.21(a) of the Disclosure Schedule, (i) there are no Liabilities between the
Company or any Subsidiary, on the one hand, and any current or former officer,
director, stockholder, manager, member, Affiliate (other than the Company and
its Subsidiaries) or Associate of the Company or any Subsidiary or any Associate
of any such officer, director, stockholder or Affiliate, on the other hand, (ii)
neither the Company nor any Subsidiary provides or causes to be provided any
assets, services or facilities to any such current or former officer, director,
stockholder, manager, member, Affiliate or Associate, (iii) neither the Company,
any Subsidiary nor any such current or former officer, director, stockholder,
manager, member, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company or any Subsidiary, and (iv)
neither the Company nor any Subsidiary beneficially owns, directly or
indirectly, any Investment Assets of any such current or former officer,
director, stockholder, manager, member, Affiliate or Associate.
(b) Except as disclosed in Section 2.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 2.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on terms
no less favorable to the Company than if such Liability or transaction was
incurred on an arm's-length basis on competitive terms.
2.22 Employees: Labor Relations. (a) Section 2.22(a) of the
Disclosure Schedule contains a list of the name of each officer, manager,
employee and consultant of the Company and its Subsidiaries, together with such
person's position or function, annual base salary or wages and any incentives or
bonus arrangement with respect to such person. Neither the Company nor any
Subsidiary has received any information that would lead it to believe that any
such person will or may cease to be engaged by the Company or any Subsidiary, or
will refuse offers of engagement by the Company, for any reason, including
because of the consummation of the transactions contemplated by this Agreement
and the Operative Agreements.
(b) Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, (i) there are no material controversies between the Company or any
Subsidiary, on the one hand, and any employee or consultant of the Company or
any Subsidiary, on the other hand, (ii) no employee of the Company or any
Subsidiary is presently a member of a collective bargaining unit and, to the
knowledge of the Company or any Subsidiary, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
employees of the Company or any Subsidiary and (iii) no unfair labor practice
complaint or sex or age discrimination claim has been brought against the
Company or any Subsidiary before the National Labor Relations Board or any other
Governmental or Regulatory Authority and there are no facts or circumstances
known to the Company or any Subsidiary that could reasonably be expected to give
rise to such complaint or claim. There has been no work stoppage, strike or
other concerted action by employees of the Company or any Subsidiary. The
Company and its Subsidiaries have complied in all material respects with all
applicable Laws relating to the employment of labor, including, those relating
to wages, hours and collective bargaining.
-18-
<PAGE>
2.23 Environmental Matters.
(a) Except as set forth in Section 2.23(a) of the Disclosure
Schedule, the Company and its Subsidiaries have obtained all necessary
Environmental Permits required for the operation of their respective Assets and
Properties.
(b) Except as set forth in Section 2.23(b) of the Disclosure
Schedule, the Company and the Subsidiaries are in compliance in all material
respects with all terms, conditions and provisions of all applicable (i)
Environmental Permits and (ii) Environmental Laws required for the operation of
their respective Assets and Properties.
(c) Except as set forth in Section 2.23(c) of the Disclosure
Schedule, there are no past, pending or, to the knowledge of the Company or any
Subsidiary, threatened Environmental Claims against the Company or any
Subsidiary, and neither the Company nor any Subsidiary knows of any facts or
circumstances which could reasonably be expected to form the basis for any
Environmental Claim against the Company or any Subsidiary.
(d) Except as set forth in Section 2.23(d) of the Disclosure
Schedule, no Releases of Hazardous Materials have occurred at, from, in, to, on,
or under any Site and no Hazardous Materials are present in, on, about or
migrating to or from any Site that are reasonably likely to give rise to an
Environmental Claim against the Company or any Subsidiary.
(e) Except as set forth in Section 2.23(e) of the Disclosure
Schedule, neither the Company, nor any Subsidiary, nor any predecessor of the
Company or any Subsidiary, nor any entity previously owned by the Company or any
Subsidiary, has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Material to any off-Site location
which could result in an Environmental Claim against the Company or any
Subsidiary.
(f) Except as set forth in Section 2.23(f) of the Disclosure
Schedule, the Company has no knowledge and has not received any notification
that any Site is a current or proposed Environmental Clean-up Site.
(g) Except as set forth in Section 2.23(g) of the Disclosure
Schedule, there are no Liens, other than Permitted Liens, arising under or
pursuant to any Environmental Law on any Site and there are no facts,
circumstances, or conditions that could reasonably be expected to restrict,
encumber, or result in the imposition of special conditions under any
Environmental Law with respect to the ownership, occupancy, development, use, or
transferability of any Site.
(h) Except as set forth in Section 2.23(h) of the Disclosure
Schedule, there are no (i) underground storage tanks, active or abandoned, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos containing
material at any Site.
-19-
<PAGE>
(i) There have been no written environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Company or any Subsidiary with respect to any
Site which have not been delivered to or identified and made available to
Investor prior to execution of this Agreement.
2.24 Substantial Custmoers and Suppliers. Section 2.24(a) of the
Disclosure Schedule lists the ten largest customers of the Company and the
Subsidiaries, collectively, on the basis of revenues for goods sold or services
provided for the most recent fiscal year. Section 2.24(b) of the Disclosure
Schedule lists the ten largest suppliers of the Company and the Subsidiaries on
the basis of cost of goods and services purchased for the most recent fiscal
year. Except as disclosed in Section 2.24(c) of the Disclosure Schedule, no such
customer or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company or any Subsidiary since the
Audited Financial Statement Date or, to the knowledge of the Company or any
Subsidiary, has threatened to cease or materially reduce such purchases or sales
or provision of services after the date hereof. Except as disclosed in Section
2.24(d) of the Disclosure Schedule, to the knowledge of the Company or any
Subsidiary, no such customer or supplier is threatened with bankruptcy or
insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of
the Disclosure Schedule, the accounts and notes receivable of the Company and
the Subsidiaries reflected on the Audited Financial Statements, and all accounts
and notes receivable arising subsequent to the Audited Financial Statement Date,
(a) arose from bona fide sales transactions in the ordinary course of business,
consistent with past practice, and are payable on ordinary trade terms, (b) are
legal, valid and binding obligations of the respective debtors enforceable in
accordance with their respective terms, (c) are not subject to any valid set-off
or counterclaim and (d) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement.
2.26 Inventory. All inventory of the Company and the Subsidiaries
reflected on the balance sheet included in the Audited Financial Statements
consisted, and all such inventory acquired since December 31, 1997 consists, of
a quality and quantity usable and salable in the ordinary course of business.
Except as disclosed in the notes to the Audited Financial Statements, all items
included in the inventory of the Company or any Subsidiary are the property of
the Company or such Subsidiary, as the case may be, free and clear of any Lien
other than Permitted Liens, have not been pledged as collateral, are not held by
the Company or any Subsidiary on consignment from others and conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by Governmental or Regulatory Authorities.
2.27 Other Negotiations; Brokers. Neither the Company nor any
Subsidiary nor any of their respective Affiliates (nor any investment banker,
financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of the Company, any Subsidiary, or any such Affiliate) (a) has
entered into any agreement that conflicts with any of the transactions
contemplated by this Agreement or any of the Operative Agreements or the Charter
Amendment or the By-Laws
-20-
<PAGE>
Amendment or (b) has entered into any agreement or had any discussions with any
third party regarding any transaction involving the Company or any Subsidiary
which could result in Investor, the Company, any Subsidiary or any general
partner, limited partner, manager, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said third
party as a result of entering into this Agreement or the Operative Agreements or
consummating the transactions contemplated hereby or thereby. Except for Private
Equity Partners LLC, whose fees will be paid solely by the Company, no agent,
broker, finder, investment banker, financial advisor or other similar Person
will be entitled to any fee, commission or other compensation in connection with
the transactions contemplated by this Agreement or the Operative Agreements on
the basis of any act or statement made or alleged to have been made by the
Company, any Subsidiary, any of their respective Affiliates, or any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of the Company, any Subsidiary or any such Affiliate.
2.28 Registration Rights. Except as disclosed in Section 2.28 of
the Disclosure Schedule and other than the Registration Rights Agreement, the
Company has not granted registration rights to any holder of any of the
securities of the Company or any Subsidiary. Except as disclosed in Section 2.28
of the Disclosure Schedule, none of the rights granted to Investor under the
Registration Rights Agreement conflict with, violate or breach, constitute (with
or without notice or lapse of time or both) a default under, or result in or
give to any Person any right of acceleration or modification under any Contract
to which the Company or any Subsidiary is a party.
2.29 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities. Assuming the representations and warranties of
Investor set forth in Section 3.3 are true and correct in all material respects,
the offer and sale of the Common Purchased Stock, the Preferred Purchased Stock,
the New Preferred Stock, the Warrants and the Common Stock issuable upon
exercise of the Warrants made pursuant to this Agreement is exempt from the
registration requirements of the Securities Act. Neither the Company nor any
Person authorized to act on its behalf has, in connection with the offering of
the Common Purchased Stock or the Preferred Purchased Stock, engaged in (a) any
form of general solicitation or general advertising (as those terms are used
within the meaning of Rule 502(c) under the Securities Act), (b) any action
involving a public offering within the meaning of Section 4(2) of the Securities
Act and the judicial interpretations of such section, or (c) any action that
would require the registration under the Securities Act of the offering and sale
of the Common Purchased Stock, the Preferred Purchased Stock and the Warrants
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" Laws. The Company has not made and will not prior to the Closing
make, directly or indirectly, any offer or sale of Common Purchased Stock, the
Preferred Purchased Stock, the Warrants or securities of the same or a similar
class as the Common Purchased Stock or the Preferred Purchased Stock if as a
result the offer and sale of the Common Purchased Stock, the Preferred Purchased
Stock and the Warrants contemplated hereby could fail to be entitled to
exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Securities Act.
-21-
<PAGE>
2.30 Restrictions on conduct of Business. Except as provided in
this Agreement or as set forth in Section 2.18(a)(ii) of the Disclosure Schedule
or Section 2.30 of the Disclosure Schedule, neither the Company nor any of the
Subsidiaries is prohibited or otherwise restricted from conducting its business
as presently conducted or intended to be conducted by any Contract, any
Governmental or Regulatory Authority or any Law.
2.31 Banks and Brokerage Accounts. Section 2.31 of the Disclosure
Schedule sets forth (a) a true and complete list of the names and locations of
all banks, trust companies, securities brokers and other financial institutions
at which the Company or any Subsidiary has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company or any Subsidiary having signatory power with respect thereto, and (c) a
list of each Investment Asset, the name of the record and beneficial owner
thereof, the location of the certificates, if any, therefor, the maturity date,
if any, and any stock or bond powers or other authority for transfer granted
with respect thereto.
2.32 Warranty Obligations. Section 2.32 of the Disclosure
Schedule sets forth (a) a list of all written warranties, guarantees and written
warranty policies of the Company and the Subsidiaries in respect of the Assets
and Properties of the Company and the Subsidiaries, which are currently in
effect or may hereinafter become effective (the "Warranty Obligations"), and the
duration of each such Warranty Obligation, (b) each of the Warranty Obligations
which is subject to any dispute or, to the knowledge of the Company and any
Subsidiary, after due inquiry, threatened dispute and (c) the experience of the
Company and the Subsidiaries during the past five years with respect to
warranties, guarantees and warranty policies of or relating to the Assets and
Properties of the Company and its Subsidiaries. True and correct copies of the
Warranty Obligations have been delivered to Investor prior to the execution of
this Agreement. Except as disclosed in Section 2.32 of the Disclosure Schedule,
(i) there have not been any material deviations from the Warranty Obligations,
and salesmen, employees and agents of the Company and the Subsidiaries are not
authorized to undertake obligations to any customer or other third parties in
excess of such Warranty Obligations and (ii) the consolidated balance sheet
included in the Audited Financial Statements reflects all adequate reserves for
Warranty Obligations. All products manufactured, designed, licensed, leased,
rented or sold by the Company and its Subsidiaries or any respective predecessor
(x) are and were free from defects in construction and design and (y) satisfy
any and all contract or other specifications related thereto, in each case, in
all material respects.
2.33 Foreign Corrupt Practices Act. Neither the Company, nor any
Subsidiary, nor any Affiliate, nor any director or officer, nor, to the
knowledge of the Company or any Subsidiary, any agent, employee or other Person
associated with or acting on behalf of the Company or any Subsidiary has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
-22-
<PAGE>
1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
2.34 NASD Matters. The Common Stock is quoted on the NASD
automatic quotation system. No filing with or consent or waiver of the NASD is
necessary for the consummation of the transactions contemplated hereby or
pursuant to the Operative Agreements.
2.35 Additional Regulatory Matters. (a) Section 2.35(a) of the
Disclosure Schedule sets forth a true and complete list of the following
information for each FCC License issued to (all of which are operated by the
Company) or operated by the Company or its Subsidiaries (including all FCC
Licenses subject to a Company Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses), the
name of the licensee, the name of the seller or sellers, the call sign, the
transmitter location (by latitude and longitude), the category of service
(indicated by GX or YX) and the frequency or frequencies authorized;
(ii) in the case of SMR Licenses, the number of channels
authorized, the number of channels constructed and whether the SMR License
is for a conventional (as indicated by GX) or trunked (as indicated by YX)
SMR System;
(iii) each holder of any such FCC License that is neither
wholly owned by the Company nor owned entirely by unaffiliated Persons and
managed by the Company; and
(iv) for all FCC Licenses (including SMR Licenses), whether
such FCC Licenses are subject to rights of first refusal, options and other
rights or obligations, including entitlements to acquire additional
ownership interests, which may affect the ownership interests of the
Company of any of its Subsidiaries therein.
(b) All of the FCC Licenses and properties, equipment and systems
owned and/or operated by the Company and any of its Subsidiaries related to the
FCC Licenses disclosed on Section 2.35(a) of the Disclosure Schedule are, and,
to the knowledge of the Company and the Subsidiaries, any such properties,
equipment and systems added in connection with any contemplated system expansion
or construction prior to or after the Closing will be, in compliance in all
material respects with all standards or rules imposed by any Governmental or
Regulatory Authority (including the FCC, the Federal Aviation Administration and
(if applicable) any public utilities commission or other state or local
governments or instrumentalities) applicable to the Company, the Subsidiaries
and their respective operation of the properties, equipment and systems or as
imposed under any agreements with suppliers or customers. To the knowledge of
the Company and its Subsidiaries, all of the equipment and systems owned and/or
operated by the Company are in good repair and working order, ordinary wear and
tear excepted.
-23-
<PAGE>
(c) Each of the Company and its Subsidiaries has paid all
franchise, regulatory, license or other fees and charges which have become due
in respect of its business and has made appropriate provision as is required by
GAAP, consistently applied, for any such fees and charges which have accrued. No
SMR License is subject to a finders preference as set forth in the rules and
regulations of the FCC or is operated under a Special Temporary Operating
Authority ("STA"). Except as disclosed in Section 2.35(c) of the Disclosure
Schedule, the FCC Licenses set forth in Section 2.35(a) of the Disclosure
Schedules constitute all of the licenses, permits and authorizations from the
FCC that are required for the operation of, and each of the Company and its
Subsidiaries has filed all required registrations, applications, reports and
other documents with, the FCC and, if applicable, any public utilities
commission and other Governmental or Regulatory Authority exercising
jurisdiction over, the SMR System businesses, radio paging businesses and other
radio communications businesses of the Company and its Subsidiaries, as such
businesses are currently conducted or as are proposed to be conducted in the
Business Plan. The Company and its Subsidiaries hold or have the contractual
right to obtain the FCC Licenses disclosed on Section 2.35(a) of the Disclosure
Schedule and all such FCC Licenses are valid and in full force and effect
without conditions except for such conditions as are stated on the FCC License
or as are generally applicable to holders of similarly situated FCC Licenses.
The Company and its Subsidiaries have filed with the FCC prior to any applicable
deadline a complete and accurate application for rejustification of any
unconstructed or deconstructed FCC License related to previously granted or
requested wide area Enhanced Specialized Mobile Radio ("ESMR") licenses. Except
as set forth on Section 2.35(c) of the Disclosure Schedule, with regard to FCC
Licenses related to wide area ESMR frequencies, neither the Company nor any
Subsidiary is subject to a short space agreement or any other agreement, FCC
waiver or otherwise applicable regulations encumbering or limiting the use of
such FCC License. All applicable loading requirements with respect to any SMR
Licenses disclosed on Section 2.35(a) of the Disclosure Schedule have been met
and the Company and its Subsidiaries have taken every reasonable action to cause
the same to be loaded in compliance with FCC regulations. Except as set forth on
Section 2.35(c) of the Disclosure Schedule, (i) no application, action or
proceeding is pending for the renewal or modification of any of the FCC Licenses
set forth in Schedule 2.35(a) of the Disclosure Schedules; and (ii) no
applications, complaints, actions or proceedings are pending or, to the
knowledge of the Company and its Subsidiaries, threatened and, to the knowledge
of the Company and its Subsidiaries, no event has occurred and is continuing
which could (a) result in the revocation, termination or adverse modification of
any FCC License disclosed on Section 2.35(a) of the Disclosure Schedule or (b)
adversely affect any rights of the Company thereunder. Except as set forth on
Section 2.35(c) of the Disclosure Schedule, the Company and its Subsidiaries
have no reason to believe and no knowledge that all of the FCC Licenses
disclosed on Section 2.35(a) of the Disclosure Schedule will not be renewed in
the ordinary course. Except as set forth in Section 2.35(c) of the Disclosure
Schedule, all applications for renewal of the FCC Licenses set forth in Section
2.35(a) of the Disclosure Schedules have been filed on a timely basis and the
Company has sufficient time, materials, equipment, contract rights and other
required resources to complete, in a timely fashion and in full, construction of
all the SMR Systems, radio paging and other radio communications systems
associated with the FCC Licenses disclosed on Section 2.35(a) of the Disclosure
Schedule in compliance with all applicable technical standards and construction
requirements and deadlines. Except as set forth on Section 2.35(c) of the
Disclosure Schedule, the
-24-
<PAGE>
current ownership and operation by the Company and its Subsidiaries of such SMR
Systems, radio paging and other radio communications systems comply with the
Communications Act of 1934, as amended (the "Communications Act"), and all
applicable rules, regulations and policies of the FCC.
(d) Section 2.35(d) of the Disclosure Schedule lists a complete
and correct list of all Company Management Agreements (and associated option
agreements, if any) and Third-Party Management Agreements to which the Company
or any of its Subsidiaries is a party and the holder of the SMR Licenses which
are the subject of such agreements, the transmitter locations (by address), and
number of channels covered by such SMR Licenses, the term of such agreements,
any options or calls (and the respective option or call prices as well as the
time period in which any option or call must be exercised or made) in favor of
any party to such agreements to purchase or sell any interest in such SMR
Licenses and the respective fees or revenues payable or receivable under any
such agreements. Except as set forth on Section 2.35(d) of the Disclosure
Schedule to the knowledge of the Company and its Subsidiaries, the terms of all
such Company Management Agreements and Third-Party Management Agreements and the
operation of each SMR System pursuant thereto comply with the Communications Act
and all applicable rules, regulations and policies of the FCC. Except as set
forth on Section 2.35(d) of the Disclosure Schedule, none of the channels
licensed to the Company or its Subsidiaries are subject to a Third Party
Management Agreement. Each Company Management Agreement includes an option
allowing the Company or a Subsidiary to purchase the channels that are subject
to that agreement and no such option will be adversely affected by this
Agreement, the Operative Agreements or the transactions contemplated hereby or
thereby.
2.36 Holdings Company Act and Investment Company Act Status.
Neither the Company nor any Subsidiary is a "holding company" or a "public
utility company" as such terms are defined in the Public Utility Company Act of
1935, as amended. Neither the Company nor any Subsidiary is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
2.37 State Takeover Statutes. No state takeover statute or
similar statute or regulation applies to the issuance and purchase of the Common
Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock, the
Warrants, the Common Stock issuable upon exercise of the Warrants and the other
transactions contemplated by this Agreement and the Operative Agreements.
2.38 Due Diligence Memoranda. No statement contained in the Due
Diligence Memoranda contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstance under which they were made, not misleading.
2.39 Disclosure. All material facts regarding the Business or
Condition of the Company or any Subsidiary have been disclosed to Investor in or
in connection with this Agreement. No representation or warranty contained in
this Agreement, and no statement contained in the
-25-
<PAGE>
Disclosure Schedule or in any certificate, list or other writing furnished to
Investor pursuant to any provision of this Agreement (including the Audited
Financial Statements) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
2.40 Projections. The projections attached hereto as Section 2.40
of the Disclosure Schedule (the "Projections") are on the whole and in all
material respects mathematically accurate, are based on reasonable assumptions
as of the date thereof, and such Projections have been prepared in good faith
and represent the good faith estimate of the Company at the date hereof and at
the Closing of the most probable course of business of the Company (after giving
effect to the transactions contemplated by this Agreement).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to the Company as follows:
3.1 Organization; Power and Authority. Investor is a partnership
duly organized, validly existing and in good standing under the Laws of the
State of Delaware. Investor has full partnership power and authority to execute
and deliver this Agreement and the Operative Agreements and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Investor of this
Agreement and the Operative Agreements to which it is a party and the
performance by Investor of its obligations hereunder and thereunder, have been
duly and validly authorized by the general partner of Investor, no other
partnership action on the part of Investor being necessary. This Agreement has
been duly and validly executed and delivered by Investor and constitutes, and
upon the execution and delivery by Investor of the Operative Agreements to which
it is a party will constitute, legal, valid and binding obligations of Investor
enforceable against Investor in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
3.2 No Conflicts. The execution, delivery and performance of this
Agreement and the Operative Agreements to which it is a party and the
consummation by Investor of the transactions contemplated hereby and thereby
will not conflict with, or constitute a default under, any agreement, indenture
or instrument to which Investor is a party, or result in a violation of the
Investor's agreement of limited partnership or any order, judgment or decree of
any court or Governmental or Regulatory Authority having jurisdiction over
Investor or any of its properties and, except for such filings as may be
required by the Exchange Act, no consent, authorization or order of, or filing
or registration with, any Governmental or Regulatory Authority is required by
the Investor for the execution, delivery and performance of this Agreement.
-26-
<PAGE>
3.3 Purchase for Investment. The Common Purchased Stock, the
Preferred Purchased Stock, the New Preferred Stock, the Warrants and the shares
of Common Stock issuable upon exercise of the Warrants will be acquired by
Investor for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Common Purchased Stock,
the Preferred Purchased Stock, the New Preferred Stock, the Warrants or the
shares of Common Stock issuable upon exercise of the Warrants in violation of
the Securities Act, it being understood that the right to dispose of such Common
Purchased Stock, Preferred Purchased Stock, the New Preferred Stock, Warrants
and shares of Common Stock issuable upon exercise of the Warrants shall be
entirely within the discretion of Investor. Investor represents and warrants
that it is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the Securities Act. Investor understands that the shares of the
Common Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock,
the Warrants and the shares of Common Stock issuable upon exercise of the
Warrants to be issued to it have not been registered under the Securities Act in
reliance on an exemption therefrom under Section 4(2) of the Securities Act and
Regulation D thereunder and that the certificates for such shares of Company
Purchased Stock, Preferred Purchased Stock, New Preferred Stock, Warrants and
shares of Common Stock issuable upon exercise of the Warrants shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER AND AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED."
The Company shall remove such legend upon receipt of an opinion from counsel to
the Investor, reasonably satisfactory in form and substance to counsel to the
Company, that the requirements for such legend have terminated.
3.4 Brokers. No agent, broker, finder, investment banker,
financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with any of the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Investor.
-27-
<PAGE>
ARTICLE IV
COVENANTS OF THE COMPANY
The Company covenants and agrees with Investor that, except to
the extent Investor may otherwise consent in writing:
4.1 Regulatory and Other Approvals. At all times, each of the
Company and the Subsidiaries shall (a) take all necessary or desirable steps and
proceed diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to, Governmental or Regulatory Authorities
or any other Person required of the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements, including
those described in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide
such other information and communications to such Governmental or Regulatory
Authorities or other Persons as Investor or such Governmental or Regulatory
Authorities or other Persons may reasonably request and (c) cooperate with
Investor as promptly as practicable in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to, Governmental or
Regulatory Authorities or other Persons required of Investor to consummate the
transactions contemplated hereby and by the Operative Agreements, the By-Laws
Amendment and the Charter Amendment. The Company shall provide prompt
notification to Investor when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Investor of any communications (and, unless
precluded by Law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
4.2 Investigation by Investor. From the date hereof until the
Closing and thereafter so long as an Investor Party holds at least the lesser of
(x) 33 % of Investor's Original Ownership and (y) 10% of the Common Stock
(including any Equity Equivalents held by such Investor Party) of the Company on
a Fully Diluted Basis, the Company shall (a) provide Investor and its Affiliates
and each of their respective officers, employees, agents, counsel, accountants,
financial advisors, consultants and other representatives (together
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of the
Company, the Subsidiaries and their respective Assets and Properties and Books
and Records and (b) furnish Investor and such Representatives with all such
information and data (including copies of Contracts, Benefit Plans and other
Books and Records) concerning the business and operations of the Company and its
Subsidiaries as Investor or any of such other Representatives reasonably may
request in connection with such investigation. Nothing contained in this Section
4.2 or other investigation by or disclosure to Investor shall affect the
survival of or modify, limit or create any exception to the representations,
warranties, covenants, agreements and indemnities of the Company hereunder or
the conditions to the obligations of Investor to close as set forth in Article V
hereof.
-28-
<PAGE>
4.3 No Solicitations. From the date hereof until the earlier of
(i) the Closing and (ii) May 31, 1998, neither the Company nor any Affiliate of
the Company will take, nor will the Company permit any such Affiliate to take
(nor will the Company or any such Affiliate authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf the Company or any such Affiliate to take), directly or
indirectly, any action to initiate, assist, solicit, negotiate, encourage or
accept any offer or inquiry from any Person (a) to engage in any Business
Combination with respect to the Company or any Subsidiary, (b) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination with the Company or any Subsidiary or (c)
to furnish or cause to be furnished any information with respect to the Company
or any Subsidiary to any Person (other than as contemplated by Section 4.2) who
the Company, or any such Affiliate (or any such Person acting for or on their
behalf) knows or has reason to believe is in the process of, or may be,
considering any Business Combination with the Company or any Subsidiary. If the
Company or any such Affiliate (or any such Person acting for or on their behalf)
receives from any Person (other than Investor or any other Person referred to in
Section 4.2) any offer, inquiry or informational request referred to above, the
Company will promptly advise such Person, by written notice, of the terms of
this Section 4.3 and will promptly, orally and in writing, advise Investor of
all the terms of such offer, inquiry or request (including the identity of the
Person making such offer, inquiry or request) and deliver a copy of such notice
to Investor.
4.4 Conduct of Business. Except for the transactions contemplated
by this Agreement and the Operative Agreements, from the date hereof through the
Closing Date, the Company and the Subsidiaries shall conduct business only in
the ordinary course consistent with past practice and the terms of this
Agreement. Without limiting the generality of the foregoing, the Company and the
Subsidiaries shall:
(a) use their best efforts to (i) preserve intact the present
business organization and reputation of the Company and the Subsidiaries, (ii)
keep available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
managers, employees and consultants of the Company and the Subsidiaries, (iii)
maintain the Assets and Properties of the Company and the Subsidiaries in good
working order and condition, ordinary wear and tear excepted, (iv) maintain the
good will of customers, suppliers and lenders and other Persons with whom the
Company or any Subsidiary otherwise has significant business relationships and
(v) continue all current sales, marketing and promotional activities relating to
the business and operations of the Company and the Subsidiaries;
(b) except to the extent required by applicable Law, cause the
Books and Records to be maintained in the usual, regular and ordinary manner;
(c) use their best efforts to maintain in full force and effect
substantially the same levels of coverage as the insurance afforded under the
policies listed in Section 2.20 of the Disclosure Schedule;
-29-
<PAGE>
(d) comply in all material respects with all Laws and Orders
applicable to the business and operations of the Company and the Subsidiaries,
and promptly following receipt thereof give Investor copies of any notice
received from any Governmental or Regulatory Authority or other Person alleging
any violation of any such Law or Order;
(e) (i) administer each Benefit Plan, or cause the same to be so
administered, in all material respects in accordance with the applicable
provisions of the Code, ERISA and all other applicable Laws; (ii) refrain from
making any representation or promise, oral or written, to any employee
concerning any Benefit Plan, except for statements as to the rights or accrued
benefits of any employee under the terms of any Benefit Plan; and (iii) promptly
notify Investor in writing of each receipt by the Company or any Subsidiary (and
furnish Investor with copies) of any notice of investigation or administrative
proceeding by the IRS, Department of Labor, PBGC or other Person involving any
Benefit Plan.
4.5 Financial Statements and Reports. From the date hereof until
the Closing and thereafter for so long as an Investor Party holds at least the
lesser of (x) 33 % of Investor's Original Ownership and (y) 10% of the Common
Stock (including any Equity Equivalents held by such Investor Party) of the
Company on a Fully Diluted Basis:
(a) The Company shall at all times maintain correct and complete
Books and Records in which full and correct entries shall be made of all its
business transactions pursuant to a system of accounting established and
administered in accordance with GAAP to the extent applicable, and set aside on
its books all such proper accruals and reserves as shall be required under GAAP.
The Company shall retain an accounting firm of nationally recognized standing
for the purpose of auditing its financial statements and reports for each fiscal
year.
(b) As promptly as practicable, and in no event later than the
presentation of the following material to the Company's management or the filing
thereof with the SEC, the Company shall provide to Investor true and complete
copies of all reports filed with the SEC and all such other financial
statements, reports and analyses as may be prepared or received by the Company
or any Subsidiary relating to the business or operations of the Company or any
Subsidiary or as Investor may otherwise reasonably request.
(c) As soon as available after the end of each fiscal month, and
in any event within 30 days of such month, the Company shall provide to Investor
an unaudited consolidated balance sheet of the Company and its Subsidiaries, if
any, as of the end of such month, and unaudited consolidated statements of
income, retained earnings and changes in cash flows of the Company and its
Subsidiaries, if any, for such month and the fiscal year to date, prepared in
accordance with GAAP (subject to normal year-end adjustments and without
footnote disclosure), and certified on behalf of the Company by the chief
financial officer of the Company, setting forth in comparative form (x) the
corresponding figures for the corresponding periods of the preceding year and
(y) the corresponding figures for the corresponding periods in the Budget and
management's discussion and analysis of such
-30-
<PAGE>
financials (including the effects and reasons for any deviations between the
Budget and such financials).
(d) At least 30 days prior to the end of each fiscal year of the
Company, the Company shall provide to Investor a budget (each, a "Budget") which
(A) forecasts ahead at least one year the Company's projected costs, revenues,
income, balance sheet and cash flow on a monthly basis, and (B) forecasts ahead
at least one year the capital requirements necessary to reasonably expand the
Company.
(e) Within 15 days after the end of each fiscal month, a report
on the buildout and loading activities of the Company during such month on a
market-by-market basis, setting forth in comparative form the corresponding
figures for the corresponding periods in the Business Plan and management's
discussion and analysis of such activities (including the effects of and reasons
for any deviations between the Business Plan and performance to date).
(f) Promptly, upon any preparation thereof, the Company shall
provide to Investor any other budgets that the Company may prepare and any
revisions of any Budget.
4.6 Certain Restrictions. From the date hereof through to the
Closing, the Company will, and will cause each Subsidiary to, refrain from:
(a) except as contemplated by the Charter Amendment and the
By-Laws Amendment, amending their respective certificates or articles of
incorporation or by-laws (or other comparable corporate charter documents) or
taking any action with respect to any such amendment or any reorganization,
liquidation or dissolution of any such corporation;
(b) changing their respective fiscal years;
(c) taking any of the actions listed in Section 2.9;
(d) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License held or used by the Company
or any Subsidiary or any Contract to which the Company or any Subsidiary is a
party or by which any of its Assets and Properties is bound;
(e) (i) taking or agreeing or committing to take or omitting or
agreeing or committing to omit any action that would make untrue any
representation or warranty of the Company hereunder untrue; or (ii) taking any
action or course of action inconsistent with compliance with the covenants and
agreements of the Company herein or which might adversely affect the interests
of Investor hereunder; and
(f) entering into any agreement to do or engage in any of the
foregoing.
-31-
<PAGE>
4.7 Affiliate Transactions. Prior to the Closing, neither the
Company nor any Subsidiary shall enter into any Contract or amend or modify any
existing Contract with any Affiliate or stockholder, in each case except with
the consent of Investor.
4.8 Notice and Cure. The Company shall notify Investor promptly
in writing of, and contemporaneously shall provide Investor with true and
complete copies of any and all information or documents relating to, and will
use its best efforts to cure before the Closing, any event, transaction or
circumstance occurring after the date of this Agreement that causes or will
cause any covenant or agreement of the Company under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
the Company contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. The Company also shall notify
Investor promptly in writing of, and will use its best efforts to cure, before
the Closing, any violation or breach of any representation, warranty, covenant
or agreement made by the Company in this Agreement, whether occurring or arising
before, on or after the date of this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Investor's right to
seek indemnity under Article VIII.
4.9 Fulfillment of Conditions. The Company shall take all
reasonable steps necessary or desirable and use its reasonable best efforts to
satisfy each condition to the obligations of Investor contained in this
Agreement and shall not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
4.10 Rights to Purchase Additional Securities. (a) For so long as
any Investor Party holds any Common Purchased Stock, Preferred Purchased Stock,
New Preferred Stock, Warrants or shares of Common Stock issued upon the exercise
of the Warrants (including, in each case, any securities into which such
securities shall have been changed, any securities resulting from any
reclassification or recapitalization of such securities and all stock dividends
and distributions thereon), prior to issuing any New Common Stock after the
Closing Date to any Person (a "New Common Stock Offer"), the Company shall offer
each of the Investor Parties then owning any Common Purchased Stock, Preferred
Purchased Stock, New Preferred Stock, Warrants or shares of Common Stock issued
upon exercise of the Warrants (including, in each case, any securities into
which such securities shall have been changed, any securities resulting from any
reclassification or recapitalization of such securities and all stock dividends
and distributions thereon) (the "Investor Stockholders") an opportunity to
purchase in cash any or all of its Pro Rata portion (determined as among all the
Investor Stockholders before giving effect to the issuance of such New Common
Stock as of the date of such New Common Stock Offer) of such New Common Stock on
the same terms and conditions as the New Common Stock being offered and, if such
New Common Stock is to be issued as a part of a unit of securities, the Company
shall offer each of the Investor Stockholders an opportunity to purchase any or
all of its Pro Rata portion (determined as provided above) of such unit of
securities (together with the New Common Stock, the "New Common Stock Units") on
the same terms and conditions as the New Common Stock Units being offered. The
Company shall make such
-32-
<PAGE>
New Common Stock Offer by providing each of the Investor Stockholders with a
notice (the "New Common Stock Notice") setting forth (i) each of the Investor
Stockholders' Pro Rata portion of such New Common Stock or such New Common Stock
Units, as the case may be, (ii) the cash consideration to be paid for each share
of New Common Stock or each New Common Stock Unit, as the case may be, and (iii)
all other material terms of such New Common Stock Offer.
(b) In order for any of the Investor Stockholders to accept the
New Common Stock Offer, such Investor Stockholder shall give a notice of
acceptance to the Company not later than 20 Business Days after its receipt of
the New Common Stock Notice (the last day of such 20-Business Day period being
referred to herein as the "Acceptance Date").
(c) Within forty (40) Business Days following the Acceptance
Date, the Company (i) shall issue, upon its receipt of the requisite
consideration therefor, New Common Stock or New Common Stock Units, as the case
may be, to each Investor Stockholder which timely accepted such New Common Stock
Offer upon the terms specified therein and (ii) may issue New Common Stock or
New Common Stock Units, as the case may be, to any other Person or Persons in an
amount not to exceed the aggregate amount thereof offered pursuant to the New
Common Stock Offer (less the aggregate amount of shares of New Common Stock or
New Common Stock Units, as the case may be, issued to the Investor Stockholders
pursuant to the foregoing clause (i)) and for a price which equals or exceeds
the price per share of New Common Stock or per unit of New Common Stock Units,
as the case may be, specified in the New Common Stock Offer.
4.11 Significant Transactions. For so long as any Investor Party
holds any Common Purchased Stock, Preferred Purchased Stock, New Preferred
Stock, Warrants or shares of Common Stock issued upon the exercise of the
Warrants (including, in each case, any securities into which such securities
shall have been changed, any securities resulting from any reclassification or
recapitalization of such securities and all stock dividends and distributions
thereon), the Company shall not, and shall cause each Subsidiary not to, enter
into any Significant Transaction without the majority approval of the Company's
Board of Directors (which approval, with respect to the items specified in items
(i), (iii), (v), (vi), (vii), (ix), (x), (xi) and (xii) of the definition of
Significant Transactions, shall include the affirmative vote of a majority of
the REI Directors (as defined in the Shareholders Agreement)).
4.12 Reservation of Shares. The Company shall at all times that
any Warrant is outstanding, keep reserved the full number of shares of Common
Stock issuable upon conversion of the Warrants.
4.13 Videoconferencing Capability. As soon as practicable
following a request therefor by Investor, the Company shall install and maintain
at the Company's cost and expense a videoconferencing system acceptable to
Investor which will enable the REI Directors (as defined in the Shareholders'
Agreement) to participate in all (a) meetings of the Board of Directors of the
Company and each of its Subsidiaries, (b) management reviews of the Company and
each of its Subsidiaries and (c) other meetings of the Company and each of its
Subsidiaries, in each case, whether or not such meetings or reviews are held at
the Company's principal office or at the offices of any
-33-
<PAGE>
Subsidiary. The Company shall bear all costs and expenses associated with the
operation of such videoconferencing system in conducting such meetings and
reviews; provided, however, that Investor will bear the costs of purchasing and
installing compatible videoconferencing equipment at Investor's office or at the
offices of Investor's advisors or other portfolio companies. The Company
understands that such videoconferencing system, in order to be acceptable to
Investor, must be compatible with other videoconferencing systems of Investor.
4.14 Venture Capital Operating Company Status. Without limiting
any other right contained herein, for so long as any Investor Party holds any
Common Purchased Stock, Preferred Purchased Stock, New Preferred Stock, Warrants
or shares of Common Stock issued upon exercise of the Warrants (including, in
each case, any securities into which such securities shall have been changed,
any securities resulting from any reclassification or recapitalization of such
securities and all stock dividends and distributions thereon), such Investor
Party shall have the right to consult with and advise the management of the
Company and to receive all materials provided to members of the Board of
Directors of the Company so long as may be required to enable Investor to
qualify as a "venture capital operating company" within the meaning of Section
2510.3-101 of the plan asset regulations promulgated by the United States
Department of Labor ("VCOC"). In addition, in the event that (a) at any time
Investor is not entitled to designate at least one member for election to the
Board of Directors of the Company or (b) the United States Department of Labor
through formal or informal rules, regulations or interpretations provides, or it
is otherwise established through governmental or court action, that such
representation does not constitute the exercise of management rights of the kind
necessary to enable Investor to continue to qualify as a VCOC, then the Company
and Investor shall in good faith negotiate provisions to enable Investor to
exercise the minimum amount of such management rights in order to continue to
qualify as a VCOC.
4.15 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants for the core lines of business set forth in the Business Plan.
4.16 Amendments to Identified Securities. From and after the date
hereof, the Company will, and will cause each Subsidiary, to refrain from:
(a) amending, changing or modifying in any manner any of the
terms and provisions of the Identified Securities, including, without
limitation, extending the exercise period or term of such Identified Securities,
the exercise price thereof or the manner in which the issuance price thereunder
is calculated;
(b) paying any dividend or making any distribution on the capital
stock of the Company which is either payable to the holders of any Identified
Security or which adjusts in any manner any of the Identified Securities;
-34-
<PAGE>
(c) granting, issuing or selling any Option or rights to purchase
stock, warrants or other property which is either payable to the holders of any
Identified Security or which adjusts in any manner any of the Identified
Securities;
(d) satisfying any obligation of the Company with respect to any
Identified Security by the issuance of any capital stock of the Company other
than as provided pursuant to the terms of such Identified Securities as in
existence on the date hereof;
(e) exchanging any of the securities issuable under any
Identified Security for other capital stock of the Company; and
(f) entering into any agreement to do or engage in any of the
foregoing.
4.17 Certain Transactions with Subsidiary. Neither the Company
nor any of its Affiliates shall make any capital contribution to or permit any
Indebtedness by Chadmoore Communications, Inc. to it other than in exchange for
capital stock of Chadmoore Wireless Group, Inc. (which for purposes of this
Section 4.17 shall include its successors (by merger or otherwise).
4.18 Business Plan. The Company shall continue in the core lines
of business contemplated by the Business Plan.
4.19 New Preferred Stock. Upon request by the Investor, the
Company shall cause the New Preferred Stock to be created and authorized under
the terms of its articles of incorporation and provide Investor with evidence
satisfactory to Investor that all documents necessary to create the New
Preferred Stock have been filed with the appropriate Governmental and Regulatory
Authorities. Upon the issuance of any New Preferred Stock to Investor, the
Company will not make, directly or indirectly, any offer or sale of New
Preferred Stock or securities of the same or a similar class as the New
Preferred Stock if as a result the offer and sale of the New Preferred Stock
contemplated by the First Warrant could fail to be entitled to exemption from
the registration requirements of the Securities Act. As used herein, the terms
"offer" and "sale" have the meanings specified in Section 2(3) of the Securities
Act. All issuances of New Preferred Stock by the Company shall comply with all
applicable federal, state and foreign securities Laws.
4.20 Certain Stock Issuances. If and whenever the Company
issues any shares of Common Stock to any of the stockholders of Chadmoore
Communications, Inc., other than the Company, then immediately upon such
issuance and upon payment by Investor of a sum equal to the product of the par
value per share of Common Stock and the number of shares issued to Investor, the
Company shall issue to Investor three shares of Common Stock for each four
shares of Common Stock issued to such stockholders. Upon issuance in accordance
with the foregoing, all such shares shall have been duly authorized, validly
issued, fully paid and nonassessable and shall comply with all applicable Laws
and the rules and regulations of each stock exchange or quotation system on
which the Common Stock is then listed or quoted. The delivery of the certificate
or certificates evidencing such shares, shall transfer to Investor good and
valid title to such shares free and clear of all Liens
-35-
<PAGE>
ARTICLE V
CONDITIONS TO OBLIGATIONS OF INVESTOR
The obligations of Investor hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Investor in its sole
discretion):
5.1 Representations and Warranties. Each of the representations
and warranties made by the Company in this Agreement shall be true and correct
in all material respects (if not qualified by materiality) and in all respects
(if qualified by materiality) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such earlier date.
5.2 No Adverse Change. There shall have occurred no material
adverse change in the Business or Condition of the Company since the Audited
Financial Statement Date.
5.3 Performance. The Company shall have performed and complied,
in all material respects, with each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company at or
before the Closing.
5.4 Officers Certificates. The Company shall have delivered to
Investor a certificate, dated the Closing Date and executed by the Chairman of
the Board, the President or any Vice President of the Company, substantially in
the form and to the effect of Exhibit A hereto, and a certificate, dated the
Closing Date and executed by the Secretary or any Assistant Secretary of the
Company, substantially in the form and to the effect of Exhibit B hereto.
5.5 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Investor, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action (a) which could reasonably be
expected to result in the issuance of any such Order or the enactment,
promulgation or deemed applicability to Investor, the Company or any
Subsidiaries, or the transactions contemplated by this Agreement or any of the
Operative Agreements of any such Law, or (b) wherein an unfavorable Order would
prevent the carrying out of this Agreement or any of the Operative Agreements or
any of the transactions or events contemplated hereby or thereby, declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to Investor.
-36-
<PAGE>
5.6 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Investor and the Company to perform their
respective obligations under this Agreement, the Operative Agreements to which
they are a party, the Charter Amendment and the By-Laws Amendment and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Investor, (c) shall not impose any limitations or restrictions
on Investor, other than limitations under federal and state securities laws, (d)
shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (e) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
5.7 Third Party Consents. The consents (or in lieu thereof
waivers) disclosed in Sections 2.5 and 2.6 of the Disclosure Schedule, and all
other consents (or in lieu thereof waivers) to the performance by Investor and
the Company of their respective obligations under this Agreement and the
Operative Agreements to which they are a party or to the consummation of the
transactions contemplated hereby and thereby as are required under any Contract
to which Investor or the Company or any Subsidiary is a party or by which any of
their respective Assets and Properties are bound and where the failure to obtain
any such consent (or in lieu thereof waiver) could reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect Investor or the Business or Condition of the Company or
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement and the Operative Agreements to Investor, (a)
shall have been obtained, (b) shall be in form and substance satisfactory to
Investor in its sole discretion, (c) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (d) shall be in full
force and effect.
5.8 Opinions of counsel. Investor shall have received (a) the
opinion of Graham & James LLP, counsel to the Company, dated the Closing Date,
addressed to Investor, in form and substance satisfactory to Investor, (b) the
opinion of Futro & Trauernicht LLC, special counsel to the Company, dated the
Closing Date, addressed to Investor, in form and substance satisfactory to
Investor (c) and the opinion of Irwin, Campbell & Tannenwald, P.C., counsel to
the Company, dated the Closing Date, addressed to Investor, in form and
substance satisfactory to Investor.
5.9 Good Standing Certificates. The Company shall have delivered
to Investor (a) copies of the certificates or articles of incorporation (or
other comparable constitutive documents), including all amendments thereto, of
the Company and each Subsidiary certified by the Secretary of State or other
appropriate official of the jurisdiction of organization, (b) certificates from
the Secretary of State or other appropriate official of the respective
jurisdictions of organization to the effect that each of the Company and the
Subsidiaries is in good standing or subsisting in such jurisdiction, listing all
charter documents of the Company and such Subsidiaries on file and attesting to
its payment of all franchise or similar Taxes, and (c) a certificate from the
Secretary of State or other appropriate official in each jurisdiction in which
the Company and the Subsidiaries are qualified,
-37-
<PAGE>
licensed or admitted to do business to the effect that the Company or the
applicable Subsidiary is duly qualified or admitted and in good standing in such
jurisdiction.
5.10 Other Agreements. Each of the Operative Agreements shall
have been duly executed and delivered by the respective parties thereto other
than the Investor and shall be in full force and effect.
5.11 Delivery of Certificates. Duly executed certificates
representing the shares of Common Purchased Stock and Preferred Purchased Stock
and the First Warrant, the Second warrant and the Third Warrant shall have been
delivered to Investor.
5.12 Proceedings. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement, the
Operative Agreements and all documents incident hereto or thereto shall be
reasonably satisfactory in form and substance to Investor, and Investor shall
have received copies of all such documents and other evidence as Investor may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
5.13 Executives and Key Managers. The Chairman of the Board and
the Chief Executive Officer of the Company will be Robert Moore, and the Chief
Operating Officer will be Jan S. Zwaik.
5.14 Business Plan. The Board of Directors of the Company shall
have approved, and there shall have been delivered to Investor, a written plan
satisfactory to Investor in its sole discretion (the "Business Plan").
5.15 By-Law Amendment. The Investor shall have received evidence
satisfactory to it that the by-laws of the Company shall have been amended, in
form and manner satisfactory to Investor in its sole discretion, so as to
effectuate the transactions contemplated by this Agreement and the Operative
Agreements (the "By-Laws Amendment").
5.16 Charter Amendment. The Investor shall have received evidence
satisfactory to it that the Charter Amendment has been filed with all requisite
Governmental and Regulatory Authorities in the State of Colorado and has become
effective in accordance with its terms and the Amended Charter is in effect.
5.17 Board of Directors. The Board of Directors of the Company
shall consist of six persons whose members shall be Robert Moore, Jan Zwaik,
Joseph J. Finn-Egan, Jeffrey A. Lipkin, Mark Sullivan and Janice Pellar.
ARTICLE VI
-38-
<PAGE>
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Company in its sole
discretion):
6.1 Representations and Warranties. Each of the representations
and warranties made by Investor in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date.
6.2 Performance. Investor shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Investor at or before the
Closing.
6.3 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
6.4 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit the Company and Investor to perform their
obligations under this Agreement and the Operative Agreements, the Charter
Amendment and the By-Laws Amendment and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
COVENANTS AND AGREEMENTS
7.1 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Investor (whether or not exercised) to
investigate the affairs of the Company or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement or the waiver of any condition to
Closing, the Company, on the one hand, and Investor, on the other hand, have the
right to rely fully upon the representations, warranties, covenants and
agreements of the other contained in this Agreement. The representations,
warranties, covenants and agreements of the Company and Investor contained in
this Agreement will survive the Closing (a) indefinitely with respect to the
-39-
<PAGE>
representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.4, 2.5,
2.21, 2.27, 2.28, 2.29, 2.35, 2.37 and 2.39 (as it relates to the foregoing
Sections), (b) until 60 calendar days after expiration of all applicable
statutes of limitation (including all periods of extension, whether automatic or
permissive) with respect to the representations and warranties in Sections 2.11,
2.14, 2.23 and 2.39 (as it relates to the foregoing Sections), (c) until the
date on which the Company's audited financial statements for the fiscal year
ending December 31, 1999 have been made publicly available with respect to all
other representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing or (d) indefinitely
with respect to each other covenant or agreement contained in this Agreement,
except that any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with clause (b) or (c) above will continue to
survive if a Claim Notice or Indemnity Notice (as applicable) shall have been
timely given under Article VIII on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in Article VIII, but only with respect to matters described in the
Claim Notice or Indemnity Notice.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. Whether or not the transactions contemplated
by this Agreement are consummated, the Company shall indemnify Investor and its
general partner and limited partners and the officers, directors, stockholders,
members, partners, employees, agents and Affiliates of each of them, in respect
of, and hold each of them harmless from and against, on a Grossed-Up Basis, any
and all Losses (whether or not involving a Third Party Claim) suffered, incurred
or sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to (i) any misrepresentation or breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of the Company contained in this Agreement or any of the Operative
Agreements (including any certificates delivered in connection herewith or
therewith), (ii) the assertion by any Person of any claim against an Indemnified
Party in connection with the matters or transactions that are the subject of or
contemplated by this Agreement or any of the Operative Agreements, (iii) the
issuance of the Proposal Letter, dated January 13, 1998, from Investor to the
Company (as amended from time to time), (iv) the status of Investor as a holder
of securities of the Company, (v) any violation by the Company or any Subsidiary
of any federal, state or foreign securities Laws prior to or on the Closing Date
and (vi) (x) the presence, Release or threatened Release, of any Hazardous
Materials existing as of or prior to the Closing Date at, from, in, to, on, or
under any Site; (y) the transportation, treatment, storage, handling or disposal
or arrangement for transportation, treatment, storage, handling or disposal of
any Hazardous Materials generated by the Company, any Subsidiary, at or to any
off-Site location; or (z) any violation of Environmental Law by the Company or
any Subsidiary prior to the Closing. The Company shall reimburse each
Indemnified Party (whether or not such Indemnified Party is a party to this
Agreement) for all expenses (including counsel fees and disbursements) as they
are incurred by such Indemnified Party in connection with investigating and
preparing or defending any Action or
-40-
<PAGE>
Proceeding (whether or not such Indemnified Party is a formal party to any such
Action or Proceeding). If and to the extent that the indemnification hereunder
is finally determined by a court of competent jurisdiction to be unenforceable,
the Company shall make the maximum contribution to the payment and satisfaction
of the indemnified Losses as shall be permissible under applicable laws. The
Company shall not be obligated to make payments to the Indemnified Party, unless
and until the Indemnified Party has suffered, incurred, sustained or become
subject to Losses in excess of $250,000 in the aggregate, in which case the
Indemnified Party shall be entitled to seek indemnity for the entire amount of
its Losses.
8.2 Method of Asserting Claim. All claims for indemnification by
any Indemnified Party under Section 8.1 will be asserted and resolved as
follows:
(a) In the case of a claim or demand made by any Person not a
party to this Agreement against the Indemnified Party (a "Third Party Claim"),
the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party
within 20 Business Days after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, however, that failure to give such
Claim Notice shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Party, which counsel must be reasonably satisfactory 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, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party Claim with counsel reasonably
satisfactory to the Indemnified Party within five Business Days of any Claim
Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnified Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) if the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party controls the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
-41-
<PAGE>
controlling 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. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damages and such monetary damages are paid in
full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 8.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 8.1 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by litigation in a court of competent jurisdiction.
(d) The rights accorded to Indemnified Parties hereunder shall be
in addition to any rights that any Indemnified Party may have at law or in
equity, under federal and state securities Laws, by separate agreement
(including under the Operative Agreements) or otherwise.
(e) Except as otherwise required by Law, the parties shall treat
any indemnification payment made pursuant to Section 8.1 as an adjustment to the
Purchase Price.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of the Company and Investor;
-42-
<PAGE>
(b) at any time before the Closing, by the Company or Investor,
in the event (i) of a material breach hereof by the non-terminating party if
such non-terminating party fails to cure such breach within five Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party;
(c) at any time after May 31, 1998, by the Company or Investor
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party;
or
(d) by Investor if there shall have occurred prior to the Closing
(i) any general suspension of, or limitation on prices for, trading in
securities on The New York Stock Exchange, (ii) a declaration of a banking,
moratorium or any suspension of payments in respect to banks in the United
States, (iii) a commencement of a war, armed hostilities or other international
or national calamity directly or indirectly involving the United States, (iv)
any limitation by federal or state authorities on the extension or credit by
lending institutions which materially and adversely affects Investor or (v) in
the case of any of the foregoing existing at the date of this Agreement, a
material acceleration or worsening thereof, upon notification of the
non-terminating party by the terminating party.
9.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 9.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Company or Investor, except as provided in the next succeeding sentences and
except that the provisions with respect to expenses in Section 11.3 and
confidentiality in Section 11.5 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 9.1(b), (c) or
(d) the Company will remain liable to Investor for any misrepresentation or
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement of the Company existing at the time of such termination, and Investor
will remain liable to the Company for any misrepresentation or breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement of
Investor existing at the time of such termination. Each of the Company and
Investor may seek such remedies, including damages and reimbursement for fees
and expenses of attorneys, against the other with respect to any such
misrepresentation, breach, nonfulfillment or failure referred to above as
provided under this Agreement, including its remedies under Article VIII with
respect thereto or as are otherwise available at law or in equity.
-43-
<PAGE>
ARTICLE X
DEFINITIONS
10.1 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Acceptance Date" has the meaning assigned to it in Section
4.10(b).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Advisory Agreement" means the Advisory Agreement by and between
the Company and Investor, substantially in the form and to the effect of Exhibit
C, as such agreement may be amended, modified or restated from time to time.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 5% or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) any director, partner, officer, manager, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
"Agreement" means this Investment Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Amended Charter" means the Articles of Incorporation of the
Company, as in effect and amended to the date hereof, and as amended by the
Charter Amendment.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods, Intellectual Property and SMR Licenses.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or
-44-
<PAGE>
indirectly, of 10% or more of any class of equity securities, any trust or
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Audited Financial Statement Date" means December 31, 1997.
"Audited Financial Statements" means the audited consolidated
balance sheet of the Company as of December 31, 1997 and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
the fiscal year then ended, in each case, including the notes thereto and which
are included in the SEC Documents.
"Benefit Plan" means any Plan maintained, established or to which
contributions have at any time been made, by the Company or any Subsidiary or
any predecessor or Affiliate of any of the foregoing existing at the Closing
Date or prior thereto, to which the Company contributes or has contributed, or
under which any employee, former employee or director of the Company or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including financial statements, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, FCC Licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Budget" has the meaning ascribed to it in Section 4.5(d).
"Business Combination" means, with respect to any Person, any (i)
any merger, consolidation or combination to which such Person is a party, (ii)
any sale, dividend, split or other disposition of any capital stock or other
equity interests of such Person, (iii) any tender offer (including a self
tender), exchange offer, recapitalization, liquidation, dissolution or similar
transaction, (iv) any sale, dividend or other disposition of all or a material
portion of the Assets and Properties of such Person or (v) the entering into of
any agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York or the State of Nevada are
authorized or obligated to close.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, Assets and Properties
of the Company and each of the Subsidiaries, individually or in the aggregate.
"Business Plan" has the meaning ascribed to it in Section 5.14.
-45-
<PAGE>
"By-Laws Amendment" has the meaning ascribed to it in Section
5.15.
"Charter Amendment" means the Certificate of Designation of the
Series C Preferred Stock of the Company in the form and to the effect of Exhibit
D.
"Claim Notice" means written notification pursuant to Section
8.2(a) of a Third Party Claim as to which indemnity under Section 8.1 is sought
by an Indemnified Party, enclosing a copy of all papers served, if any, on the
Indemnified Party and for the Indemnified Party's claim against the Indemnifying
Party under Section 8.1.
"Closing" means the closing of the transactions contemplated by
Section 1.3.
"Closing Date" means the date on which the Closing actually
occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Purchased Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Common Stock" has the meaning ascribed thereto in Section 2.3.
"Communications Act" has the meaning ascribed to it in Section
2.35(c).
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Management Agreement" shall mean any management or other
agreement (other than a loading agreement) pursuant to which the Company or any
of its Subsidiaries agrees to manage or to perform other services (other than
loading) with respect to SMR Licenses held by another person in exchange for
either the right to receive a portion of the revenues derived from such SMR
Licenses or the right to purchase such SMR Licenses or any loading agreement
pursuant to which such Subsidiary is loading SMR Licenses held by another person
in exchange for either the right to receive a portion of the revenues derived
from such SMR Licenses in excess of 25% of the aggregate revenues derived from
such SMR Licenses or the right to purchase such SMR Licenses.
"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Defined Benefit Plan" means each Plan which is subject to Part 3
of Title 1 of ERISA, Section 412 of the Code or Title IV of ERISA.
-46-
<PAGE>
"Disclosure Schedule" means the schedules delivered to Investor
by or on behalf of the Company, containing all lists, descriptions, exceptions
and other information and materials as are required to be included therein by
the Company pursuant to this Agreement.
"Dispute Period" means the period ending 30 calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Due Diligence Memoranda" means (i) the memorandum from Tony
Welwood of the Company delivered to Marc Schachter of Morgan, Lewis & Bockius
LLP on January 23, 1998 concerning corporate matters of the Company; (ii) the
memorandum dated January 22, 1998, and attachments thereto, from Robert W. Moore
of the Company to Ira White of Morgan, Lewis & Bockius LLP relating to the
resignation of David Chadwick; (iii) the letter dated March 10, 1998, and
attachments thereto, from Kevin J. Leichter of Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP to Jean Sampson of Morgan, Lewis & Bockius
LLP that describes the status of pending litigation to which the Company or any
of its subsidiaries is a party; (iv) the letter dated April 3, 1998, and
attachments thereto, from Michael Minden of Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP to Jean Sampson of Morgan, Lewis & Bockius LLP; (v)
the memorandum dated April 8, 1998 from Graham & James LLP to Recovery Equity
Partners II, L.P. with respect to (A) conflicts under other Contracts with
respect to the transactions contemplated by this Agreement and the Operative
Agreements and (B) material breaches or defaults under other Contracts and (vi)
the memorandum dated April 29, 1998 from Graham & James LLP to Recovery Equity
Partners II, L.P. with respect to issuances of capital stock of the Company.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil (collectively,
"Claims"), pursuant to or relating to any applicable Environmental Law by any
Person (including any Governmental or Regulatory Authority, private person and
citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (i) violation of or liability under any Environmental Law, (ii)
violation of any Environmental Permit or (iii) liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties arising
out of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Materials at any
location, including any off-Site location to which Hazardous Materials or
materials containing Hazardous Materials were sent for handling, storage,
treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed
or proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
-47-
<PAGE>
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened or suspected Release of a Hazardous
Material.
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety Laws, common law, orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal Laws relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, solid, toxic or hazardous substances or
wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consents or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"Equity Equivalents" means securities (including Options and the
Warrants) which, by their terms, are or may be exercisable, convertible or
exchangeable for or into Common Stock at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ESMR" has the meaning ascribed to it in Section 2.35(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"FCC" shall mean the Federal Communications Commission or any
successor thereto.
"FCC License" shall mean any paging, mobile telephone, SMR
License or other license, permit, consent, certificate of compliance, franchise,
approval or authorization of any type granted or issued by the FCC, including
any of the foregoing authorizing the acquisition, construction or operation of
an SMR System (as defined herein), radio paging system or other radio
communications system.
"First Warrant" means the Warrant in the form and to the effect
of Exhibit G-1.
"Fully-Diluted Basis" means, with respect to the calculation of
the number of shares of Common Stock, (a) all shares of Common Stock outstanding
at the time of determination and (b)
-48-
<PAGE>
all shares of Common Stock issuable upon the exercise, conversion or exchange of
any Equity Equivalents outstanding at the time of determination.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include the FCC and any stock
exchange, quotation service and the National Association of Securities Dealers.
"Grossed-Up Basis" means, when used to describe the basis on
which the payment of a specified sum is to be made, a basis such that the amount
of such payment, after being reduced by the amount of all Taxes imposed on the
recipient of such payment as a result of the receipt or accrual of such payment,
will equal the specified sum.
"Hazardous Material" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs), (b) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Identified Securities" has the meaning ascribed to it in Section
2.3.
"Indebtedness" of any Person means all obligations of such Person
(a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VIII.
"Indemnity Notice" means written notification pursuant to Section
8.2(c) of a claim for indemnity under Article VIII by an Indemnified Party,
specifying the nature of and basis for such
-49-
<PAGE>
claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Intellectual Property" means all trademarks and trademark
rights, trade names and trade name rights, service marks and service mark
rights, service names and service name rights, patents and patent rights, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions,
processes, formulae, industrial models, processes, designs, specifications,
data, technology, methodologies, computer programs (including all source codes),
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks and other media on which any
of the foregoing is stored.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company or
any Subsidiary.
"Investor" has the meaning ascribed to it in the forepart of this
Agreement.
"Investor Party" or "Investor Parties" means Investor, any
partner of Investor or any Affiliate or Associate of Investor or any such
partner.
"Investor Stockholders" has the meaning assigned to it in Section
4.10(a).
"IRS" means the United States Internal Revenue Service.
"Law" or "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Properties" has the meaning ascribed to it in
Section 2.15(a).
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person,
whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due.
-50-
<PAGE>
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority
(including FCC Licenses).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
interest, reasonable expenses of investigation, court costs, reasonable fees and
expenses of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include all fees and expenses, including fees and expenses
of attorneys, incurred in connection with (i) the investigation or defense of
any Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise).
"NASD" means the National Association of Securities Dealers, Inc.
"New Common Stock" means any Common Stock or Equity Equivalent,
other than any (a) Common Stock and Equity Equivalents issued in connection with
any stock split, stock dividend or reclassification of any Common Stock or
Equity Equivalents,(b) Common Stock and Equity Equivalents issuable in a public
offering registered under the Securities Act, (c) Common Stock and Equity
Equivalents issued to financial institution(s) on arm's-length terms in
connection with (and ancillary to) an extension of credit by such financial
institution(s) to the Company or any of its Subsidiaries, (d) Common Stock and
Equity Equivalents issued to an unaffiliated seller or sellers of another
company or business in connection with an arm's-length acquisition by the
Company or one or more of its Subsidiaries of such company or business, (e)
Common Stock and Equity Equivalents issued to management of the Company or any
Subsidiary thereof pursuant to management stock purchase or option plans
approved by the Board of Directors of the Company, (f) Common Stock issued in
satisfaction of any rights granted to any Identified Securities and (g) Common
Stock or Equity Equivalents issued in satisfaction of any rights granted in the
Warrants.
"New Common Stock Notice" has the meaning assigned to it in
Section 4.10(a).
"New Common Stock Offer" has the meaning assigned to it in
Section 4.10(a).
"New Common Stock Units" has the meaning assigned to it in
Section 4.10(a).
"New Preferred Stock" means the shares of Preferred Stock to be
issued in accordance with the terms of the First Warrant.
-51-
<PAGE>
"Operative Agreements" means the Warrants, the Registration
Rights Agreement, the Shareholders Agreement, the Advisory Agreement, and any
support or other agreements to be entered into in connection with the
transactions contemplated by this Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract
(including, without limitation, the issuance of any notes or other debt
instruments convertible or payable in any shares of capital stock or other
equity interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person) that gives the right to (i) purchase or otherwise
receive or be issued any shares of capital stock or other equity interests of
such Person or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock or other equity interests of such
Person or (ii) receive any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock or other equity interests
of such Person, including any rights to participate in the equity, income or
election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Original Ownership" means the number of shares of Common Stock
owned (and (without duplication) which Investor has the right to acquire from
any Person) by Investor and which may be acquired pursuant to the Third Warrant
as of the Closing Date, and any stock into which such Common Stock may
thereafter be converted or changed; provided, however, that in the event of a
stock dividend, split-up, recapitalization, combination, exchange of stock or
the like in respect of such Common Stock, the term "Common Stock" shall be
deemed to refer to and include the stock as well as all stock dividends and
distributions and any stock into which or for which any or all of such stock may
be changed or exchanged.
"Owned Real Property" has the meaning ascribed to it in Section
2.15(a).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permitted Issuance" means (i) the issuance from time to time by
the Company of shares of Common Stock upon exercise of the Warrants, (ii) the
issuance from time to time by the Company of Identified Securities or of shares
of Common Stock upon the exercise of Identified Securities, (iii) the issuance
from time to time by the Company of New Preferred Stock and (iv) the issuance
from time to time by the Company of New Warrants.
"Permitted Lien" means (a) any Lien for Taxes not yet due or
payable with respect to which reserves for the full amount of such Taxes have
been made, (b) the Liens set forth in Section 10.1 of the Disclosure Schedule
and (c) any minor imperfection of title or similar Lien which individually or in
the aggregate with other such Liens does not impair the value or marketability
of
-52-
<PAGE>
the property subject to such Lien or interfere with the use of such property in
the conduct of the business of the Company or any Subsidiary and which do not
secure obligations for money borrowed.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Preferred Purchased Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Preferred Stock" has the meaning ascribed thereto in Section
2.3.
"Pro Rata" means, with respect to one or more Investor
Stockholders, in proportion to the number of shares of Common Stock on a
Fully-Diluted Basis owned by such Investor Stockholder or Investor Stockholders
or which may be acquired by any such Investor Stockholder or Investor
Stockholders upon exercising any rights under any Equity Equivalent owned by
such Stockholder or Investor Stockholders.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Registration Rights Agreement" means the Registration Rights
Agreement by and between the Company and Investor, substantially in the form and
to the effect of Exhibit E, as such agreement may be amended, modified or
restated from time to time.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section
2.11(a).
"Representatives" has the meaning ascribed to it in Section 4.2.
"Resolution Period" means the period ending thirty (30) calendar
days following receipt by an Indemnified Party of a notice from the Indemnifying
Party disputing the claim described in an Indemnity Notice.
-53-
<PAGE>
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person.
"Second Warrant" means the Warrant in the form and to the effect
of Exhibit G-2.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Shareholders Agreement" means the Shareholders Agreement by and
between the Company and the other parties thereto, substantially in the form and
to the effect of Exhibit F, as such agreement may be amended, modified or
restated from time to time.
"Significant Transaction" means: (i) any Business Combination of
the Company or any Subsidiary with or into any Person; (ii) any sale, lease,
exchange or other disposition by the Company or any Subsidiary of a significant
portion of its assets, in a single transaction or a series of related
transactions, to or with any Person; (iii) any amendment to or modification or
repeal of any provision of the certificate or articles of incorporation or the
by-laws (or other organic documents) of the Company or any Subsidiary (except as
required by the transactions contemplated hereby); (iv) any acquisition by the
Company or any Subsidiary of securities or assets, in a single transaction or a
series of related transactions, if such securities or assets will represent a
substantial portion of the total assets of the Company or such Subsidiary; (v)
any increase (other than in connection with a Permitted Issuance) or reduction
in excess of 5% of the amount of capital stock outstanding (on a Fully-Diluted
Basis) on the date hereof of either the Company or any Subsidiary or the
creation of any additional class of capital stock of the Company or any
Subsidiary, or the issuance (or entering into of any agreement, arrangement or
understanding) by the Company or any Subsidiary of capital stock or Options;
(vi) the incurrence after the Closing Date by the Company or any Subsidiary of
any Indebtedness in any single transaction in excess of $125,000 or any series
of transactions that exceed, in the aggregate, $500,000 or any modification or
amendment to any agreement governing the extension thereof; (vii) the
dissolution of the Company or any Subsidiary, the adoption of a plan of
liquidation by the Company or any Subsidiary, any action by the Company or any
Subsidiary to commence any suit, case, proceeding or other action (A) under any
existing or future Law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief entered
with respect to the Company or such Subsidiary, or seeking to adjudicate the
Company or such Subsidiary a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to the Company or such Subsidiary, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for the
Company or such Subsidiary or for all or any substantial part of the Company's
or such Subsidiary's assets, or making a general assignment for the benefit of
the creditors of the Company or such Subsidiary; (viii) any other transaction
not in the ordinary course of business, consistent with past practice, (ix) any
Contract or any amendment or modification of any existing Contract between the
Company or any Subsidiary and (A) any Affiliate or officer or director of the
-54-
<PAGE>
Company or (B) any Affiliate of such officer or director, (x) the valuation of
any shares of capital stock issued in a transaction permitted pursuant to
Section 4.17, (xi) any material deviation from the Company's core business as
stated in the Business Plan (regardless of any amendments thereto) and (xii) any
discretionary declaration or payment of any dividend or other distribution on
the shares of capital stock of the Company.
"Site" means any of the real properties currently or previously
owned, leased or operated by the Company, any Subsidiary, any predecessors of
the Company or any Subsidiary, or any entities previously owned by the Company
or any Subsidiary, including all soil, subsoil, surface waters and groundwater.
"SMR License" shall mean an FCC License authorizing the
construction, ownership and operation of an SMR system in the 800 or 900 MHZ
band issued pursuant to 47 CFR Part 90 of the rules and regulations of the FCC.
"SMR System" shall mean an SMR system licensed under 47 CFR Part
90 of the rules and regulations of the FCC.
"STA" has the meaning ascribed to it in Section 2.35(c).
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least 50% of
either the equity interest in, or the voting control of, such Person, whether or
not existing on the date hereof.
"Tax" or "Taxes" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
8.2(a).
"Third-Party Management Agreement" shall mean any management or
other agreement (other than a loading agreement) pursuant to which a person
(other than the Company or any of its Subsidiaries) is managing SMR Licenses
held by the Company or a Subsidiary or any
-55-
<PAGE>
loading agreement pursuant to which a person (other than the Company or any of
its Subsidiaries) is loading SMR Licenses held by the Company or any of its
Subsidiaries in exchange for the right to receive a portion of the revenues
derived from such SMR Licenses in excess of 25% of the aggregate revenues
derived from such SMR Licenses.
"Third Warrant" means the Warrant in the form and to the effect
of Exhibit G-3.
"VCOC" has the meaning ascribed to it in Section 4.14.
"Warrants" means the First Warrant, the Second Warrant, the Third
Warrant and any warrant issued in accordance with the terms of the First Warrant
("New Warrants"), as each such warrant may be amended, modified or restated from
time to time.
"Warranty Obligations" has the meaning ascribed to it in Section
2.32.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement, (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement, (v) the phrases "ordinary course
of business" and "ordinary course of business consistent with past practice"
refer to the business and practice of the Company or a Subsidiary and (vi) the
words "include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation." All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.
(c) When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person or any
similar phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, (ii) with respect to any other Person, the
actual knowledge of the directors, officers, members, managers, general
partners, and other similar Persons in a similar position or having similar
powers and duties and (iii) in the case of each of (i) and (ii), the knowledge
of facts that such individuals should have after reasonable inquiry.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by prepaid first class certified mail,
return receipt requested, or mailed by overnight courier prepaid, to the parties
at the following addresses or facsimile numbers:
-56-
<PAGE>
If to Investor, to:
Recovery Equity Investors II, L.P.
901 Mariner's Island Boulevard
Suite 465
San Mateo, CA 94404
Facsimile No.: (650) 578-9842
Attn: Joseph J. Finn-Egan
Jeffrey A. Lipkin
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
If to the Company to:
Chadmoore Wireless Group, Inc.
2875 East Patrick Lane
Suite G
Las Vegas, Nevada 89120
Facsimile No.: (702) 891-5255
Attn: Robert Moore, President and Chief Executive Officer
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, California 95814-4411
Facsimile No.: (916) 441-6700
Attn: Gilles S. Attia, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon facsimile confirmation, (iii)
if delivered by mail in the manner described above to the address as provided
for in this Section, be deemed given on the earlier of the third Business Day
following mailing or upon receipt and (iv) if delivered by overnight courier to
the address as provided in this Section, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other
-57-
<PAGE>
Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
11.2 Entire Agreement. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
11.3 Expenses. Except as otherwise expressly provided in this
Agreement (including as provided in Article VIII and 9.2), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with this Agreement, the Operative
Agreements and the transactions contemplated hereby and thereby; provided,
however, that if the Closing does not occur and on or prior to the last day of
the 12-month period following the date hereof the Company or any Subsidiary
consummates a Business Combination or enters into any agreement, arrangement or
understanding (including a non-binding letter of intent) to consummate a
Business Combination, then promptly upon the earliest of such event to occur the
Company shall reimburse Investor in cash for its documented expenses (whether
incurred prior to, on or after the date hereof) resulting from, arising out of
or relating to the evaluation, negotiation and documentation of the transactions
contemplated hereby (including the fees and expenses of attorneys, accountants
and other consultants).
11.4 Public Announcements. At all times at or before the Closing,
neither the Company nor Investor will issue or make any statements or releases
to the public with respect to this Agreement or the transactions contemplated
hereby without the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public
statement or release from the other party and such statement or release is, in
the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required statement or release and promptly furnish the other party
with a copy thereof. The Company and Investor will also obtain the other party's
prior approval of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
11.5 Confidentiality. Each party hereto will hold in strict
confidence from any Person (other than any Investor Party), unless (i) compelled
to disclose by judicial or administrative process (including in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after
-58-
<PAGE>
the furnishing of such documents or information hereunder) through no fault of
such receiving party, (c) later acquired by the receiving party from another
source if the receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and information
confidential or (d) in the case of Investor, disclosed to a transferee of
Investor of securities of the Company, provided such transferee agrees to be
bound by the provisions of this Section 11.5.
11.6 Futher Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing, the Company shall execute and deliver to
Investor such other documents and instruments, provide such materials and
information and take such other actions as Investor may reasonably request to
consummate the transactions contemplated by this Agreement and the Operative
Agreements and otherwise to cause the Company to fulfill its obligations under
this Agreement and the Operative Agreements, including, without limitation, any
filings under the Hart-Scott-Rodino Antitrust Improvements of 1976, as amended,
and the rules and regulations thereunder.
11.7 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
11.8 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.9 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VIII.
11.10 No Assigment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned (by operation of law
or otherwise) by the Company without the prior written consent of Investor and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
11.11 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.12 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision
-59-
<PAGE>
will be fully severable, (b) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
11.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
11.14 Construction. The parties hereto agree that this Agreement
is the product of negotiation between sophisticated parties and individuals, all
of whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
11.15 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.16 Limited Recourse. Notwithstanding anything in this
Agreement, any Operative Agreement or any other document, agreement or
instrument contemplated hereby or thereby to the contrary, the obligations of
Investor hereunder and under any Operative Agreement shall be without recourse
to any partner, Associate or Affiliate of Investor or its partners, or any other
respective officers, directors, employees or agents and shall be limited to the
assets of Investor.
11.17 FCC Compliance. Investor does not intend to control or
attempt to control the Company or any Subsidiary through the rights granted to
it under this Agreement, and agrees that it will seek the prior approval of the
FCC, to the extent required, or a declaratory ruling from the FCC that such
prior consent is not required, before exercising any of the rights granted to it
under the Warrants if, upon the exercise thereof, a transfer of control
requiring the prior consent of the FCC is likely to occur. In the event it is
determined that such prior FCC approval is required, Investor, as the Company
shall reasonably request and at the sole cost and expense of the Company, and
the Company shall cooperate in preparing and filing with the FCC all
applications that are required in order to obtain such approval.
-60-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
CHADMOORE WIRELESS GROUP, INC.
By:__________________________________
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS, II L.P.,
its General Partner
By:_____________________________
Name: Joseph J. Finn-Egan
Title: General Partner
By:_____________________________
Name: Jeffrey A. Lipkin
Title: General Partner
[Investment Agreement]
-61-
<PAGE>
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience only.
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF COMMON PURCHASED STOCK, PREFERRED
PURCHASED STOCK AND WARRANTS; CLOSING ............................1
1.1 Purchase and Sale......................................1
1.2 Purchase Price.........................................1
1.3 Closing................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................2
2.1 Organization and Qualification.........................2
2.2 Authority Relative to this Agreement and
the Operative Agreements...............................2
2.3 Capital Stock..........................................2
2.4 Subsidiaries; Company; Business........................4
2.5 No Conflicts...........................................4
2.6 Governmental Approvals and Filings.....................5
2.7 Books and Records......................................5
2.8 SEC Documents; Financial Statements....................6
2.9 Absence of Changes.....................................6
2.10 No Undisclosed Liabilities.............................8
2.11 Taxes..................................................8
2.12 Legal Proceedings.....................................10
2.13 Compliance With Laws and Orders.......................11
2.14 Benefit Plans; ERISA..................................11
2.15 Real Property.........................................13
2.16 Tangible Personal Property............................14
2.17 Intellectual Property Rights..........................14
2.18 Contracts.............................................14
2.19 Licenses..............................................16
2.20 Insurance.............................................17
2.21 Affiliate Transactions................................18
2.22 Employees; Labor Relations............................18
-i-
<PAGE>
2.23 Environmental Matters.................................19
2.24 Substantial Customers and Suppliers...................20
2.25 Accounts Receivable...................................20
2.26 Inventory.............................................20
2.27 Other Negotiations; Brokers...........................20
2.28 Registration Rights...................................21
2.29 Exemption from Registration; Restrictions on
Offer and Sale of Same or Similar Securities..........21
2.30 Restrictions on Conduct of Business...................22
2.31 Banks and Brokerage Accounts..........................22
2.32 Warranty Obligations..................................22
2.33 Foreign Corrupt Practices Act.........................22
2.34 NASD Matters..........................................23
2.35 Additional Regulatory Matters.........................23
2.36 Holdings Company Act and Investment Company
Act Status............................................25
2.37 State Takeover Statutes...............................25
2.38 Due Diligence Memoranda...............................25
2.39 Disclosure............................................25
2.40 Projections...........................................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR.......................26
3.1 Organization; Power and Authority.....................26
3.2 No Conflicts..........................................26
3.3 Purchase for Investment...............................27
3.4 Brokers...............................................27
ARTICLE IV
COVENANTS OF THE COMPANY.........................................28
4.1 Regulatory and Other Approvals........................28
4.2 Investigation by Investor.............................28
4.3 No Solicitations......................................29
4.4 Conduct of Business...................................29
4.5 Financial Statements and Reports......................30
4.6 Certain Restrictions..................................31
4.7 Affiliate Transactions................................32
4.8 Notice and Cure.......................................32
4.9 Fulfillment of Conditions.............................32
4.10 Rights to Purchase Additional Securities..............32
4.11 Significant Transactions..............................33
4.12 Reservation of Shares.................................33
-ii-
<PAGE>
4.13 Videoconferencing Capability..........................33
4.14 Venture Capital Operating Company Status..............34
4.15 Use of Proceeds.......................................34
4.16 Amendments to Identified Securities...................34
4.17 Certain Transactions with Subsidiary..................35
4.18 Business Plan.........................................35
4.19 New Preferred Stock...................................35
4.20 Certain Stock Issuances...............................35
ARTICLE V
CONDITIONS TO OBLIGATIONS OF INVESTOR............................36
5.1 Representations and Warranties........................36
5.2 No Adverse Change.....................................36
5.3 Performance...........................................36
5.4 Officers' Certificates................................36
5.5 Orders and Laws.......................................36
5.6 Regulatory Consents and Approvals.....................37
5.7 Third Party Consents..................................37
5.8 Opinions of Counsel...................................37
5.9 Good Standing Certificates............................37
5.10 Other Agreements......................................38
5.11 Delivery of Certificates..............................38
5.12 Proceedings...........................................38
5.13 Executives and Key Managers...........................38
5.14 Business Plan.........................................38
5.15 By-Law Amendment......................................38
5.16 Charter Amendment.....................................38
5.17 Board of Directors....................................38
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY.........................39
6.1 Representations and Warranties........................39
6.2 Performance...........................................39
6.3 Orders and Laws.......................................39
6.4 Regulatory Consents and Approvals.....................39
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.......................................................39
7.1 Survival of Representations, Warranties,
Covenants and Agreements..............................39
-iii
<PAGE>
ARTICLE VIII
INDEMNIFICATION..................................................40
8.1 Indemnification.......................................40
8.2 Method of Asserting Claims............................41
ARTICLE IX
TERMINATION......................................................42
9.1 Termination...........................................42
9.2 Effect of Termination.................................43
ARTICLE X
DEFINITIONS......................................................44
10.1 Definitions...........................................44
ARTICLE XI
MISCELLANEOUS....................................................56
11.1 Notices...............................................56
11.2 Entire Agreement......................................58
11.3 Expenses..............................................58
11.4 Public Announcements..................................58
11.5 Confidentiality.......................................58
11.6 Further Assurances; Post-Closing Cooperation..........59
11.7 Waiver................................................59
11.8 Amendment.............................................59
11.9 Third Party Beneficiaries.............................59
11.10 No Assignment; Binding Effect.........................59
11.11 Headings..............................................59
11.12 Invalid Provisions....................................60
11.13 Governing Law.........................................60
11.14 Construction..........................................60
11.15 Counterparts..........................................60
11.16 Limited Recourse......................................60
11.17 FCC Compliance........................................60
-iv
<PAGE>
LIST OF EXHIBITS
Exhibit A Officer's Certificate
Exhibit B Secretary's Certificate
Exhibit C Advisory Agreement
Exhibit D Charter Amendment
Exhibit E Registration Rights Agreement
Exhibit F Shareholders Agreement
Exhibit G-1 Three-Year Warrant
Exhibit G-2 Eleven-Year Warrant
Exhibit G-3 Five and One-Half Year Warrant
Disclosure Schedule
-v-
<PAGE>
Exhibit A
CHADMOORE WIRELESS GROUP, INC.
Officer's Certificate
Pursuant to Section 5.4 of the Investment Agreement, dated as of
May 1, 1998 (the "Investment Agreement"; capitalized terms used but not defined
herein shall have the respective meanings ascribed to them in the Investment
Agreement), between Recovery Equity Investors II, L.P., a Delaware limited
partnership, and Chadmoore Wireless Group, Inc., a Colorado corporation (the
"Company"), I, Robert W. Moore, in my capacity as President and Chief Executive
Officer of the Company and on behalf of the Company, DO HEREBY CERTIFY that:
(1) I am the duly elected, qualified and acting President and
Chief Executive Officer of the Company.
(2) Each of the representations and warranties made by the Company
in the Investment Agreement is true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of the date hereof as though made on and as of the date hereof, and each
of the representations and warranties made by the Company in the Investment
Agreement as of a specified date earlier than the date hereof was also true and
correct in all material respects (if not qualified by materiality) or in all
respects (if qualified by materiality) on and as of such earlier date.
(3) Each of the agreements, covenants and obligations required by
the Investment Agreement to be performed or complied with by the Company at or
before the Closing has been duly performed or complied with in all material
respects.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the day of May, 1998.
By:
-----------------------------
Name: Robert W. Moore
<PAGE>
Disclosure Schedule
-------------------
This Disclosure Schedule is made and given pursuant to that certain
Investment Agreement, dated as of May 1, 1998, by and between Recovery Equity
Investors II, L.P. and Chadmoore Wireless Group, Inc. (the "Agreement"). The
section and subsections in this Disclosure Schedule correspond to the sections
and subsections set forth in the Agreement. Unless otherwise defined herein, all
capitalized terms shall have the meanings ascribed to them in the Agreement.
This Disclosure Schedule is, and shall be deemed to be for all purposes, an
integral part of the Agreement.
Organization and Qualification. Chadmoore Wireless Group is not qualified to do
business in Nevada.
[Intentionally left blank].
None.
Capital Stock.
(a) Attached as Annex 2.3(a) hereto is a list of each holder of record
of the Common Stock and Preferred Stock of the Company.
(b) See Attachment A to the Stock Purchase Warrant (Certificate No. 1)
(hereinafter referred to as "Attachment A") which is attached as
Exhibit F-1 to the Investment Agreement which is incorporated herein by
this reference. The Company has reserved a sufficient number of shares
of Common Stock for each convertible security listed on Attachment A.
(c) The Company has the following agreements or understandings with the
Persons indicated in which the Company may satisfy an outstanding
Liability by issuing securities:
1. Agreement with Private Equity Partners ("PEP") to issue 5,000
shares of Common Stock per month for a six-month period as a
consulting fee in consideration for PEP's assistance with
corporate issues and the preparation of the Company's Annual
Report on Form 10-KSB for the fiscal year ending December 31,
1997. The shares of Common Stock are to be issued under the
Company's Employee Benefit and Consulting Services Plan, dated
July 7, 1995 (the "Plan").
2. Verbal agreement with Kelly Perry wherein Mr. Perry has agreed
to develop a budgeting system in exchange for a payment of
$20,000 of which the Company has agreed to pay up to one-third
of such payment in the form of Common Stock at its fair market
value on the date of issuance.
3. The Company is in the process of negotiating an employment
contract with Bobby Davis relating to his employment as
general manager of the Company's direct distribution markets.
As part of the employment contract, it is currently
contemplated that the Company will issue Mr. Davis stock
options as part of his compensation package.
4. Moscato Marsh & Partners, Inc. ("Marsh") Advertising and
Marketing Letter Agreement, dated December 9, 1997, between
the Company and Marsh (the "Letter Agreement"). The term of
the Letter Agreement commenced on December 1, 1997 and
terminates on November 30, 1998. As compensation, consultant
will receive $3,600 of the Company's Common Stock per month
and payment of a portion of expenses and other fees in the
form of Common Stock. The Letter Agreement is proposed to be
substantially amended and its scope increased in accordance
with that certain letter dated March 18, 1998 and the "Revised
Agreement" attached thereto.
<PAGE>
5. Financial Consulting Services Agreement, dated March 3, 1998,
by and between M&A West, a Nevada corporation ("M&A") and the
Company (the "M&A Agreement"). The term of the M&A Agreement
commenced on March 3, 1998, and terminates on September 3,
1998; provided, however, the agreement provides that it will
automatically renew for successive six month periods unless a
notice of termination is received thirty days prior to
expiration of the term. As compensation, M&A is entitled to
5,000 shares of Common Stock and at the signing of the
agreement and for each 6 month period thereafter, M&A is
entitled to freely tradeable Common Stock valued at $50,000 on
the date of issuance.
6. The Company has entered into a Restructuring Agreement, dated
September 19, 1997 ("Restructuring Agreement"), with Willora
Company Limited and Cygni S.A. regarding the Company's
outstanding 8% Convertible Debentures (principal amount
$1,750,000). The basic terms of the Restructuring Agreement
are described in the Company's Form 8-K filed via EDGAR on
October 6, 1997, with the Securities and Exchange Commission.
Under the terms of the Restructuring Agreement, the Company
was obligated to issue a new debenture which, among other
things, required the Company to make cash or stock monthly
payments of $162,750, beginning November 30, 1997. The Company
has not issued a new debenture and has not made the required
monthly payment. The Company will likely issue the stock in
lieu of making the cash payment. In addition, under the terms
of the Restructing Agreement, the Company is obligated to
issue an additional 70,000 shares of Common Stock pursuant to
Regulation S. Further, the Company agreed to reprice Willora's
Warrant to purchase 131,250 shares of Common Stock to $1.00
and to reprice the warrants held by Flurina, totaling 150,000
shares to $1.00 per share. The final documentation for the
transactions contemplated by the Restructuring Agreement was
scheduled to have been completed by November 20, 1997 per a
letter agreement, dated November 14, 1997, executed by the
parties to the Restructuring Agreement. To date, definitive
agreements implementing the terms of the Restructuring
Agreement have not been executed by the parties.
(d) See Exhibit A, B, C, D, I, J, K and M of Attachment A to the Stock
Purchase Warrant (Certificate No. 2) (hereinafter referred to as
"Attachment A") which is attached as Exhibit F-1 to the Investment
Agreement.
(e) See Annex 2.3(a).
(f) None.
Subsidiaries; Company; Business.
(a) (A) The entities listed below are Subsidiaries of the Company and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company.
1. PTT Tanner, Inc., a Nevada corporation ("PTT Tanner"). The
authorized capital stock of PTT Tanner consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding, all of which are held by
the Company. The board of directors of PTT Tanner consists of
the following person: Robert W. Moore. The officers of PTT
Tanner are as follows: Robert W. Moore, President and
Secretary.
2. Chadmoore Communications, Inc., a Nevada corporation ("CCI").
The authorized capital stock of CCI consists of 42,000,000
shares, of which 40,000,000 are designated as Common Stock,
$.001 par value, of which 4,700,000 shares of Common Stock are
currently issued and outstanding, 4,000,000 of which are held
by the Company
2
<PAGE>
and 700,000 of which are held by Third Mobile, Inc. ("Third
Mobile"), and 2,000,000 shares of Preferred Stock, $.001 par
value, none of which are issued and outstanding. Third Mobile
also holds a warrant to acquire 700,000 shares of Common Stock
of CCI at a purchase price of $2.50 per share expiring on
January 23, 2000, and a warrant to purchase 700,000 shares of
Common Stock of CCI at the purchase price of $4.00 per share
expiring on January 23, 2003. The board of directors of CCI
consists of the following persons: Robert Moore and Jan Zwaik.
The officers of CCI are as follows: Robert W. Moore, Chairman;
Jan Zwaik, Treasurer; and Alyson Sheradin, Secretary.
3. Chadmoore Construction Services, Inc., a Nevada corporation
("CCS"). The authorized capital stock of CCS consists of 2,000
shares of Common Stock, no par value, of which 2,000 shares
are currently issued and outstanding and all of which are held
by the Company. The board of directors of CCS consists of the
following person(s): Robert W. Moore and Jan Zwaik. The
officers of CCS are as follows: Robert W. Moore, Chairman; Jan
Zwaik, Treasurer; and Alyson Sheradin, Secretary.
4. PTT Beacon Hill, Inc., a Nevada corporation ("PTT Beacon").
The authorized capital stock of PTT Beacon consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding, all of which are held by
the Company. The board of directors of PTT Beacon consists of
the following person: Robert W. Moore. The officers of PTT
Beacon are as follows: Robert W. Moore, President and
Secretary.
5. CMRS Systems, Inc., a Delaware corporation ("CMRS"). The
authorized capital stock of CMRS consists of 5,028 shares of
Common Stock, no par value, of which 49,308 shares are
currently issued and outstanding, all of which are held by the
Company. The board of directors of CMRS consists of the
following person(s): Robert W. Moore. The officers of CMRS are
as follows: Robert W. Moore, President.
6. PTT of Nevada, Inc., a Nevada corporation ("PTT Nevada"). The
authorized capital stock of PTT Nevada consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by the Company. The board of directors of PTT Nevada consists
of the following person(s): Robert W. Moore. The officers of
PTT Nevada are as follows: Robert W. Moore, President and
Secretary.
(B) The entities listed below are Subsidiaries of CCI and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company:
1. PTT Tristin, Inc., a Nevada corporation ("PTT Tristin"). The
authorized capital stock of PTT Tristin consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CCI. The board of directors of PTT Tristin consists of the
following person: Robert W. Moore. The officers of PTT Tristin
are as follows: Robert W. Moore, President and Secretary.
2. PTT Burton, Inc., a Nevada corporation ("PTT Burton"). The
authorized capital stock of PTT Burton consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CCI. The board of directors of PTT Burton consists of the
following person: Robert W. Moore. The officers of PTT Burton
are as follows: Robert W. Moore, President and Secretary.
3. PTT Maple, Inc., a Nevada corporation ("PTT Maple"). The
authorized capital stock of PTT Maple consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently issued and outstanding and all of which are held by
CCI.
3
<PAGE>
The board of directors of PTT Maple consists of the following
person: Robert W. Moore. The officers of PTT Maple are as
follows: Robert W. Moore, President and Secretary.
4. Chadmoore Communications of Tennessee, Inc., a Tennessee
corporation ("CCT"). The authorized capital stock of CCT
consists of 1,000 shares of Common Stock, no par value, of
which 1,000 shares are currently issued and outstanding, all
of which are held by CCI. The board of directors of CCT
consists of the following persons): Robert W. Moore and Jan
Zwaik. The officers of CCT are as follows: Robert W. Moore,
Chairman; Jan Zwaik, Treasurer; and Alyson Sheridan,
Secretary.
5. PTT Communications of Richmond LLC, a Delaware limited
liability company ("PTT Richmond"). The membership interests
in PTT Richmond are divided as follows: 70% to CCI and 30% to
Comm-Tronnics VA., Inc. The manager of PTT Richmond is CCI.
6. PTT Communications of Virginia Beach LLC, a Delaware limited
liability company ("PTT Virginia Beach"). The membership
interests in PTT Virginia Beach are divided as follows: 65% to
CCI and 35% to the Wireless Company. The manager of PPT
Virginia Beach is CCI.
7. PTT Communications of Austin LLC, a Delaware limited liability
company ("PTT Austin"). The membership interests in PTT Austin
are divided as follows: 70% to CCI and 30% to S&P
Communications. The Company believes that PTT Austin is
required to qualify to do business in Texas, but such
qualification has not yet been obtained although the Company
is currently in the process of obtaining such qualification.
The manager of PTT Austin is CCI.
8. PTT Communications of Ft. Wayne LLC, a Delaware limited
liability company ("PTT Ft. Wayne"). The membership interests
in PTT Ft. Wayne are divided as follows: 70% to CCI and 30% to
Emergency Radio Service, Inc. The manager of PTT Ft. Wayne is
CCI.
9. PTT Communications of Huntsville LLC, a Delaware limited
liability company ("PTT Huntsville"). The membership interests
in PTT Huntsville are divided as follows: 60% to CCI and 40%
to Huntsville Radio Service, Inc. The manager of PTT
Huntsville is CCI.
10.PTT Communications of Jacksonville LLC, a Delaware limited
liability company ("PTT Jacksonville"). The membership
interests in PTT Jacksonville are divided as follows: 70% to
CCI and 30% to Reidy, Rhodes and Taylor. The manager of PTT
Jacksonville is CCI.PTT
11.PTT Communications of Roanoke LLC, a Delaware limited
liability company ("PTT Ronoake"). The membership interests in
PTT Ronoake are divided as follows: 70% to CCI and 30% to
Radio Communications, Inc. The manager of PTT Ronoake is CCI.
(C) The entities listed below are Subsidiaries of CMRS and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company:
1. PTT Roseland, Inc., a Nevada corporation ("PTT Roseland"). The
authorized capital stock of PTT Roseland consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CMRS. The board of directors of PTT Roseland consists of
only Robert W. Moore. The only officer of PTT Roseland is
Robert W. Moore.
4
<PAGE>
2. PTT Franklin, Inc., a Nevada corporation ("PTT Franklin"). The
authorized capital stock of PTT Franklin consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently outstanding and all of which are held by CMRS.
The board of directors of PTT Franklin consists of the
following person: Robert W. Moore. The only officer of PTT
Franklin is Robert W. Moore, President and Secretary.
3. 800 SMR Network, Inc., a Delaware corporation ("800 SMR"). The
authorized capital stock of 800 SMR consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently outstanding and all of which are held by CMRS. The
board of directors of 800 SMR consists of the following
person: Robert W. Moore. The only officer of 800 SMR is Robert
W. Moore, Chairman.
4. PTT Chaco, Inc., a Nevada corporation ("PTT Chaco"). The
authorized capital stock of PTT Chaco consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently outstanding and all of which are held by 800 SMR.
The board of directors of PTT Chaco consists of the following
person: Robert W. Moore. The only officer of PTT Chaco is
Robert W. Moore, President and Secretary.
5. PTT Artina, Inc., a Nevada corporation ("PTT Artina"). The
authorized capital stock of PTT Artina consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently outstanding and all of which are held by 800
SMR. The board of directors of PTT Chaco consists of the
following person: Robert W. Moore. The officers of PTT Chaco
are as follows: Robert W. Moore, President and Secretary.
6. PTT Communications of Rockford LLC, a Delaware limited
liability company ("PTT Rockford"). The membership interests
in PTT Rockford are divided as follows: 60% to 800 SMR and 40%
to Comelec East. The manager of PTT Rockford is 800 SMR.
7. PTT Communications of Baton Rouge, LLC a Nevada limited
liability company ("PTT Baton Rouge"). The membership
interests in PTT Baton Rouge are divided as follows: 80% to
800 SMR and 20% to EMCO. The manager of PTT Baton Rouge is 800
SMR.
8. PTT Communications of Bay City LLC, a Delaware limited
liability company ("PTT Bay City"). The membership interests
in PTT Bay City are divided as follows: 80% to 800 SMR and 20%
to Anderson Radio. The manager of PTT Bay City is 800 SMR.
9. PTT Communications of Lake Charles LLC, a Delaware limited
liability company ("PTT Lake Charles"). The membership
interests in PTT Lake Charles are divided as follows: 93% to
800 SMR and 7% to Telecom Rentals, Inc. The manager of PTT
Lake Charles is 800 SMR.
(D) The Company has a 20% equity ownership interest in JJ&D
L.L.C. ("JJ&D").
(b) Chadmoore Communications, Inc. is not qualified to do business in
the following jurisdictions; however, it is currently in the process of
becoming so qualified or intends to become so qualified as soon as
practicable following the Closing:
1. Alabama
2. Illinois
3. Wisconsin
4. Texas
5. New York
5
<PAGE>
6. Florida
7. Mississippi
8. Michigan
9. Virginia
CMRS Systems, Inc. is not qualified to do business in the following
jurisdictions; however, it is currently in the process of becoming so qualified
or intends to become so qualified as soon as practicable following the Closing:
1. Illinois
2. Louisiana
3. Michigan
PTT Communications of Rockford, LLC is not qualified to do business in
Illinois.
PTT Communications of Roanoke, LLC is not qualified to do business in
Virginia.
2.5 No Conflicts.
None.
2.6 Governmental Approvals and Filings.
(a) In connection with the issuance and sale of the Common Purchased
Stock, Preferred Purchased Stock and Warrants to Investor, the Company
intends to file a Form D with the United States Securities and Exchange
Commission within 15 days following the Closing Date pursuant to Rule
506 of the Securities Act in order to qualify for the exemption
contained therein.
(b) The Company will make all state securities filings in connection
with the issuance of the Common Purchased Stock, Preferred Purchased
Stock and Warrants as required by all applicable state securities laws,
including without limitation, the filing of a notice of transaction
under Section 25102(f) under the California Corporate Securities Law of
1968, as amended, with the California Commissioner of Corporations.
2.7 [Intentionally Left Blank]
2.8 [Intentionally Left Blank]
2.9 Absence of Changes.
(a) None.
(b) See Annex 2.9(b) attached hereto for a list of all issuances of the
Company's securities since December 31, 1997.
(c) The Regional Operations Directors' salaries are being adjusted from
60% base salary and 40% bonus to 75% base salary and 25% bonus. This
Company believes that this change is necessary to appropriately
motivate management to build-out existing sites.
(d) The Company has entered into a Services Agreement ("Services
Agreement") and Pledge Agreement ("Pledge Agreement"), each dated March
9, 1998, with HSI GeoTrans Wireless, Inc. ("GeoTrans"). In addition,
the Company has drawn down approximately $1.5 million under the MarCap
Corporation ("MarCap") debt facility during 1998.
(e) None.
6
<PAGE>
(f) The Company entered into a Master Purchase Agreement with JJ&D,
dated September 13, 1996 ("JJ&D Agreement") wherein the Company was
granted the right to purchase Scanning Repeater Modules. However, the
Company has negotiated the right to manufacture its own Scanning
Repeater Modules utilizing the JJ&D technology with a third-party
manufacturer. Since the Company has acquired this right, the Company
has written down the value of its investment in JJ&D by approximately
$440,000. The original Master Purchase Agreement has terminated and the
Company is in the process of negotiating a new Master Purchase
Agreement.
(g) The Company has pledged certain assets to GeoTrans under the
Services Agreement and Pledge Agreement. In addition, the Company has
pledged certain assets of CCI and 800 SMR to MarCap pursuant to the
terms of an Assignment and Security Agreements, each dated October 30,
1997.
Further, the Company is in the process of upgrading its SMR
Stations. Each station upgrade costs approximately $71,000 for the
initial 5-channel configuration necessary to commence aggressive
distribution. To date, the Company has incurred approximately
$6,375,000 in relation to the construction of approximately 180 sites.
CCI is obligated to transfer approximately 500 licenses (which
such transfer has already been reflected on the Schedule of Licenses
contained in Annex 2.19 to CELLSMR) pursuant to the Treatch Agreement.
The Treatch Agreement is attached hereto as Annex 2.9(g).
(h) Pursuant to a letter agreement (the "Letter Agreement") dated
February 25, 1997, and as clarified on March 5, 1998, MarCap agreed to
modify certain financial covenants as set forth on Exhibit A to the
Letter Agreement. MarCap also agreed to waive existing covenants
through April 30, 1998, provided that the Company uses its best efforts
to raise at least $5 million of equity financing and $15 million of
aggregate financing by such date.
(i) The Company's business plan requires it to either construct
additional sites or expand sites where capacity hits 90%. The Company
will continue with its business plan and incur these capital
expenditures.
(j) None.
(k) None.
(l) None.
(m) None.
Undisclosed Liabilities.
None
Taxes.
(a) Attached as Annex 2.11(a) is a description of the current status of
the Company's outstanding tax issues.
(b) None.
(c) Attached as Annex 2.11(b) is a Schedule of Extended Income Tax
Returns.
(d) None.
(e) None.
7
<PAGE>
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
(k) The Company is a member of the limited liability companies listed
in Section 2.4 and it treats these interests as partnership interests
for purposes of taxation.
(l) None.
(m) None.
(n) See attached hereto as Annex 2.11(n) a memo describing certain
limitations on the Company's ability to utilize its net operating
losses.
(o) None.
Legal Proceedings.
(a) None.
(b) Other than as disclosed in the Company's Form 10-KSB for the fiscal
year ended December 31, 1997, the Company has not had any material
legal proceedings within the last five years.
2.13 Compliance with Laws and Orders.
(a) See Section 2.1 and 2.4(b).
(b) None.
(c) None.
2.14 Benefit Plans; ERISA.
The following is a list of all of the Company's benefit plans:
1. Medical. Medical insurance coverage for employees and
dependants is a primary care plan and is under a policy
issued by Fortris Benefits Insurance. All medical insurance
premiums for its employees are paid by the Company.
2. Dental. Dental insurance coverage for employees and
dependants is a dental plan underwritten by MetLife Preferred
Dentist Program. All dental insurance premiums for its
employees are paid by the Company.
3. Life Insurance. Each employee has a $30,000 life insurance
benefit through the medical coverage provided to each
employee by the Company.
4. Change of Control Agreements. In the event of a change of
control of the Company (defined as the acquisition of more
than 50% of the outstanding Common Stock of the Company or
more than 10% of the outstanding Common Stock of the Company,
in each case without the consent of the board of directors),
each employee that is a party to the Company's standard form
Change of Control Agreement is entitled to 2.9 times their
base annual salary, in accordance with the Company's
Incentive Plan.
8
<PAGE>
5. Employee Benefit and Consulting Services Plan. The Company
has adopted an Employee Benefit and Consulting Services Plan
("EBSC Plan") whereby the Company is authorized to issue
Common Stock and Options to purchase Common Stock to eligible
employees, officers, directors and consultants.
6. Employee Stock Option Plan. The Company is in the process of
obtaining the requisite corporate approvals for the 1998
Stock Option Plan and the reservation of 3,000,000 shares of
the Company's Common Stock thereunder.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
(k) None.
Real Property.
(a) 1. The Company acquired an office building as part of its
acquisition of General Communications. The building has approximately
8,000 square feet and is located at 1727 Cherokee Boulevard, Memphis,
Tennessee 38111. The Company has placed a Deed of Trust in escrow in
favor of Motorola pursuant to the terms of the Motorola Financing
Agreement.
2. The Company has entered into an industrial lease for warehouse
and office space for approximately 15,635 square feet, dated as
of October 18, 1997, with Patrick Commerce Center, LLC, as
lessor, for its principal business headquarters located at 2875
East Patrick Lane, Suite G, Las Vegas, NV 89120.
3. The Company has entered into an office lease, dated as of
November 1995, for approximately 1,000 square feet with RPM
Management Company, as lessor, for offices located at 1508 Macon
Drive, Bldg. C, Suite 3, Little Rock, AR 72211.
4. The Company has entered into an office lease, dated April
1997, for approximately 800 square feet with Joe Poppenheimer, as
lessor, for office space located at 7033 Greenbriar Drive, Southaven,
MS 38671.
5. The Company and its Subsidiaries have entered into
approximately 180 antenna site leases for space in buildings and radio
towers to install communications equipment. Attached as Annex 2.15(b)
is a list of all of the Company's and its Subsidiaries' antenna site
leases.
6. Pursuant to the terms of the Motorola Financing Agreement, the
Company has placed into escrow a Deed of Trust in favor of Motorola
9
<PAGE>
relating to building and land located Shelby County, Tennessee.
The Company has several standard commercial leases relating to office
equipment such as copiers, faxes and computers. The Company believes
that such leases are not material to the Business or Condition of the
Company.
(b). None.
(c). None.
(d). None.
2.16 Tangible Personal Property.
The Company has pledged certain of its assets under the MarCap Debt
Facility and under the GeoTrans Services Agreement.
2.17 Intellectual Property Rights.
(i)
1. Chadmoore Wireless Group and Logo
2. PTT Communications, Inc. and Logo (an application has been
filed with the U.S. Patent and Trademark Office)
3. Power to Talk(TM) (an application has been filed with the U.S.
Patent and Trademark Office)
4. Teamlink(TM) (an application has been filed with the Patent
and Trademark Office)
5. Fleetlink(TM) (an application has been filed with the U.S.
Patent and Trademark Office)
6. General Communications(TM)
7. Airtel, Inc.
(ii) None.
(iii) The Company has granted a license to use all of the Company's
trademarks and service marks to each dealer and any Person who is a
party to any of the LLC agreements listed in Section 2.4 above.
The Company is not aware of any Person that has alleged that
the Company is infringing on its Intellectual Property. However, the
mark "Team Link" has been registered with the Patent and Trademark
Office by Pivotal Communications, L.L.C. of Atlanta, Georgia
("Pivotal"). Pivotal is utilizing the mark for pre-paid long distance
telephone cards. The Company has neither contacted nor been contacted
by Pivotal.
2.18 Contracts.
(a)(i) (A) The Company has entered into employment agreements with the
following persons:
1. Employment Agreement dated as of January 1, 1997, by and
between the Company and Robert W. Moore. Mr. Moore is a member
of the Company's board of directors and is President and Chief
Executive Officer of the Company. The initial term of
employment under this agreement commenced on January 1, 1995,
and ended on January 1, 1997. Pursuant to Section 1.2, the
term of employment was automatically renewed for an additional
two-year period. The base salary under the agreement is
10
<PAGE>
$125,000 and Mr. Moore is entitled to a bonus of up to $40,000
based on certain performance criteria.
2. Employment Agreement dated June 16, 1997, by and between the
Company and Jan S. Zwaik. Mr. Zwaik is a member of the
Company's Board of Directors and Chief Operating Officer of
the Company. The term of employment under this agreement
commenced on February 17, 1997, and ends on February 17, 1999.
The base salary under the agreement is $110,000 and Mr. Zwaik
is entitled to a bonus of up to $40,000 based on certain
performance criteria.
3. Employment Agreement, dated as of September 8, 1997, by and
between the Company and Anthony Welwood. Mr. Welwood is the
Vice President of Operations of the Company. The initial term
of employment under this agreement commenced on March 17,
1997, and ends on March 16, 1999. The agreement is
automatically renewed for successive one-year periods unless
the parties otherwise terminate the agreement in accordance
with its terms. The base salary under the agreement is $80,000
and Mr. Welwood is entitled to a bonus of up to $25,000 based
on certain performance criteria.
4. Employment Agreement, dated as of September 8, 1997, by and
between the Company and Alyson Sheridan. Ms. Sheridan is the
Vice President of Administration of the Company. The initial
term of employment under this agreement commenced on January
1, 1997, and ends on January 1, 1999. The agreement is
automatically renewed for successive one-year periods unless
the parties otherwise terminate the agreement in accordance
with its terms. The base salary under the agreement is $62,000
and Ms. Sheridan is entitled to a bonus of up to $40,000.
5. The Company has entered into Incentive Agreements, in
substantially the same form that has been delivered to
Investor, with the following employees: Riaz Ali, Marcia
Boydston, Stacey Ceragioli, Duane Ellis, Mike Henrey, Greg
Keskey, Julie Hemphill, Walter Lippincott, Rhoda Markoe,
Robert W. Moore, Daniel Schafer, Alyson Sheradin, Toni Welwood
and Jan Zwaik.
6. The Company has extended an employment contract to Bobby
Davis. The employment contract has not been executed by the
employee as of this date.
(a)(i)(B) The Company or its Subsidiaries is a party to the consulting
agreements listed below:
1. Consulting Agreement, dated January 15, 1995, and Addendum No.
1 thereto dated July 12, 1995, between the Company and Neil A.
Cox. The stated term of this agreement expired on July 15,
1996. As compensation, consultant received 35,000 shares of
Common Stock of the Company and an option to purchase 40,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share under the EBCS Plan.
2. Consulting Agreement, dated May 1, 1995, by and between the
Company and Tebsa Holdings Ltd. The term of this agreement
commenced on May 1, 1995, and terminated on November 9, 1995.
If the Company received $500,000 of investment funds as a
result of consultant's efforts, consultant was to receive as
compensation an option to purchase 150,000 shares of the
Common Stock of the Company at an exercise price of $1.50 per
share, and an option to purchase 150,000 shares of the Common
Stock of the Company at an exercise price of $4.00 per share.
For introductions resulting in investments in excess of
11
<PAGE>
$500,000, consultant was to receive an option to purchase
100,000 shares of the Common Stock of the Company at an
exercise price of $1.50 per share, and an option to purchase
100,000 shares of the Common Stock of the Company at an
exercise price of $4.00 per share.
3. Consulting Agreement, dated July 6, 1995, and Addendum No.1
thereto dated July 6, 1995, by and between the Company and
Newhouse Consulting Ltd. The term of this agreement commenced
on the date of execution and terminated July 6, 1996. As
compensation, consultant received an option to purchase 20,000
shares of the Common Stock of the Company at an exercise price
of $1.00 per share. Consultant received a warrant to purchase
27,625 shares of Common Stock of the Company at an exercise
price of $5.00 per share. Pursuant to Addendum No. 1,
consultant received an additional option to purchase 20,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share.
4. Consulting Agreement, dated July 12, 1995, between the Company
and Alyson Sheradin. The term of this agreement commenced on
July 12, 1995, and terminated on July 12, 1996. As
compensation, the consultant received 60,000 shares of Common
Stock of the Company under the EBCS Plan.
5. Consulting Agreement, dated July 12, 1995, by and between the
Company and Asian Financial Network, Inc. The term of this
agreement commenced on July 12, 1995, and terminated on July
12, 1996. As compensation, consultant received an option to
purchase 45,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
6. Consulting Agreement, dated July 12, 1995, between the Company
and Charles W. Trench. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase
175,000 shares of the Common Stock of the Company at an
exercise price of $1.00 per share under the EBCS Plan.
7. Consulting Agreement, dated July 12, 1995, between the Company
and Daniel J. Shrader. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received 15,000 shares of the Common
Stock of the Company. Consultant also received an option to
purchase 15,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
8. Consulting Agreement, dated July 12, 1995, between the Company
and David Mowry. The term of this agreement commenced on July
12, 1995 and terminated on July 12, 1996. As compensation,
consultant received 40,000 shares of the Common Stock of the
Company under the Plan. Consultant also received an option to
purchase 90,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
9. Consulting Agreement, dated July 12, 1995, between the Company
and Lawson M. Kerster. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase 30,000
shares of the Common Stock of the Company at an exercise price
of $1.00 per share under the EBCS Plan.
10.Consulting Agreement, dated July 12, 1995, between the
Company and Leonard Evans. The term of this agreement
commenced on July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase 20,000
12
<PAGE>
shares of the Common Stock of the Company at an exercise price
of $1.00 per share under the EBCS Plan.
11.Consulting Agreement, dated July 12, 1995, between the
Company and Thomas D. Krosschell. The term of this agreement
commenced on July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received 15,000 shares of the Common
Stock of the Company. Consultant also received an option to
purchase 15,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
12.Consulting Agreement, dated September, 1995, and Addendum
No.1 thereto dated January 6, 1996, by and between the Company
and Rolfe Widdowson Limited Partnership. The term of this
agreement expired on July 12, 1996. As compensation,
consultant received two options to purchase 20,000 shares of
the Common Stock of the Company at an exercise price of $1.00
per share under the EBCS Plan. Consultant also received a
Class B warrant to purchase 27,625 shares of Common Stock of
the Company
13.Consulting Agreement, dated November 10, 1995, between the
Company and Fidelity Holdings Limited. The term of this
agreement commenced on November 10, 1995, and terminates on
November 10, 1998. As compensation, consultant received an
option to purchase 87,500 shares of Common Stock of the
Company at an exercise price of $0.50 per share under the EBCS
Plan.
14.Consulting Agreement, dated November 10, 1995, between the
Company and Harris Limited. The term of this agreement
commenced on November 10, 1995, and terminated on May 10,
1997. As compensation, consultant received an option to
purchase 215,000 shares of Common Stock of the Company at an
exercise price of $0.50 per share under the EBCS Plan.
15.Consulting Agreement, dated November 10, 1995, between the
Company and JJ&D, L.L.C. The term of this agreement commenced
on November 10, 1995 and terminates on November 10, 1998. As
compensation, consultant received an option to purchase 30,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share under the EBCS Plan.
16.Consulting Agreement, dated November 10, 1995, by and between
the Company and Orient Group, Ltd. The term of this agreement
commenced on November 10, 1995, and terminates on November 10,
1998. As compensation, consultant was to receive 54,166,
54,167 and 54,167, shares of restricted Common Stock of the
Company on February 12, 1996, April 12, 1996 and June 11,
1996, respectively.
17.Consulting Agreement, dated November 10, 1995, by and between
the Company and Spectrum Engineering, Inc. The term of this
agreement commenced on November 10, 1995, and terminates on
November 10, 1998. As compensation, received an option to
purchase 250,000 shares of Common Stock of the Company at an
exercise price of $0.50 per share under the EBCS Plan.
18.Consulting Agreement, dated January 19, 1996, by and between
the Company and Lybster, Ltd. The term of this agreement
commenced on January 19, 1996, and terminates on January 19,
2001. As compensation, consultant received an option to
purchase 450,000 shares at an exercise price of $0.37 per
share exercisable for a period of 18 months.
13
<PAGE>
19.Consulting Agreement, dated April 16, 1996, between the
Company and 707 Corp. The term of this agreement commenced on
April 16, 1996 and terminated on April 16, 1997. As
compensation, consultant received an option to purchase 70,000
shares of restricted Common Stock of the Company at an
exercise price of $2.50 per share.
20.Moscato Marsh & Partners, Inc. ("Marsh") Advertising and
Marketing Letter Agreement, dated December 9, 1997, between
the Company and Marsh. The term of the letter agreement
commenced on December 1, 1997 and terminates on November 30,
1998. As compensation, consultant will receive $3,600 per
month worth of the Company's Common Stock and payment of a
portion of expenses and other fees in the form of Common
Stock. The letter agreement is proposed to be substantially
amended and its scope increased in accordance with that
certain letter dated March 18, 1998 and the "Revised
Agreement" attached thereto.
21. Private Equity Partners ("PEP") Engagement Letter, dated June
5, 1997.
22. PEP Engagement Letter, dated March 7, 1998.
23. Letter Agreement dated January 27, 1998 between the Company
and PEP.
24.Pledge Agreement, dated March 9, 1998, by CMRS in favor of
GeoTrans (related to pledge of capital stock of PTT Franklin).
(a)(i)(C)In connection with the transactions contemplated by this
Agreement, the Company will compensate PEP as follows: PEP is entitled
to receive 6% of the gross proceeds of the offering.
(a)(ii) The Company entered into a Guaranty and Security Agreement,
dated as of December 30, 1996, in favor of Motorola, as amended by the
First Amendment thereto, dated October 30, 1997 ("Company Guaranty and
Security Agreement"). Pursuant to Section 4.4 of the Company Guaranty
and Security Agreement, the Company agreed to continue to serve
primarily as a holding company for companies in the business of
acquiring and operating SMR communications systems.
(a)(iii) The Company and Subsidiaries are a party to the following
limited liability company agreements:
1. PTT Communications of Richmond LLC, Limited Liability Company
Agreement, dated June 12, 1997, between CCI and Comm-Tronnics
VA., Inc.
2. PTT Communications of Austin LLC, Limited Liability Company
Agreement, dated July 3, 1997 and amended August 19, 1997,
between CCI, 800 SMR and S&P Communications.
3. PTT Communications of Ft. Wayne LLC, Limited Liability Company
Agreement, dated June 12, 1997 and amended July 23, 1997 and
August 5, 1997, between CCI and Emergency Radio Service, Inc.
4. PTT Communications of Huntsville LLC, Limited Liability
Company Agreement, effective June 12, 1997 and as amended
August 15, 1997, between CCI and Huntsville Radio Service,
Inc. and related letter, dated September 16, 1997, executed by
the parties.
5. PTT Communications of Jacksonville LLC, Limited Liability
Company Agreement, dated July 24, 1997, between CCI and Reidy,
Rhodes and Taylor.
14
<PAGE>
6. PTT Communications of Roanoke LLC, Limited Liability Company
Agreement, dated August 4, 1997, between CCI and Radio
Communications Company, Inc.
7. PTT Communications of Rockford LLC, Limited Liability Company
Agreement, dated August 7, 1997 between 800 SMR and Comelec
East.
8. PTT Communications of Baton Rouge Limited, Limited Liability
Company Agreement, dated June 12, 1997, between 800 SMR and
EMCO.
9. PTT Communications of Bay City LLC, Limited Liability Company
Agreement, dated June 12, 1997, between 800 SMR and Anderson
Radio.
10.PTT Communications of Lake Charles LLC, Limited Liability
Company Agreement, dated July 3, 1997, between 800 SMR and
Telcom Rentals, Inc.
11.PTT Communications of Virginia Beach, LLC, dated August 21,
1997, amended October 17, 1997 and November 5, 1997, between
CCI and The Wireless Company.
(a)(iv) Attached as Annex 2.18(a)(iv) is a Debt Role describing all
debt owed by the Company and its Subsidiaries.
1. Financing and Security Agreement, dated October 29, 1996, by
and between Motorola, Inc. ("Motorola"), and Chadmoore
Communications, Inc., as amended by the First Amendment
thereto dated October 30, 1997, by and among CCI, CMRS and
MarCap.
2. Company Guaranty and Security Agreement.
3. Motorola Purchase Agreement, dated October 26, 1996, by and
between the Company and Motorola.
4. Tennessee Deed of Trust with Security Agreement and
Assignment of Rents and Leases, dated December 20, 1996, by
and among Chadmoore Communications of Tennessee, Inc. ("CCT"),
Chicago Title Insurance Company, and Motorola, as amended by
the Deed of Trust Modification and Extension Agreement, dated
as of October 30, 1997. The mortgaged property is located on
Lot 20 of the Cherokee Commercial Center Subdivision located
in Shelby County, Tennessee.
5. Guaranty and Security Agreement, dated as of December 30,
1996, between CCT and Motorola, as amended by the First
Amendment thereto dated October 30, 1997, by the Company in
favor of MarCap ("Security Agreement").
6. First Amendment to Guaranty and Security Agreement, dated
as of July 21, 1997, between CCT and Motorola.
7. Stock Pledge Agreement, dated as of December 30, 1996, by
and between CCT and Motorola.
8. Assignment and Security Agreement, dated as of October 30,
1997, by CCI in favor of MarCap.
9. Assignment and Security Agreement, dated October 30, 1997,
by 800 SMR in favor of MarCap.
10. First Amendment to Guaranty and Security Agreement, dated
as of October 30, 1997, by Chadmoore Communications of
15
<PAGE>
Tennessee, Inc. in favor of MarCap.
11. Stock Pledge Agreement, dated as of October 30, 1997, by
and between CMRS Systems, Inc. and MarCap (with respect to
pledge of stock of PTT Artina, Inc., a Nevada corporation).
12. Stock Pledge Agreement, dated as of October 30, 1997, by
and between CCI and MarCap (with respect to pledge of stock of
PTT Maple, Inc., a Nevada corporation).
13. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 25 Hardy Road, Falmouth, Maine.
14. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 2205 Lamar Avenue, Memphis,
Tennessee.
15. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 3737 Hillegas Road, Fort Wayne,
Indiana.
16. Letter, dated February 25, 1998 ("MarCap Letter"), from
Mark F. Sullivan to John W. Wellhausen, and countersigned by
Jan S. Zwaik and John W. Wellhausen, with respect to an
agreement to cross-collateralize the Motorola and MarCap
credit facilities, to adjust the collateral ratio, the
Company's agreement to use its diligent efforts to $5 million
in an equity financing and $15 million in aggregate financing
by April 30, 1998, a waiver of existing covenants provided
that the Company continue to use its diligent efforts to
secure such financing and that MarCap would not object to the
Company raising $10 million in new senior debt if the Company
is not in material default under the financing agreements.
17. Services Agreement with GeoTrans.
18. Pledge Agreement with GeoTrans.
19. The Company is in the process of negotiating a restructure
of the $1,627,500 8% Convertible Note due August 31, 1998,
wherein, pursuant to these negotiations, the Company has set
aside the SMR licenses listed on Annex 2.18(a)(iv)(20)
attached hereto.
20. Additional Promissory Note (principal amount $481,440)
dated October 31, 1997, between CCI, CMRS in favor of MarCap.
(v) The Company and its Subsidiaries are a party to the following
dealer agreements:
1. Dealer Agreement, dated August 6, 1997, between CCI and
Comm-Tronnics VA., Inc.
2. Dealer Agreement, dated June 12, 1997, between CCI and
Huntsville Radio Service, Inc.
3. Dealer Agreement, dated August 4, 1997, between CCI and Radio
Communications Company, Inc.
4. Dealer Agreement, dated February 6, 1998, between CCI and
Nashville Communications.
5. Dealer Agreement, dated November 25, 1997, between CCI and
Pyramid Communications.
6. Dealer Agreement, dated February 6, 1998, between CCI and
Electronic Maintenance & Communication.
16
<PAGE>
7. Dealer Agreement, dated February 6, 1998, between CCI and
Louisiana Radio Communications.
8. Dealer Agreement, dated February 6, 1998, between CCI and
Tele-Rad (2 markets).
9. Dealer Agreement, dated February 6, 1998, between CCI and
Shanks Communications.
10.Dealer Agreement, dated March 25, 1998, between CCI and
Middle Tennessee 2-Way.
11.Dealer Agreement, dated August 21, 1997, and as amended
October, 17, 1997 November 5, 1997 and November 13, 1997,
between CCI and The Wireless Company.
12.Dealer Agreement, dated June 24, 1997, between CCI and Reidy,
Rhodes & Taylor.
13. Dealer Agreement, dated November 4, 1997, between CCI and
Maine Radio.
14.Dealer Agreement, dated August 7, 1997, between CCI and
Comelec East (2 markets).
15.Dealer Agreement, dated January 5, 1998, between CCI and
Industrial Communications.
16.Dealer Agreement, dated May 30, 1997, between CCI and Team
One Communications (6 markets).
17.Dealer Agreement, dated May 30, 1997, between CCI and Ft.
Myers Communications.
18.Dealer Agreement, dated May 16, 1997, between CCI and
Spectrum Communications.
19.Dealer Agreement, dated May 15, 1997, between CCI and
Communications Unlimited.
20.Dealer Agreement, dated February 13, 1997, between CCI and
Segno Communications.
21.Dealer Agreement, dated June 12, 1997, between CCI and
Emergency Radio Service.
22.Dealer Agreement, dated April 1, 1997, between CCI and
CommQuest Wireless.
23. Dealer Agreement, dated June 10, 1997, between CCI and EMCO.
24. Dealer Agreement, dated May 22, 1997, between CCI and Telcom
Rentals.
25.Dealer Agreement, dated May 4, 1997, between CCI and Dorler
Communications (2 markets).
26. Dealer Agreement, dated May 12, 1997, between CCI and
Anderson Radio.
27.Dealer Agreement, dated August 15, 1997, between CCI and
Chrouch Communications.
28. Dealer Agreement, dated April 15, 1997, between CCI and Alpha
Wireless.
17
<PAGE>
29.Dealer Agreement, dated June 4, 1997, between CCI and
Diversified Electronics.
30.Dealer Agreement, dated May 27, 1997, between CCI and South
Sales Communications.
31.Dealer Agreement, dated June 3, 1997, between CCI and Two-Way
Radio of Carolina.
32.Dealer Agreement, dated June 1, 1997, between CCI and
Wireless Communications.
33.Dealer Agreement, dated June 7, 1997, between CCI and
Carolina Communications.
34. Dealer Agreement, dated July 3, 1997, between CCI and S&P
Communications.
35.Dealer Agreement, dated May 8, 1997, between CCI and Texas
Communications.
36.Dealer Agreement, dated January 5, 1998, between CCI and
Industrial Communications.
37. Dealer Agreement, dated April 29, 1997, between CCI and 2-Way
Radio
(v)(B) 1. Motorola Master Purchase Agreement.
2. JJ&D Master Purchase Agreement.
3. Unitel Master Purchase Agreement.
(v)(C) See Annex 2.32 for a copy of the Company's standard Customer
Service Agreement.
(vi) See list of agreements in Section 2.18(a)(iv) above.
(vii) The Company has entered into the following agreements to dispose
of assets not in the ordinary course of business:
1. Pursuant to a letter agreement dated October 2, 1997, CCI is
obligated to transfer approximately 500 licenses to CELLSMR
License Holding, L.C., a Texas Limited Liability Company
("CELLSMR") (which such transfer has already been reflected on
the schedule of licenses contained in Annex 2.19), for
providing certain technology relating to the construction and
build-out of approximately 1,500 licenses (the "Treatch
Agreement"). The Treatch Agreement is attached hereto as Annex
2.9(g).
2. The Company has received an offer from Southern Communications
to purchase 71 channels from the Company for approximately
$1.4 million. The channels are considered by the Company to be
excess capacity for the term of the current business plan.
(viii) None.
(ix) None.
(x) (A) Pursuant to the Offshore Subscription Agreement between the
Company and certain purchasers of the Company's Series B Preferred
Stock, the Company is restricted from issuing any securities under
Regulation S until the first to occur of the following: (i) the
then-remaining Liquidation Preference, as defined, of the Preferred
Stock is no greater than Two Hundred Eight Five Thousand ($285,000)
18
<PAGE>
United States Dollars; (ii) April 20, 1998; (iii) such purchasers give
written approval for such additional financings.
(B) Under the terms of the Company and Guaranty Security
Agreement, the Company agreed to certain financial covenants
regarding consolidated tangible net worth, debt to
consolidated tangible net worth, accumulated radio units,
minimum annualized revenue and cash flow to debt service. The
Company is currently in default with respect to these
financial covenants. In addition, the past due installment
payments owed by the Company to the Licensees as described in
paragraph 1 above, constitutes a default under Section 4.3 of
the Security Agreement whereby the Company made an affirmative
covenant to timely discharge all of its obligations to the
extent such obligations exceed, in the aggregate, $50,000.
However, pursuant to a Letter Agreement (the "MaCap Letter")
dated February 25, 1997, and as clarified on March 5, 1998,
MarCap agreed to modify these covenants as set forth on
Exhibit A to the MarCap Letter. MarCap also agreed to waive
existing covenant defaults through April 30, 1998, provided
that the Company uses its diligent best efforts to raise at
least $5 million of equity financing and $15 million of
aggregate financing by such date (the "Waiver").
(xi) The Company does not have any powers of attorney or other similar
delegations of authority made by the Company or any Subsidiary to any
other person or entity.
(xii) See Annex 2.19.
(b) 1. The Company has past due installment payments owed to certain
holders of FCC Licenses ("Licensees") that have entered into license
option agreements with the Company or its Subsidiaries. The aggregate
amount of these past due amounts is approximately $271,400 ($64,300 for
the quarter ended June 30, 1997; $64,300 for the quarter ended
September 30, 1997; $64,300 for the quarter ended December 31, 1997;
and an estimated $78,500 for the quarter ending March 31, 1998). Under
the terms of the Company's standard agreement with the Licensees, the
Company has 30 days from the date any Licensee sends a notice of
termination to pay all delinquent payments. If the Company tenders such
payment, the agreement with the Licensee remains in full force and
effect.
2. Under the terms of the Security Agreement, the Company
agreed to certain financial covenants regarding consolidated
tangible net worth, debt-to-consolidated tangible net worth,
accumulated radio units, minimum annualized revenue and cash
flow- to-debt service. Pursuant to the MarCap Letter, MarCap
agreed to modify these covenants as set forth on Exhibit A to
the MarCap Letter; and MarCap also agreed to waive existing
covenants through April 30, 1998, provided that the Company
uses its diligent best efforts to raise at least $5 million of
equity and $15 million of aggregate financing by such date.
2.19 Licenses.
(a) Attached hereto as Annex 2.19 is a complete list of licenses held
by the Company or its Subsidiaries or for which the Company has an
option to acquire. The Company is the holder of each license listed
under the "Transferred To" column that is listed as the Company and is
indicated as being transferred to the Company or any of its
subsidiaries. The Company has an option to acquire all licenses that
have a date under the heading "Option to Acquire Expires." The Company
has executed a promissory note and is in the process of having the FCC
transfer all licenses that state that the Company has a executed a
19
<PAGE>
purchase agreement with the licensee and issued a promissory note as
indicated under the heading "Prom. Note."
(b) Attached hereto as Annex 2.19 is a list of the Company's business
licenses and other licenses or permits that are material to the
Company's business.
(c) None.
2.20 Insurance.
(a) Directors, Officers and Corporate Liability Insurance Policy,
Policy Number: 861-01-90 Insurer: National Union Fire Insurance Company
of Pittsburgh, Pa., 175 Water Street, New York, New York, 10038
Expiration Date: January 21, 1999 Annual Premiums: $88,000 Description
of Policy: This is a general Directors, Officer and Corporate liability
policy that provides up to $5 million of coverage for securities and
other claims. Claims Made: None.
(b) General Liability Insurance Policy: Insurer: Kaercher Insurance,
P.O. Box 1868, Las Vegas, NV 89126 Expiration Date: March 3, 1999
Annual Premiums: $48,945 Description of Policy: This is a general
blanket business liability policy with aggregate claims for up to $2
million. In addition, the policy covers automobile liability for up to
$1 million. Claims Made: None.
(c) Key Man Insurance Polciy: Insurer: Northwestern National Life
Insurance Expiration Date: June 5, 2001 Annual Premiums: $3,510
Description of Policy: This is a 5 year term life insurance policy on
the life of Robert W. Moore for $2,000,000. Claims Made: None.
(d) Worker's Compensation Policy Insurer: Kaercher Insurance Expiration
Date: March 9, 1999 Description of Policy: This is a general worker's
compensation policy. Claims Made: None.
2.21 Affiliate Transactions.
(a) None.
(b) None.
2.22 Employees; Labor Relations.
(a) See Annex 2.22(a) for a list of each employee of the Company and
its Subsidiaries.
(b) None.
2.23 Environmental Matters.
(a) - (h)None.
2.24 Customers.
(a) Attached hereto as Annex 2.24(a) is a list of the top 10 customers
of the Company.
(b) Attached hereto as Annex 2.24(b) is a list of the top 10 suppliers
of the Company.
(c) None.
(d) None.
2.25 Accounts Receivable.
20
<PAGE>
None.
2.28 Registration Rights.
The Persons listed below have certain registration rights with respect
to securities of the Company as described below:
1. Pursuant to the terms of a Conversion Agreement, dated March 24,
1995, Green Valley Partners ("Green Valley") is entitled to piggy-back
registration rights with respect to shares of Common Stock of the Company issued
upon conversion of certain outstanding debt. This piggy-back registration right
is subject to underwriter cut-back in the event that the underwriter of the
public offering notifies Green Valley that it is willing or able to proceed with
the proposed offering only with respect to a smaller number of shares of Common
Stock of the Company than the number of shares proposed to be offered
collectively by the Company and Green Valley. This registration provision does
not address priority cut-back with respect to other holders of the Company's
securities that may be entitled to registration rights.
2. Pursuant to Stock Option Agreements, each dated as of September 13,
1995, by and between the Company and Golden Rhino Ltd. ("GRL"), the Company
granted GRL registration rights with respect to up to 250,000 shares of Common
Stock of the Company issuable upon exercise of the options (the "GRL Option
Stock"). Pursuant to Section 7 of the Option Agreements, in the event the
Company files a registration statement under the Securities Act during the 3
year period ending September 13, 1998, either for the account of the Company or
any other Person (except for a registration statement on Form S-8, S-14 or other
inappropriate form), at the request of a majority in interest of the holders of
GRL Option Stock, the Company agreed to include the GRL Option Stock in any such
registration statement. This registration provision does not address underwriter
cut-back or priority cut-back with respect to other holders of the Company's
securities that may be entitled to registration rights.
3. Pursuant to the terms of a private placement offering of 1,342,999
units (each consisting of 1 share of Common Stock of the Company and 1 warrant
to purchase one share of Common Stock of the Company) completed on March 12,
1996, the holders of such units ("1995 Private Placement Holders") are entitled
to 1 demand registration for shares of Common Stock held by them and shares of
Common Stock issuable upon exercise of the warrants; provided, however, that the
1995 Private Placement Holders are not entitled to such demand registration
until after the 180th day following the Company's next registered public
offering.
4. Pursuant to a private placement offering of $3,000,000 8%
Convertible Debentures due September 6, 1998 ("8% Debentures") to Cygni, S.A.,
and a Registration Rights Agreement, effective as of August 30, 1996, the
holder(s) of the 8% Debentures are entitled to 1 demand registration if shares
of Common Stock of the Company issued upon conversion of the Debentures (and
shares issued upon exercise of certain warrants issued in connection with the 8%
Debentures) are issued with any restrictive legend. If the Company fails to
comply with this registration provision, it is obligated to pay the holders of
such registration right $100,000 in liquidated damages. Pursuant to Section 2.2
of the Registration Rights Agreement, the holders of the 8% Debentures also are
entitled to piggy-back registration rights provided that any such securities
included on behalf of such holders would be registered as a "shelf" registration
and not part of any underwriting arrangement entered into by the Company and/or
other holders of securities of the Company who may be participating in such
registration. Section 2.1(b) of the Registration Rights Agreement provides for a
standard underwriter cut-back and a first priority registration right with
respect to other holders of the Company's securities that are entitled to
registration rights; provided, however, with respect only to the piggy-back
registration provisions set forth in Section 2.2, Section 2.1(b) (including the
registration priority provisions set forth therein) does not apply with respect
to the Company's first registered public offering.
5. Pursuant to a Registration Rights Agreement, dated February 19,
21
<PAGE>
1997, between the Company and Willora Company Limited ("Willora"), Willora has
the right to 1 demand registration with respect to the shares of the Common
Stock of the Company which are issued and/or issuable upon conversion of the 8%
Convertible Debentures held by Willora.
6. Pursuant to a Stock Purchase Warrant, dated February 19, 1997,
between the Company and Willora, Willora is entitled to piggy-back registration
rights with respect to all shares of Common Stock of the Company underlying such
warrant. The registration provision of this Stock Purchase Warrant provides for
a standard underwriter cut-back and a pro-rata cut-back with respect to other
holders of the Company's securities proposing to register securities in any such
offering.
7. Pursuant to a Registration Rights Agreement, dated December 10,
1997, holders of the Company's Series B 8% Convertible Preferred Stock are
entitled to 1 demand registration in the event that Regulation S is materially
amended and the underlying shares are not freely tradable after the applicable
restricted period under Regulation S. In the event the Company fails to comply
with these registration provisions, the Company is liable for liquidated damages
equal to 1% of the principal amount of the securities for the first three months
and 3% per month for each month thereafter until the shares have been
registered. The payment of the liquidated damages by the Company does not
relieve it of its registration obligations.
8. Pursuant to a Conversion Agreement, dated as of December 29, 1995,
the Company granted SMR Digital Communications, Inc. ("SMR Digital") the same
registration rights as those granted to the 1995 Private Placement Holders.
9. Pursuant to an Assignment Agreement, dated as of December 29, 1995,
the Company granted Tele-Lease the same registration rights as those granted to
the 1995 Private Placement Holders.
10. Pursuant to Option Agreements, each dated as of October 1, 1997,
between the Company and Jan S. Zwaik, Anthony Welwood and Alyson Sheradin,
respectively, the Company granted such persons piggy-back registration rights
only in the event the shares of Common Stock of the Company underlying such
options are not eligible for registration on Form S-8. The registration
provision of the Option Agreements provides for a standard underwriter cut-back
and a pro-rata cut-back with respect to other holders of the Company's
securities proposing to register securities in any such offering.
11. Pursuant to a Warrant Agreement, dated January 1, 1997, between the
Company and Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
("Christensen") with respect to 300,000 shares of Common Stock, Christensen is
entitled to piggy-back registration rights only in the event the shares of
Common Stock of the Company underlying the subject warrants are not eligible for
registration on Form S-8. The registration provision of the Warrant Agreement
provides for a standard underwriter cut-back and a pro-rata cut-back with
respect to other holders of the Company's securities proposing to register
securities in any such offering.
12. Pursuant to an Option Agreement, dated July 9, 1997, between the
Company and Jan Zwaik, Mr. Zwaik is entitled piggy-back registration rights only
in the event the shares of Common Stock of the Company underlying such option
are not eligible for registration on Form S-8. The registration provision of the
Option Agreement provides for a standard underwriter cut-back and a pro-rata
cut-back with respect to other holders of the Company's securities proposing to
register securities in any such offering.
13. Pursuant to a Consulting Agreement, dated July 6, 1995, between the
Company and Newhouse Consulting Ltd., the Company granted this consultant the
same registration rights as those granted to the 1995 Private Placement Holders.
14. Pursuant to a Consulting Agreement, dated September 1995, between
the Company and Rolfe Widdowson Family Limited Partnership, the Company granted
this consultant the same registration rights as those granted to the 1995
22
<PAGE>
Private Placement Holders.
15. Pursuant to a Conversion Agreement, dated September 22, 1995, by
and between David M. Munch ("Munch"), CCI and the Company, Munch converted
$25,000 indebtedness of a loan into 16,667 shares of Common Stock of the
Company. This piggy-back registration right is subject to underwriter cut-back
in the event that the underwriter of the public offering notifies Munch that it
is willing or able to proceed with the proposed offering only with respect to a
smaller number of shares of Common Stock of the Company than that proposed to be
collectively offered by the Company and Munch. This registration provision does
not address priority cut-back with respect to other holders of the Company's
securities that are entitled to registration rights.
16. A warrant to purchase 385,604 shares of Common Stock of the Company
was assigned to Global Scope Ltd. ("GSL") by Green Valley on December 26, 1995.
GSL is entitled to 1 demand registration for the Common Stock of the Company
underlying the warrant at any time after the 180th day following the first
registered public offering conducted by the Company for its own account. There
are no provisions related to a standard underwriter cut-back or priority
cut-back with respect to other holders of registration rights.
17. Pursuant to a Stock Option Agreement, dated April 16, 1996, between
the Company and 707 Corp., 707 Corp. is entitled to piggy-back registration
rights with respect to shares of Common Stock of the Company issuable upon
exercise of the stock option. This registration provision does not address
underwriter cut-back or priority cut-back with respect to other holders of
registration rights.
18. Pursuant to a Stock Option, dated April 16, 1996, between the
Company and JJ&D, L.L.C. ("JJ&D"), JJ&D is entitled to piggy-back registration
rights with respect to shares of Common Stock of the Company issuable upon
exercise of the stock option. This registration provision does not address
underwriter cut-back or priority cut-back with respect to other holders of
registration rights.
19. Pursuant to a stock option agreement issued to AMG Capital
International S.A. ("AMG"), AMG was granted was registration rights the same
rights as the purchasers in the 1995 Private Placement Holders.
20. Pursuant to Mutual Settlement Agreement and Release Agreements
entered into between the Company and the persons listed below, the Company
granted each person "piggy back registration rights" with regard to any
registration statement that the Company files, except a registration statement
on Form S-4, S-8, or other inappropriate form (the "Settlement Registration
Rights"), (this registration provision does not address underwriter cut-back or
priority cut-back with respect to other holders of registration rights):
a. Barbara Taylor - 10,200 shares
b. Herbert Ruetsch - 10,200 shares
c. Doris Shaw - 10,200 shares
d. Tim Nickles - 8,500 shares
e. Chad Donn, Inc. 8,000 shares.
21. Under the M&A Agreement, the Company has agreed to issue freely
tradeable shares of Common Stock in consideration of consulting services to be
provided to the Company.
22. Pursuant to the Mutual Settlement and Release Agreement dated
September 1997, the Company granted registration rights equal to the Settlement
Registration Rights to the following persons relating to an aggregate of 101,700
shares of Common Stock: Roy Farrington, Virginia Ferrington, Bruce Farrington,
Marlys Johnson and Lois Mason.
2.30 Restrictions on Conduct of Business.
See Section 2.18(a)(ii) above.
23
<PAGE>
2.31 Banks and Brokerage Accounts.
(a) See Annex 2.31(a) attached hereto for a list of all bank and
brokerage accounts held by the Company and its subsidiaries.
(b) See Annex 2.31(a).
(c) None.
2.32 Warranty Obligations.
(a) Attached hereto as Annex 2.32 is the Company's standard Customer
Service Agreement and Terms and Conditions.
(b) None.
(c) None.
2.35 Additional Regulatory Matters.
(a)(i-iv) See Annex 2.19.
(c) None.
(d) None.
Projections.
See Annex 2.40.
Permitted Liens. The Company has Liens on certain assets pursuant to
the agreements listed as Items 1-4, 5-12 and 18 in Section 2.18(a)(iv) of
this Disclosure Schedule.
Exhibit 2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RIGHTS TO REPURCHASE CONTAINED HEREIN AND THE
RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN THE
SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
Date of Issuance: May 1, 1998 Certificate No. 1
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II, L.P.,
a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 4,000,000 Warrant Shares at the Exercise Price.
This Warrant is issued to REI on the Date of Issuance pursuant to the Investment
Agreement. The Exercise Price and number of Warrant Shares (and the amount and
kind of other securities) for which this Warrant is exercisable shall be subject
to adjustment and subject to rights to receive other securities, all as provided
herein. Certain capitalized terms used herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
<PAGE>
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant may
be exercised, in whole or in part, at any time and from time to time, commencing
on the Date of Issuance through 5:00 p.m., Nevada time, on May 1, 2001, or, if
such day is not a Business Day, on the next succeeding Business Day (the
"Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 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 the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) a check or wire transfer payable to the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant
Shares being purchased upon such exercise (the "Aggregate Exercise
Price").
(ii) Certificates for Warrant Shares (rounded up to the nearest
whole share) purchased upon exercise of this Warrant shall be delivered by the
Company to the Purchaser within three Business Days after the date of the
Exercise Time.
(iii) Notwithstanding (ii) above, in lieu of delivery of
certificates for all or part of the Warrant Shares with respect to which this
Warrant is being exercised, the Purchaser, at its option, may elect to receive
and the Company shall then deliver to the Purchaser (a) such number of shares of
Preferred Stock of the Company as shall be designated by the Purchaser having an
aggregate stated value equal to the Aggregate Exercise Price of the Warrant
Shares with respect to which the Purchaser is making this election and which
Preferred Stock shall have terms identical in all respects with those of the
Preferred Purchased Stock, except that the stated value per share of such
Preferred Stock shall be equal to the Exercise Price in effect at the Exercise
Time ("New Preferred Shares") and (b) a warrant, on terms identical in all
respects with this Warrant, except that (w) the exercise period shall be for
five and one-half years after the date of the issuance thereof, (x) the terms
and provisions of Section 9 hereof shall not be applicable, (y) the number of
shares acquirable thereunder shall be equal to the number of Warrant Shares with
respect to which the Purchaser is making this election, and (z) the exercise
price thereunder shall be equal to the Exercise Price hereunder in effect at the
Exercise Time. The Purchaser may
2
<PAGE>
exercise its rights under this clause by delivering notice to the Company within
three Business Days of the Exercise Time.
(iv) Unless this Warrant has expired or all of the purchase
rights represented hereby have been exercised, the Company shall prepare a new
Warrant, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised and shall,
within three Business Days after the date of the Exercise Time, deliver such new
Warrant to the Person designated for delivery in the Exercise Agreement.
(v) The Warrant Shares and New Preferred Shares issuable upon the
exercise of this Warrant shall be deemed to have been issued to the Purchaser at
the Exercise Time, and the Purchaser shall be deemed for all purposes to have
become the Registered Holder of such Warrant Shares or New Preferred Shares at
the Exercise Time.
(vi) The issuance of certificates for Warrant Shares or New
Preferred Shares upon exercise of this Warrant shall 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 Warrant Shares or New Preferred Shares; provided, however,
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issuance of any Warrants or
any certificates representing Warrant Shares or New Preferred Shares in a name
other than that of a Registered Holder, and the Company shall not be required to
issue or deliver such Warrant or certificate for Warrant Shares or New Preferred
Shares unless and until the Person requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.
(vii) The Company shall not close its books against the transfer
of this Warrant or of any Warrant Shares or New Preferred Shares issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant. The Company shall from time to time take
all such action as may be necessary to assure that the par value per share, if
any, of the unissued Warrant Shares and New Preferred Shares acquirable upon
exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect. In the event that the Company fails to comply with its
obligations set forth in the foregoing sentence, in addition to all other rights
which the Registered Holder or Purchaser may have at law or in equity, the
Purchaser may (but shall not be obligated to) purchase Warrant Shares or New
Preferred Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
(viii) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
3
<PAGE>
(ix) 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 a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(x) The Company shall at all times reserve and keep available (x)
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant and (y) upon creation of the New
Preferred Shares, out of its authorized but unissued Preferred Stock, the
maximum number of New Preferred Shares issuable upon the exercise of this
Warrant. All Warrant Shares and New Preferred Shares which are so issuable
shall, when issued and upon the payment of the applicable Exercise Price, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as may be necessary
to ensure that all such Warrant Shares and New Preferred Shares may be so issued
without violation by the Company of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Common Stock or other securities constituting Warrant Shares may be
listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance) or any violation by the
Company of any agreement to which the Company or any of its assets or properties
may be subject. The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on each domestic securities exchange or quotation system
upon which shares of Common Stock or other securities constituting Warrant
Shares are listed or quoted at the time of such exercise.
(xi) If the Warrant Shares or New Preferred Shares issuable by
reason of exercise of this Warrant are convertible into or exchangeable for any
other stock or securities, then the Company shall, at the Purchaser's option and
upon surrender of this Warrant by such Purchaser as provided above together with
any notice, statement or payment required to effect such conversion or exchange
of Warrant Shares or New Preferred Shares, deliver to such Purchaser (or as
otherwise specified by such Purchaser) a certificate or certificates
representing the stock or securities into which the Warrant Shares or New
Preferred Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares or New Preferred
Shares are not to be issued in the name of the Registered Holder, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the Warrant Shares are to be issued, and if the number of Warrant Shares to be
issued does not include all of the Warrant Shares purchasable hereunder, it
shall also
4
<PAGE>
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the Date of Issuance, either (x) the
Company issues or sells, or in accordance with Section 2B is deemed to have
issued or sold, other than pursuant to a Permitted Issuance, other than upon the
exercise, exchange or conversion of Floating Price Securities and other than
pursuant to an event for which an adjustment is made pursuant to Section 2C, any
shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to such issuance or sale or (y) the Company
issues or sells any shares of Common Stock upon exercise, exchange or conversion
of any Floating Price Securities for a consideration per share less than the
Deemed Issue Price in effect immediately prior to such issuance, then
immediately upon such issuance or sale (A) the Exercise Price shall be reduced
to equal the amount determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of which
will be the sum of (1) the number of shares of Common Stock Deemed Outstanding
immediately prior to such issuance or sale multiplied by the Exercise Price in
effect immediately prior to such issuance or sale, plus (2) the consideration,
if any, received by the Company upon such issuance or sale, and the denominator
of which will be the product derived by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by the number of shares of Common
Stock Deemed Outstanding immediately after such issuance or sale and (B) in the
case of an issuance described in (y) above, the Deemed Issue Price shall be
reduced in a manner proportional to the reduction to the Exercise Price pursuant
to clause (A) above. Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares acquirable upon exercise of this Warrant shall be
adjusted to equal the number of shares determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares acquirable (whether or not then acquirable or subject to a contingency)
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Section 2, the calculation of the number of shares of Common
Stock Deemed Outstanding shall exclude the number of Warrant Shares issuable
upon exercise of the Warrants.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation
5
<PAGE>
convertible common stock) (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein called
"Convertible Securities") other than a Permitted Issuance, 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 is less than the
Exercise Price in effect immediately prior to such issuance or sale, 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 be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon exercise of such Options or upon conversion
or exchange of such Convertible Securities" is determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus
in the case of such Options which are exercisable for Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price in effect immediately prior to such issuance or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
such conversion or exchange" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Exercise Price has been or is to be
made pursuant to other provisions of this Section 2B, no further adjustment of
the Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
6
<PAGE>
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time (other than with
respect to Options or Convertible Securities constituting Floating Price
Securities which are the subject of 2A(y)), the Exercise Price in effect at the
time of such change shall be adjusted to the Exercise 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 changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Warrant Shares shall be correspondingly
readjusted; provided, that no readjustment shall be made pursuant to this clause
(iii) in respect of any Warrant Shares which have been issued on or prior to the
occurrence of any action otherwise requiring such readjustment.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder (whether or not then acquirable or
subject to a contingency) shall be adjusted to the Exercise Price and number of
Warrant Shares which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent not
exercised in full and outstanding immediately prior to such expiration or
termination, never been issued; provided, that no readjustment shall be made
under this clause (iv) in respect of any Warrant Shares which have been issued
on or prior to such expiration or termination.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
investment banking or appraisal firm jointly selected by the Company and the
Required Holders, whose determination shall be final and binding on the Company
and the Registered Holder. If the Required Holders and the Company are unable to
agree upon an independent investment banking or appraisal firm, then the
Required Holders shall select one such independent investment banking or
appraisal firm and the Company shall select another such firm, and the
calculation of fair value shall be made by a third independent investment
banking or appraisal firm that has been selected by the two firms so chosen by
the
7
<PAGE>
Required Holders and the Company. In each such case, the firm calculating
fair value shall submit to the Company and to each Registered Holder such firm's
written opinion addressed to each such Registered Holder setting forth such
determination of fair value. If the independent investment banking or appraisal
firm gives a range for its calculation of fair value, then fair value for
purposes of this paragraph shall be the midpoint of such range. The fees and
expenses of such firm shall be paid by the Company.
(vi) Integrated Transactions. In case any Option 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 Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
(viii) 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, Options or Convertible Securities or
(B) 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.
2C. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
8
<PAGE>
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which 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 an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to such
Organic Change and a corresponding immediate adjustment to the number of Warrant
Shares acquirable and receivable upon exercise of the Warrants (whether or not
then acquirable or subject to a contingency), if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
such Registered Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Registered Holder may be entitled
to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
9
<PAGE>
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 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 shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of the Common Stock
(the "Purchase Rights"), then the Registered Holder shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Registered Holder would have acquired if such
Registered Holder had held the maximum number of Warrant Shares acquirable
(whether or not then acquirable or subject to a contingency) upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below and terms not otherwise defined herein have the meaning assigned to them
in the Investment Agreement:
"Affiliate" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (ii) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any Option or the conversion or exchange of any Convertible Securities) of
that Person or any of its Affiliates, or (iii) any member, director, partner,
officer, agent, employee or relative of such Person or any of its direct or
indirect Affiliates. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise. With respect to a natural person, the term "Affiliate"
also shall include such person's spouse and lineal descendants.
10
<PAGE>
"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Bankruptcy Law" means Title 11 of the United States Code and any
similar federal or state law for the relief of debtors.
"Block Trade" means the sale of shares of Common Stock in a "block" as
defined in Rule 10b-18(14) (without giving effect to the proviso thereto) of the
Rules and Regulations under the Securities Exchange Act of 1934, as in effect on
the Date of Issuance.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Business Plan" has the meaning ascribed thereto in the Investment
Agreement.
"Call Notice" has the meaning ascribed to it in Section 9.
"Call Price" has the meaning ascribed to it in Section 9.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of all classes of the Company's Common Stock actually outstanding at
such time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" has the meaning ascribed to it in Section
2B(i).
"Date of Issuance" means May 1, 1998 the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
An "Event of Default" shall be deemed to have occurred if:
11
<PAGE>
(i) the Company materially defaults in the performance or
observance of any of its covenants or agreements contained in this Warrant, the
Investment Agreement or any other Operative Agreement (as defined in the
Investment Agreement) or a material breach of any representations or warranties
of the Company contained in such documents shall exist at the time such
representation or warranty was made or deemed to be made;
(ii) any breach or default occurs by the Company or any
Subsidiary (as defined in the Investment Agreement) under any agreement,
mortgage, indenture, instrument or other Contract (as defined in the Investment
Agreement) under which there is issued or by which there is secured or evidenced
any Indebtedness in excess of $100,000;
(iii) the Company or any Subsidiary (as defined in the Investment
Agreement) defaults in the performance or observance of any of its covenants or
agreements in the Company Management Agreements, the Management Agreement, the
SMR Licenses, the Loan Agreements or the FCC Licenses (as each such term is
defined in the Investment Agreement) and such default, either individually or
taken together with all or any other such defaults, would have a material
adverse effect on the Business or Condition of the Company or its Assets and
Properties;
(iv) (x) an Action or Proceeding is pending or, to the knowledge
of the Company and its Subsidiaries, threatened, or (y) an Order is outstanding
or, the Company or a Subsidiary has received notice of or knows of an Order, in
any case against, relating to or affecting the Business or Condition of the
Company (as defined in the Investment Agreement) which could reasonably be
expected to have a material adverse effect thereon;
(v) a final judgment for the payment of money (other than with
respect to the Notes) is entered by a court of competent jurisdiction against
the Company or any Subsidiary which remains undischarged for a period (during
which such judgment remains undischarged, unvacated, unbounded or unstayed) of
30 days, provided that such judgment (individually or together with all other
such judgments) exceeds $100,000;
(vi) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (1) commences a voluntary case, (2) consents to
the entry of an order for relief against it in an involuntary case, (3) consents
to the appointment of a receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law of it or for all or substantially all of its
property, (4) makes a general assignment for the benefit of its creditors, or
(5) generally is unable to pay its debts as the same become due; or
under any Bankruptcy Law that (1) is for relief against the Company or any
Subsidiary in an involuntary case, (2) appoints a receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law of the Company or any
Subsidiary or for all or substantially all of its property, or (3) orders the
liquidation of the Company or any Subsidiary, and the order or decree remains
unstayed and in effect for 60 days.
12
<PAGE>
"Exercise Period" has the meaning ascribed to it in Section 1A.
"Exercise Price" means $1.25 for each Warrant Share as such price may be
adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1B(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have 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 such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the necessity of
calculating Fair Market Value for purposes of this Warrant, then, such value
shall be determined by an independent investment banking or appraisal firm
mutually acceptable to the Company and the Required Holders. If the Required
Holders and the Company are unable to agree upon an independent investment
banking or appraisal firm, then the Required Holders shall select one such
independent investment banking or appraisal firm and the Company shall select
another such firm, and the calculation of Fair Market Value shall be made by a
third such independent investment banking or appraisal firm that has been
selected by the two firms so chosen by the Required Holders and the Company. In
each such case, the firm calculating Fair Market Value shall submit to the
Company and each Registered Holder such firm's written opinion addressed to each
such Registered Holder setting forth such determination. If the independent
investment banking or appraisal firm gives a range for its calculation of Fair
Market Value, then Fair Market Value shall be the midpoint of such range. The
fees and expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
13
<PAGE>
"Floating Price Securities" means the Securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document or
understanding in existence on the Date of Issuance (other than the securities
listed in Sections 1 and 3 of Attachment A hereto) pursuant to which the Company
is either obligated or permitted to issue shares of Common Stock.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Common Stock, as of each date of determination thereof, the
sum of (i) all shares of Common Stock outstanding at the time of determination
and (ii) all shares of Common Stock issuable upon the exchange, exercise,
conversion or payment with respect to all Options and Convertible Securities
then outstanding.
"Identified Securities" means the securities listed in Attachment A
hereto.
"GAAP" means generally accepted accounting principles consistently
applied.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"New Preferred Shares" has the meaning ascribed to it in Section
1B(iii).
"Options" has the meaning ascribed to it in Section 2B(i).
"Organic Change" has the meaning ascribed to it in Section 2D.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrant, the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 10,119,614 shares of Common Stock (subject to adjustment), the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 14,612,796 shares of Common Stock (subject to adjustment) or any New
Warrant (as each such Warrant may be amended, supplemented or otherwise modified
from time to time in accordance with the provisions thereof) (and any
replacements thereof), (ii) the issuance from time to time by the Company of
Identified Securities and of shares of Common Stock upon the exercise of
Identified Securities other than Floating Price Securities, (iii) the issuance
from time to time by the Company of New Warrants and (iv) the issuance by the
Company of shares of Common Stock in accordance with Section 4.20 of the
Investment Agreement.
"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
14
<PAGE>
"Purchaser" has the meaning ascribed to it in Section 1B(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered 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 Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares 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
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company. The Registered Holder shall not sell,
transfer or otherwise dispose of this Warrant or any Warrant Shares, in whole or
in part, except pursuant to an effective registration statement under the
Securities Act or an exemption from registration thereunder and then only in
accordance with the terms of the Shareholders Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Shareholders Agreement.
15
<PAGE>
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
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall 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 Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (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. Company Call Right. At any time after April 1, 1999, to the
extent this Warrant has not been exercised, the Company shall have the right to
purchase this Warrant from the Registered Holder, in whole but not in part, for
a purchase price equal to the product of the Exercise Price and the number of
Warrant Shares for which this Warrant is then exercisable (the "Call Price") in
each case as of the date of closing contemplated in the next sentence, by giving
written notice to the Registered Holder of the Company's desire to purchase this
Warrant (the "Call Notice") provided that on the date such Call Notice is given
(i) the Fair Market Value per share of the Company's Common Stock is at least
equal to $1.75 (appropriately adjusted for stock splits, stock dividends,
recapitalizations and similar events), (ii) at least 10% of the Company's
outstanding shares of Common Stock traded in the 40 trading day period during
which the Fair Market Value per share of the Company's Common Stock was
determined for purposes of clause (i); provided, however, that for purposes of
determining the number of shares traded during such period, Block Trades shall
be excluded, (iii) the Company's Common Stock is listed on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market and (iv) the Company
has not experienced a material shortfall from the Projections and no Event of
Default (or event which with notice or lapse of time or both would become an
Event of Default) has occurred and is continuing. The closing of the purchase
and sale of this Warrant shall take place on such date as is specified in the
Call Notice, which date shall be no sooner than 30 Business Days after receipt
of the Call Notice and no later than 60 days after receipt of the Call Notice,
at the Company's principal place of business. At such closing, the Registered
Holder shall transfer all right, title and interest in and to this Warrant to
the Company and the Company shall pay to the Registered Holder, by wire transfer
of immediately available funds, an amount equal to the Call Price.
Notwithstanding the foregoing, at any time prior to the closing contemplated by
this Section 9, this Warrant may be exercised in accordance with its terms.
16
<PAGE>
SECTION 10. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. 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 prior written consent of
the Required Holders.
SECTION 12a Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13a 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. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
* * * * *
17
<PAGE>
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 as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
----------------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
Title:
[Certificate No. 1]
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ), hereby agrees to subscribe for the
purchase of [all of the] [Insert number] Warrant Shares covered by such Warrant
and makes payment herewith in full therefor at the price per share and in the
manner provided by such Warrant.
Signature
------------------------------
Address
--------------------------------
<PAGE>
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. ) with respect to [all of the] [Insert
number] Warrant Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature
--------------------------------
Witness
--------------------------------
Exhibit 3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN
THE SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
` ----------------------
Date of Issuance: May 1, 1998 Certificate No. 2
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation (the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II,
L.P., a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 14,612,796 Warrant Shares at the Exercise
Price. This Warrant is issued to REI on the Date of Issuance pursuant to the
Investment Agreement. The Exercise Price and number of Warrant Shares (and the
amount and kind of other securities) for which this Warrant is exercisable shall
be subject to adjustment as provided herein. Certain capitalized terms used
herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
<PAGE>
SECTION 1. Exercise of Warrant.
1A. Exercise Rights. Prior to the tenth anniversary of the Date of
Issuance, the number of Warrants Shares with respect to which this Warrant may
be exercised shall not exceed, at the time of any exercise hereof (together with
all shares of Common Stock acquired pursuant to previous exercises hereunder)
three-quarters of the total number of shares of Common Stock which have been
issued upon the conversion, exchange or exercise, as applicable, of the
Convertible Securities, the Floating Price Securities and the Options from the
Date of Issuance through the Exercise Time (as hereinafter defined). From the
tenth anniversary through and including the eleventh anniversary of the Date of
Issuance, the purchase rights represented by this Warrant may be exercised, in
whole or in part, for all Warrant Shares then issuable hereunder.
1B. Exercise Period. Subject to Section 1A, the purchase rights
represented by this Warrant may be exercised, in whole or in part, at any time
and from time to time, commencing on the Date of Issuance through 5:00 p.m.,
Nevada time, on the eleventh anniversary of the Date of Issuance, or, if such
day is not a Business Day, on the next succeeding Business Day (the "Exercise
Period").
1C. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 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 the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check or wire transfer payable to the
Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares being purchased upon such exercise (the
"Aggregate Exercise Price"), (ii) the surrender to the Company of debt
or equity securities or a combination of debt and equity securities of
the Company or any of its direct or indirect subsidiaries having a value
equal to the Aggregate Exercise Price of the Warrant Shares being
purchased upon such exercise (which value in the case of debt securities
or any preferred stock shall be deemed to equal the aggregate
outstanding principal amount or liquidation value thereof plus all
accrued and unpaid interest thereon or accrued or declared and unpaid
dividends thereon and in the case of shares of Common Stock shall be the
Fair Market Value thereof) or (iii) the delivery of a
2
<PAGE>
notice to the Company that the Purchaser is exercising the Warrant (or
portion thereof) by authorizing the Company to reduce the number of
Warrant Shares to be delivered to Purchaser upon such exercise of the
Warrant or portion thereof by the number of Warrant Shares having an
aggregate Fair Market Value determined as of the date immediately prior
to the date of the Exercise Time equal to the Aggregate Exercise Price.
(ii) Certificates for Warrant Shares (including, without
limitation, fractional shares) purchased upon exercise of this Warrant shall be
delivered by the Company to the Purchaser within three 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 shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall, within such three Business Day period, deliver such new Warrant to
the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
Registered Holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall 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
Warrant Shares; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrants or any certificates representing Warrant Shares in a
name other than that of a Registered Holder, and the Company shall not be
required to issue or deliver such Warrant or certificate for Warrant Shares
unless and until the Person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share, if any, of the unissued
Warrant Shares acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that the Company
fails to comply with its obligations set forth in the foregoing sentence, in
addition to all other rights which the Registered Holder or Purchaser may have
at law or in equity, the Purchaser may (but shall not be obligated to) purchase
Warrant Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
3
<PAGE>
(vi) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained 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 a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. All Warrant Shares which are so
issuable shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance) or any violation by the Company of any agreement to
which the Company or any of its assets or properties may be subject. The Company
will cause the Warrant Shares, immediately upon such exercise, to be listed on
each domestic securities exchange or quotation system upon which shares of
Common Stock or other securities constituting Warrant Shares are listed or
quoted at the time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities,
then the Company shall, at the Purchaser's option and upon surrender of this
Warrant by such Purchaser as provided above together with any notice, statement
or payment required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such Purchaser) a
certificate or certificates representing the stock or securities into which the
Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1D. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares are not to be
issued in the name of the Registered Holder, the Exercise Agreement shall also
state the name of the Person to whom the certificates
4
<PAGE>
for the Warrant Shares are to be issued, and if the number of Warrant Shares to
be issued does not include all of the Warrant Shares purchasable hereunder, it
shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment upon Certain Issuances of Common Stock.
(i) Issuance of Floating Price Securities at Less than the Deemed
Issue Price. If and whenever, on or after the Date of Issuance, the Company
issues any shares of Common Stock upon exercise or conversion of any Floating
Price Securities for a consideration per share less than the Deemed Issue Price,
then immediately upon such issuance, the number of Warrant Shares acquirable
hereunder shall be increased by three shares (rounded up to the nearest whole
share) for each additional four shares of Common Stock which are issued with
respect to such Floating Price Security (with such additional shares being equal
to the difference between the number of shares of Common Stock which are issued
with respect to such Floating Price Security and the number of shares of Common
Stock which would have been issued with respect to such Floating Price Security
at the Deemed Issue Price).
(ii) Issuance of Floating Price Securities at Greater than the
Deemed Issue Price. If and whenever, on or after the Date of Issuance, the
Company issues any shares of Common Stock upon exercise or conversion of any
Floating Price Securities for a consideration per share greater than the Deemed
Issue Price, then immediately upon such issuance, the number of Warrant Shares
acquirable hereunder shall be reduced by three shares (rounded down to the
nearest whole share) for each fewer four shares of Common Stock issued which are
issued with respect to such Floating Price Security (with such fewer shares
being equal to the difference between the number of shares of Common Stock which
would have been issued with respect to such Floating Price Security at the
Deemed Issue Price and the number of shares of Common Stock which are issued
with respect to such Floating Price Security). In no event shall any adjustment
be made which would result in the number of Warrant Shares issuable hereunder
being less than zero.
2B. Adjustment upon Expiration of Options. If and whenever, on or after
the Date of Issuance and prior to the tenth anniversary of the Date of Issuance
any Option expires unexercised, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock with respect to which
such Option remained unexercised. In no event shall any adjustment
5
<PAGE>
be made which would result in the number of Warrant Shares issuable hereunder
being less than zero.
2C. Adjustment upon Payment or Cancellation of Convertible Securities.
If and whenever, on or after the Date of Issuance and prior to the tenth
anniversary of the Date of Issuance all amounts due with respect to any
Convertible Security are satisfied in full or the right to convert or exchange a
Convertible Security is canceled, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock which could have been
issued with respect to such Convertible Security. In no event shall any
adjustment be made which would result in the number of Warrant Shares issuable
hereunder being less than zero.
2D. Adjustment upon Payment or Expiration of Floating Price Securities.
Without duplication of any adjustment pursuant to Section 2A(i) or 2A(ii) above,
if and whenever, on or after the Date of Issuance and prior to the tenth
anniversary of the Date of Issuance all amounts due with respect to a Floating
Price Security are satisfied in full or the right to convert or exchange a
Floating Price Security is canceled, the number of Warrant Shares acquirable
hereunder shall be reduced by three quarters of a share (rounded down to the
nearest whole share) for each one share of Common Stock which could have been
issued with respect to such Floating Price Security. In no event shall any
adjustment be made which would result in the number of Warrant Shares issuable
hereunder being less than zero.
2E. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and the Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and the Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
2F. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which 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 an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as
6
<PAGE>
the case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to such
Organic Change and a corresponding immediate adjustment to the number of Warrant
Shares acquirable and receivable upon exercise of the Warrants (whether or not
then acquirable or subject to a contingency), if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
such Registered Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Registered Holder may be entitled
to acquire upon exercise of Warrants.
2G. Certain Adjustments to Identified Securities. Without duplication of
any adjustment pursuant to Section 2A, 2E or 2F above, if and whenever, on or
after the Date of Issuance, the number of shares of Common Stock issuable with
respect to any Identified Security increases, the number of Warrant Shares
acquirable hereunder shall be increased by one-half share for each additional
one share (rounded up to the nearest whole share) so issuable with respect to
such Identified Security.
2H. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof.
7
<PAGE>
2I. Notices.
(i) Immediately upon any adjustment of the number of Warrant
Shares or the Exercise Price, the Company shall give written notice thereof to
the Registered Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 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 shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation convertible common
stock) or rights to purchase stock, warrants, securities or other property
(other than pursuant to a Permitted Issuance) pro rata to the record holders of
the Common Stock which is also granted, issued or sold (whether or not
immediately or subject to a contingency) to the holders of, or adjusts in any
way, any of the Identified Securities (the "Purchase Rights"), then the
Registered Holder shall be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Registered Holder
would have acquired if such Registered Holder had held the maximum number of
Warrant Shares acquirable (whether or not then acquirable or subject to a
contingency) upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below:
"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right,
8
<PAGE>
without limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" means the securities listed in Section 1 of
Attachment A hereto.
"Date of Issuance" means May 1, 1998, the date the Company initially
issues this Warrant regardless of the number of times new certificates
representing the unexpired and unexercised rights formerly represented by this
Warrant shall be issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
"Exercise Period" has the meaning ascribed to it in Section 1B.
"Exercise Price" means $0.001 for each Warrant Share as such price may
be adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1C(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have 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 such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the
9
<PAGE>
necessity of calculating Fair Market Value for purposes of this Warrant, then,
such value shall be determined by an independent investment banking or appraisal
firm mutually acceptable to the Company and the Required Holders. If the
Required Holders and the Company are unable to agree upon an independent
investment banking or appraisal firm, then the Required Holders shall select one
such independent investment banking or appraisal firm and the Company shall
select another such firm, and the calculation of Fair Market Value shall be made
by a third such independent investment banking or appraisal firm that has been
selected by the two firms so chosen by the Required Holders and the Company. In
each such case, the firm calculating Fair Market Value shall submit to the
Company and each Registered Holder such firm's written opinion addressed to each
such Registered Holder setting forth such determination. If the independent
investment banking or appraisal firm gives a range for its calculation of Fair
Market Value, then Fair Market Value shall be the midpoint of such range. The
fees and expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
"Floating Price Securities" means the securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document, arrangement
or understanding in existence on the Date of Issuance other than the Options and
the Convertible Securities pursuant to which the Company is either obligated or
permitted to issue shares of Common Stock.
"Identified Securities" means the Convertible Securities, the Floating
Price Securities and the Options.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"Options" means the securities listed in Section 3 of Attachment A
hereto.
"Organic Change" has the meaning ascribed to it in Section 2F.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrants, the Stock
Purchase Warrant, dated even date as the Date of Issuance, between the Company
and REI for the purchase of up to 4,000,000 shares of Common Stock (subject to
adjustment), the Stock Purchase Warrant, dated even date as the Date of
Issuance, between the Company and REI for the purchase of up to 10,119,614
shares of Common Stock (subject to adjustment) or any New Warrants (as each such
Warrant may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof) (and any replacements thereof), (ii) the
issuance from time to time by the Company of Identified Securities or of shares
of Common Stock upon the exercise of the Identified Securities, (iii) the
issuance from time to time by the Company of New Warrant and (iv) the issuance
by the Company of shares of Common Stock in accordance with Section 4.20 of the
Investment Agreement.
10
<PAGE>
"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
"Purchaser" has the meaning ascribed to it in Section 1C(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered 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 Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares 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
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company. The Registered Holder shall not sell,
transfer or otherwise dispose of this Warrant or any Warrant Shares, in whole or
in part, except pursuant to
11
<PAGE>
an effective registration statement under the Securities Act or an exemption
from registration thereunder and then only in accordance with the terms of the
Stockholders' Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Stockholders' Agreement.
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
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall 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 Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (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. Information Regarding Identified Securities. As soon as
practical after the end of each fiscal quarter, and in any event with thirty
(30) days after the end of such fiscal quarter, the Company shall provide REI,
in writing, the following information, in each case calculated as of the last
date of such fiscal quarter, together with comparable figures from the fiscal
quarter immediately preceding such fiscal quarter;
(i) the number of Warrant Shares acquirable under this Warrant;
(ii) the number of Warrant Shares for which purchase rights
hereunder may be exercised;
(iii) all adjustments to the Warrant Shares during such fiscal
quarter, setting forth, in reasonable detail, all calculations related thereto,
including, without limitation, (A) all shares of Common Stock issued during such
fiscal quarter in connection with each of the Convertible Securities, Floating
Price Securities and the Options, (B) all Convertible Securities which have been
terminated without being converted during such fiscal quarter, (C) all Options
that have been terminated or expired without being exercised during such
quarter, (D) all Floating Price Securities for which payment has been made
without the issuance of Common Stock or
12
<PAGE>
which have terminated during such quarter and (E) all adjustments to the
Identified Securities which result in an adjustment in the Warrant Shares;
(iv) the number of shares of Common Stock then issuable pursuant
to each of the Convertible Securities, the Floating Price Securities (at the
Deemed Issue Price) and the Options; and
(v) the price(s), if any, other than the Deemed Issue Price, at
which Common Stock would then be issued under each Floating Price Security, if
the issuance took place at that price.
SECTION 10. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. 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 prior written consent of
the Required Holders.
SECTION 12. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13. 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. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
* * * * *
13
<PAGE>
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 as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
--------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
Title:
[Certificate No. 2]
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. ), hereby agrees to subscribe for the purchase of
[Insert number] Warrant Shares covered by such Warrant and makes payment
herewith in full therefor at the price per share and in the manner provided by
such Warrant.
Signature
------------------------------
Address
--------------------------------
<PAGE>
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED, hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. ___) with respect to [Insert number] Warrant
Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Dated: Signature
--------------------------------
Witness
--------------------------------
Exhibit 4
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN
THE SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
Date of Issuance: May 1, 1998 Certificate No. 3
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation (the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II,
L.P., a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 10,119,614 Warrant Shares at the Exercise
Price. This Warrant is issued to REI on the Date of Issuance pursuant to the
Investment Agreement. The Exercise Price and number of Warrant Shares (and the
amount and kind of other securities) for which this Warrant is exercisable shall
be subject to adjustment as provided herein. Certain capitalized terms used
herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant may
be exercised, in whole or in part, at any time and from time to time, commencing
on the Date of
<PAGE>
Issuance through 5:00 p.m., Nevada time, on October 31, 2003, or, if such day is
not a Business Day, on the next succeeding Business Day (the "Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser"); provided,
however, that such exercise is for not less than the lesser of 1,000,000
Warrant Shares or the number of Warrant Shares remaining hereunder.
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check or wire transfer payable to the
Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares being purchased upon such exercise (the
"Aggregate Exercise Price") or (ii) the surrender to the Company of debt
or other obligations of the Company or any of its direct or indirect
subsidiaries having a value equal to the Aggregate Exercise Price of the
Warrant Shares being purchased upon such exercise.
(ii) Certificates for Warrant Shares (including, without
limitation, fractional shares) purchased upon exercise of this Warrant shall be
delivered by the Company to the Purchaser within three 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 shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall, within such three Business Day period, deliver such new Warrant to
the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
Registered Holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance
2
<PAGE>
tax in respect thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of Warrant Shares; provided, however,
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issuance of any Warrants or
any certificates representing Warrant Shares in a name other than that of a
Registered Holder, and the Company shall not be required to issue or deliver
such Warrant or certificate for Warrant Shares unless and until the Person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the reasonable satisfaction of the Company
that such tax has been paid.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share, if any, of the unissued
Warrant Shares acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that the Company
fails to comply with its obligations set forth in the foregoing sentence, in
addition to all other rights which the Registered Holder or Purchaser may have
at law or in equity, the Purchaser may (but shall not be obligated to) purchase
Warrant Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained 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 a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. All Warrant Shares which are so
issuable shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares
3
<PAGE>
may be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance) or any violation by the
Company of any agreement to which the Company or any of its assets or properties
may be subject. The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on each domestic securities exchange or quotation system
upon which shares of Common Stock or other securities constituting Warrant
Shares are listed or quoted at the time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities,
then the Company shall, at the Purchaser's option and upon surrender of this
Warrant by such Purchaser as provided above together with any notice, statement
or payment required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such Purchaser) a
certificate or certificates representing the stock or securities into which the
Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares are not to be
issued in the name of the Registered Holder, the Exercise Agreement shall also
state the name of the Person to whom the certificates for the Warrant Shares are
to be issued, and if the number of Warrant Shares to be issued does not include
all of the Warrant Shares purchasable hereunder, it shall also state the name of
the Person to whom a new Warrant for the unexercised portion of the rights
hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the Date of Issuance, either (x) the
Company issues or sells, or in accordance with Section 2B is deemed to have
issued or sold, other than pursuant to a Permitted Issuance, other than upon the
exercise, exchange or conversion of Floating Price Securities and other than
pursuant to an event for which an adjustment is made pursuant to Section 2C, any
shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to such issuance or sale, or (y) the Company
issues or sells any shares of Common Stock upon exercise, exchange or conversion
of any Floating Price Securities for a consideration per share less than the
Deemed Issue Price in effect immediately prior to such issuance, then
immediately upon such issuance or sale (A) the Exercise Price shall be reduced
to equal the amount determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of which
will be the sum of (1) the number of shares
4
<PAGE>
of Common Stock Deemed Outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such issuance or
sale, plus (2) the consideration, if any, received by the Company upon such
issuance or sale, and the denominator of which will be the product derived by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by the number of shares of Common Stock Deemed Outstanding immediately
after such issuance or sale and (B) in the case of an issuance described in (y)
above, the Deemed Issue Price shall be reduced in a manner proportional to the
reduction to the Exercise Price pursuant to clause (A) above. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares
acquirable upon exercise of this Warrant shall be adjusted to equal the number
of shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable (whether or
not then acquirable or subject to a contingency) upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of this Section 2,
the calculation of the number of shares of Common Stock Deemed Outstanding shall
exclude the number of Warrant Shares issuable upon exercise of the Warrants.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation convertible common
stock) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") other than a Permitted Issuance, 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 is less than the Exercise Price in
effect immediately prior to such issuance or sale, 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 be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable upon exercise of such Options or upon conversion or exchange
of such Convertible Securities" is determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the case
of such Options which are exercisable for Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise of
5
<PAGE>
such Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price in effect immediately prior to such issuance or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
such conversion or exchange" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Exercise Price has been or is to be
made pursuant to other provisions of this Section 2B, no further adjustment of
the Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time (other than with
respect to Options or Convertible Securities constituting Floating Price
Securities which are the subject of 2A(y)), the Exercise Price in effect at the
time of such change shall be adjusted to the Exercise 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 changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Warrant Shares shall be correspondingly
readjusted; provided, that no readjustment shall be made pursuant to this clause
(iii) in respect of any Warrant Shares which have been issued on or prior to the
occurrence of any action otherwise requiring such readjustment.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder (whether or not then acquirable or
subject to a contingency) shall be adjusted to the Exercise Price and number of
Warrant Shares which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent not
exercised in full and outstanding immediately prior to such expiration or
termination, never been issued; provided, that no
6
<PAGE>
readjustment shall be made under this clause (iv) in respect of any Warrant
Shares which have been issued on or prior to such expiration or termination.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
investment banking or appraisal firm jointly selected by the Company and the
Required Holders, whose determination shall be final and binding on the Company
and the Registered Holder. If the Required Holders and the Company are unable to
agree upon an independent investment banking or appraisal firm, then the
Required Holders shall select one such independent investment banking or
appraisal firm and the Company shall select another such firm, and the
calculation of fair value shall be made by a third independent investment
banking or appraisal firm that has been selected by the two firms so chosen by
the Required Holders and the Company. In each such case, the firm calculating
fair value shall submit to the Company and to each Registered Holder such firm's
written opinion addressed to each such Registered Holder setting forth such
determination of fair value. If the independent investment banking or appraisal
firm gives a range for its calculation of fair value, then fair value for
purposes of this paragraph shall be the midpoint of such range. The fees and
expenses of such firm shall be paid by the Company.
(vi) Integrated Transactions. In case any Option 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 Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
7
<PAGE>
(viii) 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, Options or Convertible Securities or
(B) 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.
2C. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which 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 an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to
8
<PAGE>
such Organic Change and a corresponding immediate adjustment to the number of
Warrant Shares acquirable and receivable upon exercise of the Warrants (whether
or not then acquirable or subject to a contingency), if the value so reflected
is less than the Fair Market Value of the Common Stock in effect immediately
prior to such Organic Change). The Company shall not effect any such Organic
Change unless, prior to the consummation thereof, the successor entity (if other
than the Company) resulting from such Organic Change (including a purchaser of
all or substantially all the Company's assets) assumes by written instrument (in
form and substance satisfactory to the Required Holders) the obligation to
deliver to such Registered Holder such shares of stock, securities or assets as,
in accordance with the foregoing provisions, such Registered Holder may be
entitled to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 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 shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of the Common Stock
(the "Purchase Rights"), then the Registered Holder shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Registered
9
<PAGE>
Holder would have acquired if such Registered Holder had held the maximum number
of Warrant Shares acquirable (whether or not then acquirable or subject to a
contingency) upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below and terms not otherwise defined herein have the meaning assigned to them
in the Investment Agreement:
"Affiliate" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (ii) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any Option or the conversion or exchange of any Convertible Securities) of
that Person or any of its Affiliates, or (iii) any member, director, partner,
officer, agent, employee or relative of such Person or any of its direct or
indirect Affiliates. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise. With respect to a natural person, the term "Affiliate"
also shall include such person's spouse and lineal descendants.
"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Bankruptcy Law" means Title 11 of the United States Code and any
similar federal or state law for the relief of debtors.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of all classes of the Company's Common Stock actually outstanding at
such time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
10
<PAGE>
"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" has the meaning ascribed to it in Section
2B(i).
"Date of Issuance" means May 1, 1998 the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
"Exercise Period" has the meaning ascribed to it in Section 1A.
"Exercise Price" means $0.39 for each Warrant Share as such price may be
adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1B(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have 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 such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the necessity of
calculating Fair Market Value for purposes of this Warrant, then, such value
shall be determined by an independent investment banking or appraisal firm
mutually acceptable to the Company and the Required Holders. If the Required
Holders and the Company are unable to agree upon an independent investment
banking or appraisal firm, then the Required Holders
11
<PAGE>
shall select one such independent investment banking or appraisal firm and the
Company shall select another such firm, and the calculation of Fair Market Value
shall be made by a third such independent investment banking or appraisal firm
that has been selected by the two firms so chosen by the Required Holders and
the Company. In each such case, the firm calculating Fair Market Value shall
submit to the Company and each Registered Holder such firm's written opinion
addressed to each such Registered Holder setting forth such determination. If
the independent investment banking or appraisal firm gives a range for its
calculation of Fair Market Value, then Fair Market Value shall be the midpoint
of such range. The fees and expenses of such firm will be borne by the Company,
and the determination of such firm will be final and binding upon all parties.
"Floating Price Securities" means the Securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document or
understanding in existence on the Date of Issuance (other than the securities
listed in Sections 1 and 3 of Attachment A hereto) pursuant to which the Company
is either obligated or permitted to issue shares of Common Stock.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Common Stock, as of each date of determination thereof, the
sum of (i) all shares of Common Stock outstanding at the time of determination
and (ii) all shares of Common Stock issuable upon the exchange, exercise,
conversion or payment with respect to all Options and Convertible Securities
then outstanding.
"Identified Securities" means the securities listed in Attachment A
hereto.
"GAAP" means generally accepted accounting principles consistently
applied.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"Options" has the meaning ascribed to it in Section 2B(i).
"Organic Change" has the meaning ascribed to it in Section 2D.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrants, the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 14,612,796 shares of Common Stock (subject to adjustment), the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 4,000,000 shares of Common Stock (subject to adjustment) or any New
Warrants (as each such Warrant may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof) (and any
replacements thereof), (ii) the issuance from time to time by the Company of
Identified Securities or of shares of Common Stock upon the exercise of
Identified Securities other than Floating Price
12
<PAGE>
Securities, (iii) the issuance from time to time by the Company of New Warrants
and (iv) the issuance by the Company of shares of Common Stock in accordance
with the terms of Section 4.20 of the Investment Agreement.
"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
"Purchaser" has the meaning ascribed to it in Section 1B(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered 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 Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares 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,
13
<PAGE>
without charge to the Registered Holder (subject to the provisions of paragraph
1B(iv) hereof), upon surrender of this Warrant with a properly executed
Assignment (in the form of Exhibit II hereto) at the principal office of the
Company. The Registered Holder shall not sell, transfer or otherwise dispose of
this Warrant or any Warrant Shares, in whole or in part, except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration thereunder and then only in accordance with the terms of the
Shareholders Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Shareholders Agreement.
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
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall 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 Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (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 and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered 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 prior written consent of
the Required Holders.
14
<PAGE>
SECTION 11. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 12. 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. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
* * * * *
15
<PAGE>
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 as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
-------------------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
Title:
[Certificate No. 3]
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
------------------
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ), hereby agrees to subscribe for the
purchase of [all of the] [Insert number] Warrant Shares covered by such Warrant
and makes payment herewith in full therefor at the price per share and in the
manner provided by such Warrant.
Signature______________________________
Address________________________________
<PAGE>
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED,
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (Certificate No. ) with respect to [all of the] [Insert
number] Warrant Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature
--------------------------------
--------------------------------
Witness
--------------------------------
Exhibit 5
SHAREHOLDERS AGREEMENT
by and among
CHADMOORE WIRELESS GROUP, INC. ,
RECOVERY EQUITY INVESTORS II, L.P.,
and
ROBERT W. MOORE
<PAGE>
SHAREHOLDERS AGREEMENT, dated as of May 1, 1998, by
and among CHADMOORE WIRELESS GROUP, INC., a Colorado corporation (the
"Company"), RECOVERY EQUITY INVESTORS II, L.P., a Delaware limited
partnership ("REI"), Robert W. Moore ("Moore"), and any other Person
who executes a Joinder Agreement and thereby becomes a party to this
Agreement. Capitalized terms are used as defined in Article I hereto.
RECITALS
WHEREAS, the Company and REI have entered into that
certain Investment Agreement dated as of May 1, 1998 (as the same may
be amended, supplemented or otherwise modified from time to time the
"Investment Agreement"), pursuant to which, among other things, REI is
acquiring (a) 8,854,662 newly issued shares of Common Stock, par value
$0.001 per share, of the Company (the 'Common Stock"), (b) 10,119,614
newly issued shares of Series C Preferred Stock, par value $0.001 per
share, of the Company and (c) Warrants granting REI the right to
acquire shares of Common Stock;
WHEREAS, immediately following the consummation of
the transactions contemplated by the Investment Agreement, Moore will
beneficially own 2,024,266 shares of Common Stock and options to
acquire an additional 350,000 shares of Common Stock.
WHEREAS, each of the Company, REI and Moore wish to
enter into this Agreement to regulate certain aspects of their
relationship and to provide for, among other things, restrictions on
the transfer or other disposition of certain securities of the Company
and matters relating to the corporate governance of the Company; and
WHEREAS, the Investment Agreement, among other
things, provides that the execution and delivery of this Agreement is a
condition to the consummation of the other transactions contemplated by
the Investment Agreement.
NOW, THEREFORE, in connection with the Investment
Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
I.1 Definitions. (a) The following defined terms, when used in
this Agreement, shall have the respective meanings set forth below
(such definitions to be equally applicable to both singular and plural
forms of the terms defined):
<PAGE>
"Articles of Incorporation" means the Articles of
Incorporation of the Company, as amended as of the date hereof, and as
the same may be amended or restated from time to time after the date
hereof.
"Board' means the Board of Directors of the Company.
"By-Laws" means the By-Laws of the Company, as
amended as of the date hereof, and as the same may be amended or
restated from time to time after the date hereof.
"Closing" has the meaning ascribed to it in the
Investment Agreement.
"Closing Date" has the meaning ascribed to it in the
Investment Agreement.
"Common Stock" has the meaning ascribed to it in the
recitals hereto.
"Company" has the meaning ascribed to it in the
introductory paragraph of this Agreement.
"Competitor" means, as of any date, any Person
regulated, or that has Affiliates regulated, by the Wireless
Telecommunication Bureau or the Common Carrier Bureau of, in each case,
the FCC (other than as a result of the consummation of the transactions
contemplated by Section 3.1(b)).
"Equity Equivalents" means securities which, by their
terms, are or may be exercisable, convertible or exchangeable for or
into Common Stock.
"Exchange Act" means the Securities and Exchange Act
of 1934, as amended from time to time, and the rules and regulations of
the Securities and Exchange Commission thereunder.
"FCC" has the meaning ascribed to it in the
Investment Agreement.
"Fully-Diluted Basis" means, with respect to the
calculation of the number of shares of Common Stock, (a) all shares of
Common Stock outstanding at the time of determination and (b) all
shares of Common Stock issuable upon the exercise, conversion or
exchange of any Equity Equivalents outstanding at the time of
determination.
"Independent Directors" has the meaning ascribed to
it in Section 2.1.
"Investment Agreement" has the meaning ascribed to it
in the recitals hereto.
"Joinder Agreement" means a Joinder Agreement
substantially in the form attached hereto as Exhibit A.
2
<PAGE>
"Management Directors" has the meaning ascribed to it
in Section 2.1.
"Moore" has the meaning ascribed to it in the
introductory paragraph of this Agreement.
"Moore Shareholders" means (a) Moore and (b) any
Person who is a transferee of Restricted Securities held by a Moore
Shareholder pursuant to Section 3.1, in each case, (i) for so long as
such Person shall hold Restricted Securities and (ii) the provisions of
this Agreement applicable to Moore Shareholders are applicable to such
Person.
"Person" means an individual, partnership,
corporation, trust, unincorporated organization, limited liability
company, joint venture, government (or any agency or political
subdivision thereof) or any other entity of any kind.
"Projections" has the meaning ascribed to it in the
Investment Agreement.
"REI" has the meaning ascribed to it in the
introductory paragraph of this Agreement.
"REI Directors" has the meaning ascribed to it in
Section 2.1.
"REI Shareholders" means (a) REI and (b) any Person
who is a transferee of Restricted Securities held by an REI Shareholder
pursuant to Section 3.1, in each case, (i) for so long as such Person
shall hold Restricted Securities and (ii) the provisions of this
Agreement applicable to REI Shareholders are applicable to such Person.
"Restricted Securities" means the Common Stock, any
Equity Equivalents and any securities issued with respect thereto as a
result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar
event or upon the conversion, exchange or exercise thereof.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations of the
Securities and Exchange Commission thereunder.
"Shareholders" means the Moore Shareholders and the
REI Shareholders.
"Transfer" means sell, transfer, assign, pledge,
hypothecate, give away or in any manner dispose of, or enter into any
voting agreement with respect to, any shares of Restricted Securities.
"Triggering Event" means an "Event of Default" as
defined in the Warrant, dated the date hereof, to purchase up to
4,000,000 shares of Common Stock (subject to adjustment) issued to REI
by the Company and shall also include a material shortfall from the
Projections.
3
<PAGE>
"Voting Securities" means the shares of Common Stock
and other securities (including voting preferred stock) issued by the
Company which are entitled to vote generally for the election of
directors of the Company, whether currently outstanding or hereafter
issued (other than securities having such powers only upon the
occurrence of a contingency).
"Warrants" has the meaning ascribed to it in the
Investment Agreement.
ARTICLE II
CORPORATE GOVERNANCE
II.1 Board of Directors. Except as contemplated by
this Agreement or as otherwise agreed to by the REI Shareholders,
neither the Company nor any of the Shareholders shall take or recommend
to the Company's shareholders any action which would cause the Board to
consist of more or less than six members or, if an additional director
is designated as provided herein, seven members.
Except as contemplated by this Agreement or as
otherwise agreed to by the REI Shareholders and Moore, the Company and
each of the Shareholders shall take all action necessary to cause the
Board to consist of the following individuals: (i) two individuals (the
"REI Directors") to be designated by the REI Shareholders and (ii) two
individuals (the "Management Directors") to be designated by the Chief
Executive Officer of the Company. In addition, the Company shall take
all action necessary to cause the Board to have two additional members,
to be determined by a majority of the Board of Directors, each of whom
is not a direct or indirect Affiliate, officer or director of the
Company or any Subsidiary of the Company or any direct or indirect
Affiliate or family member of any of the foregoing (the "Independent
Directors"), provided, however, that at any time after the date hereof,
either the REI Directors or the Management Directors may, by notice to
the others, elect to increase the number of Independent Directors to
three with the individual to be so designated to be qualified and to be
determined as specified above. Upon the Closing, the Board shall
consist of six members, (x) Joseph J. Finn-Egan and Jeffrey A. Lipkin
as REI Directors, (y) Robert W. Moore and Jan S. Zwaik as Management
Directors and (z) Mark Sullivan and Janice Pellar as Independent
Directors. In furtherance and not in limitation of the foregoing, the
Company shall recommend to its shareholders that any Person designated
as described herein be included in the slate of nominees recommended
for election to the Board at each meeting of the Company held for such
purpose. The Company has taken all necessary steps to ensure that upon
the Closing the Board will consist of the individuals identified
herein.
In the event that any member of the Board designated
as provided herein shall cease to serve as a director for any reason,
the vacancy resulting therefrom shall be filled as soon as practicable
with a Person designated as provided herein. Neither the Company nor
any Shareholder shall take any action inconsistent with the provisions
of this Section 2.1, including, without limitation, recommending the
removal of any member of the Board without the consent of Persons
entitled to designate such member.
4
<PAGE>
II.2 Voting. (a) During the period from the Closing
Date through and until the third anniversary thereof, (x) each of the
Shareholders (other than, in the case of REI, if a Triggering Event has
occurred and is continuing) shall take all such action as may be
required so that all Voting Securities beneficially owned by such
Shareholder are voted (in person or in proxy or by written consent) for
the election of the REI Directors and the Management Directors and (y)
without the prior written consent of the REI Directors, the Board shall
not establish any committee that has more than three members or that
does not have at least one REI Director as a member.
(b) Each of the Shareholders shall be present, in
person or by proxy, at all duly held meetings of the shareholders of
the Company so that all Voting Securities held by the Shareholders may
be counted for the purposes of determining the presence of a quorum at
such meetings.
II.3 No Duty to Designate. Nothing contained in this
Article II shall be construed as requiring the REI Shareholders to
designate any REI Director or to require any REI Director to continue
to serve in office if such REI Director elects to resign.
II.4 Directors and Officers Insurance Policy. The
Company shall cause the REI Directors and the Management Directors to
be covered by directors and officers liability insurance to the same
extent and in the same amount as any Independent Director.
ARTICLE III
TRANSFER RESTRICTIONS
III.1 Transfers of Securities. Subject to the next
succeeding sentence, during the period from and after the Closing Date
through and until the third anniversary thereof, each of the REI
Shareholders and each of the Moore Shareholders shall have the right to
Transfer any Restricted Securities held by them to any Person, provided
that such Person shall have executed and delivered a Joinder Agreement.
Notwithstanding the foregoing, no REI Shareholder or Moore Shareholder
shall transfer any Restricted Securities to a Competitor, except (a)
with the approval of a majority of the members of the Board, (b)
pursuant to a tender offer or exchange offer to all holders of Common
Stock by a Competitor, after the consummation of which, such Competitor
would, directly or indirectly, be the beneficial owner of more than
fifty percent of the Common Stock on a Fully Diluted Basis, or (c) in
the case of the REI Shareholders, only, if a Triggering Event has
occurred and is continuing.
III.2 Legend. Each certificate representing
Restricted Securities of the Shareholders shall be endorsed with the
legends set forth in Exhibit B hereto and such other legends as may be
required by applicable state securities laws. Any certificate issued at
any time in exchange or substitution for any certificate bearing such
legends (except a new certificate issued upon the completion of a
Transfer pursuant to a registered public offering under the Securities
Act and made in accordance with the Securities Act) shall also bear
such legends, unless the such Restricted
5
<PAGE>
Securities represented thereby are no longer subject to the provisions
of this Agreement or, in the opinion of the Company (with advice from
counsel to the Company, as the Company may deem appropriate), the
restrictions imposed under the Securities Act or any state securities
law, in which case the applicable legend (or legends) may be removed.
ARTICLE IV
CERTAIN COVENANTS OF THE PARTIES
IV.1 Amendment to Articles of Incorporation. Subject
to obtaining all necessary approvals from the FCC, the Company shall
take all action necessary for an amendment to the Articles of
Incorporation, in the form of Exhibit C hereto, to be presented to the
shareholders of the Company for their approval as soon as reasonably
practicable at an annual meeting and each Shareholder shall take all
such actions as may be required so that all Voting Securities
beneficially owned by such Shareholder are voted (in person or by
proxy) for the approval of such amendment.
ARTICLE V
MISCELLANEOUS
V.1 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York
without giving effect to any choice of law or conflict of law provision
or rule that would cause the application of the laws of any
jurisdiction other than the State of New York, except to the extent
that the Colorado Business Corporation Act applies as a result of the
Company being incorporated in the State of Colorado, in which case such
Colorado Business Corporation Act shall apply.
V.2 Entire Agreement; Amendments. This Agreement
constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and this Agreement may be amended, modified
or supplemented only by a written instrument duly executed by the
Company, Moore and REI Shareholders which then hold in the aggregate
more than 50% of the aggregate shares of Restricted Securities on a
Fully-Diluted Basis then held by all REI Shareholders. In the event of
an amendment, modification or supplement of this Agreement in
accordance with its terms, the Shareholders shall take all action
necessary or appropriate, within 30 calendar days following such
amendment, modification or supplement, or as soon thereafter as is
practicable, to cause the adoption of any amendment to the Articles of
Incorporation or By-Laws of the Company that may be required as a
result of such amendment, modification or supplement to this Agreement.
The Shareholders hereby agree to vote their shares of Restricted
Securities to approve each such amendment to the Articles of
Incorporation or By-Laws of the Company.
V.3 Term. Except for the provisions of this Article V
(and subject to the next succeeding sentence), this Agreement shall
automatically and without further action terminate upon the earliest to
occur of (a) any transaction pursuant to which any Person or group
(within the meaning of Rule 13d under the Exchange Act) other than the
Shareholders acquire a majority of the
6
<PAGE>
outstanding Voting Securities of the Company or (b) the written
agreement of (i) REI Shareholders which then hold in the aggregate more
than 50% of the aggregate shares of Restricted Securities on a
Fully-Diluted Basis then held by all REI Shareholders and (ii) Moore.
V.4 Certain Actions. Unless otherwise expressly
provided herein, whenever any action is required under this Agreement
by:
(a) the REI Shareholders (as a group, as opposed to
the exercise by a REI Shareholder of its individual rights hereunder),
it shall be by the affirmative vote of the holders of Restricted
Securities representing more than 50% of the Common Stock on a
Fully-Diluted Basis then held by the REI Shareholders as a group, or as
otherwise agreed in writing by the REI Shareholders as a group (a copy
of such writing to be supplied to Moore Shareholders by the Company or
the REI Shareholders);
(b) the Moore Shareholders (as a group, as opposed to
the exercise by a Moore Shareholder of its individual rights
hereunder), it shall be affirmative vote of Moore; or
(c) the Shareholders (as a group, as opposed to the
exercise by a Shareholder of its individual rights hereunder), it shall
be by the joint votes of the REI Shareholders (acting pursuant to
clause (a) above) and Moore Shareholders (acting pursuant to clause (b)
above).
V.5 Inspection. For so long as this Agreement shall
remain in effect, this Agreement shall be made available for inspection
by any Shareholder at the principal executive offices of the Company.
V.6 Waivers. No waiver by any party hereto of any
term or condition of this Agreement, in one or more instances, shall be
valid unless in writing, and no such waiver shall be deemed to be
construed as a waiver of any subsequent breach or default of the same
or any other term or condition hereof.
V.7 Successors and Assigns. Except as otherwise
expressly provided herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns (including transferees of Restricted
Securities pursuant to Article III); provided, however, that (i)
nothing contained herein shall be construed as granting any Shareholder
the right to Transfer any of its Restricted Securities except in
accordance with this Agreement, (ii) any Person that acquires
Restricted Securities from a Shareholder shall be bound by, and
entitled to the benefits of, the provisions of this Agreement that were
applicable to the transferee thereof and (iii) notwithstanding any
Transfer of Restricted Securities by any Shareholder to another
Shareholder, only the provisions of this Agreement which were expressly
applicable to REI Shareholders or Moore, respectively, shall be
applicable to such REI Shareholder transferee or Moore Shareholder
transferee.
7
<PAGE>
V.8 Remedies. In the event of a breach by any party
to this Agreement of its obligations under this Agreement, any party
hereto injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages and
costs (including reasonable attorneys' fees), will be entitled to
specific performance of its rights under this Agreement. The parties
hereto agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties hereto that
the remedy at law, including monetary damages, for breach of any such
provision will be inadequate compensation for any loss and that any
defense in any action for specific performance that a remedy at law
would be adequate is waived. Such equitable remedies and all other
remedies are cumulative and not exclusive and shall be in addition to
any remedies which any party hereto may have under this Agreement or
otherwise.
V.9 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any
present or future law, and if the rights or obligations of any party
hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (d) in lieu of
such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
V.10 Headings; Certain Conditions. The headings of
the various Articles and Sections of this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any
of the terms or provisions hereof. Unless the context otherwise
expressly requires, (a) all references herein to Articles, Sections and
Exhibits, are to Article and Sections of, and Exhibits to, this
Agreement, (b) the words "herein," "hereunder" and "hereof" and words
of similar import refer to this Agreement as a whole and not to any
particular Section or provision and (c) the words "include," "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation".
V.11 Further Assurances. Each party hereto shall
cooperate and shall take such further action and shall execute and
deliver such further documents as may be reasonably requested by any
other party hereto in order to carry out the provisions and purposes of
this Agreement.
V.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
V.13 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to have
been duly given only if delivered personally against written receipt or
by facsimile transmission against facsimile confirmation or mailed (by
registered or certified
8
<PAGE>
mail, postage prepaid, return receipt requested) or delivered by
reputable overnight courier, fee prepaid, to the parties hereto at the
following addresses or facsimile numbers:
If to any Moore Shareholder, to:
Robert W. Moore
c/o Chadmoore Wireless Group, Inc.
2875 East Patrick Lane
Suite G
Las Vegas, Nevada 89120
Facsimile No.: (702) 891-5255
If to any REI Shareholder, to:
Recovery Equity Investors II, L.P.
901 Mariner's Island Boulevard, Suite 465
San Mateo, CA 94404
Facsimile No.: (650) 578-9842
Attn: Joseph J. Finn-Egan
Jeffrey A. Lipkin
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
If to the Company, to:
Chadmoore Wireless Group, Inc.
4270 Polaris Street
Las Vegas, Nevada 89104
Facsimile No.: (702) 891-5255
Attn: Robert W. Moore, President & CEO
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, California 95814-4411
Facsimile No.: (916) 441-6700
Attn: Gilles S. Attia, Esq.
9
<PAGE>
All such notices, requests and other communications will be deemed
delivered upon receipt. Any party hereto may from time to time change
its address, facsimile number or other information for the purpose of
notices to such party by giving notice specifying such change to the
other parties hereto in accordance with this Section.
V.14 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. EACH OF
THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. 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 AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE PARTIES HERETO FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT IT 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
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
[Signature page to follow]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the date first above written.
CHADMOORE WIRELESS GROUP, INC.
By:
--------------------------------
Name:
Title:
--------------------------------
ROBERT W. MOORE
RECOVERY EQUITY INVESTORS II, L.P.,
By Recovery Equity Partners II, L.P.,
its general partner
By:
--------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:
--------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
[Shareholders Agreement]
<PAGE>
Exhibit A
Form of Joinder Agreement
CHADMOORE WIRELESS GROUP, INC.
RECOVERY EQUITY INVESTORS II, L.P.
ROBERT W. MOORE
Ladies & Gentlemen:
In consideration of the transfer to the undersigned
of [describe security being transferred] of CHADMOORE WIRELESS GROUP,
INC. a Colorado corporation (the "Company"), the undersigned represents
that [he] [she] [it] is a Transferee of [Insert name of transferor] and
agrees that, as of the date written below, [he] [she] [it] shall become
a party to that certain Shareholders' Agreement, dated as of
, 1998 (as such agreement may have been amended, supplemented or
modified from time to time, the "Agreement"), among the Company and the
persons named therein, and shall be fully bound by, and subject to, all
of the covenants, terms and conditions of the Agreement that are
applicable to the undersigned's transferor, as though an original party
thereto and shall be deemed a [Moore Shareholder] [REI Shareholder] for
all purposes thereof.
Executed as of the day of , .
SIGNATORY:
------------------------
Address:
------------------------
------------------------
------------------------
ACKNOWLEDGED AND ACCEPTED:
CHADMOORE WIRELESS GROUP, INC.
<PAGE>
By:
-------------------------------
Name:
Title:
----------------------------------
ROBERT W. MOORE
RECOVERY EQUITY INVESTORS II, L.P.
By Recovery Equity Partners II, L.P.,
its general partner
By:
-------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:
-------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
<PAGE>
Exhibit B
Legends
-------
Shares of Restricted Securities shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS ON TRANSFER IN THE SHAREHOLDERS AGREEMENT
DATED AS OF MAY , 1998 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER HEREOF). NO REGISTRATION OF TRANSFER
OF SUCH SECURITY WILL BE MADE ON THE BOOKS OF THE ISSUER AND
NO SHARES SHALL BE ISSUED TO ANY PERSON OTHER THAN THE
REGISTERED HOLDER OF THIS SECURITY UNLESS AND UNTIL ALL
APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN SUCH
SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THESE SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER AND AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.
B-1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS...............................................1
1.1 Definitions................................................1
ARTICLE II CORPORATE GOVERNANCE.............................................4
2.1 Board of Directors.........................................4
2.2 Voting.....................................................4
2.3 No Duty to Designate.......................................5
2.4 Directors and Officers Insurance Policy....................5
ARTICLE III TRANSFER RESTRICTIONS...........................................5
3.1 Transfers of Securities....................................5
3.2 Legend.....................................................5
ARTICLE IV CERTAIN COVENANTS OF THE PARTIES.................................6
4.1 Amendment to Articles of Incorporation.....................6
ARTICLE V MISCELLANEOUS.....................................................6
5.1 Governing Law..............................................6
5.2 Entire Agreement; Amendments...............................6
5.3 Term.......................................................6
5.4 Certain Actions............................................7
5.5 Inspection.................................................7
5.6 Waivers....................................................7
5.7 Successors and Assigns.....................................7
5.8 Remedies...................................................7
5.9 Invalid Provisions.........................................8
5.10 Headings; Certain Conditions...............................8
5.11 Further Assurances.........................................8
5.12 Counterparts...............................................8
5.13 Notices....................................................8
5.14 Waiver of Jury Trial......................................10
Exhibit A Form of Joinder Agreement for Permitted Transferees
Exhibit B Legends
Exhibit C Amendment
-i-
Exhibit 6
CHADMOORE WIRELESS GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of May 1,
1998, between CHADMOORE WIRELESS GROUP, INC., a Colorado corporation
(the "Company"), and RECOVERY EQUITY INVESTORS II, L.P., a Delaware
limited partnership ("REI").
RECITALS
WHEREAS, the Company and REI have entered into that
certain Investment Agreement, dated as of May 1, 1998 (as the same may
be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the "Investment Agreement"),
pursuant to which, among other things, REI is acquiring (a) 8,854,662
newly issued shares of Common Stock, par value $0.001 per share, of the
Company (the "Common Stock"), (b) 10,119,614 newly issued shares of
Series C Preferred Stock, par value $0.001 per share, and (c) the
Warrants, each dated as of May 1, 1998, granting REI the right to
acquire shares of Common Stock (as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms thereof; and
WHEREAS, the Investment Agreement, among other
things, provides that the execution and delivery of a registration
rights agreement in substantially the form hereof is a condition to the
consummation of the other transactions contemplated by the Investment
Agreement.
NOW THEREFORE, in connection with the Investment
Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
I.1 Definitions. The following defined terms, when
used in this Agreement, shall have the respective meanings set forth
below (such definitions to be equally applicable to both singular and
plural forms of the terms defined):
"Business Day" means a day other than Saturday,
Sunday or any day on which banks located in the States of New York,
Nevada or California are authorized or obligated to close.
"Commission" means the United States Securities and
Exchange Commission.
"Common Stock" has the meaning ascribed to it in the
recitals hereto.
"Company" has the meaning ascribed to it in the
introductory paragraph of this Agreement.
"Demand Registration" means any Long-Form
Registration or Short-Form Registration requested in accordance with
Section 2.1(a), and, in the case of a Long-Form Registration, effected
in accordance with Section 2.4.
<PAGE>
"Effective Period" has the meaning ascribed to it in
Section 2.8
"Equity Equivalents" means securities (including the
Warrants) which, by their terms, are or may be exercisable, convertible
or exchangeable for or into Common Stock at the election of the holder
thereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
issued thereunder.
"Fully Diluted" means, with respect to the
calculation of the number of shares of Common Stock, (a) all shares of
Common Stock outstanding at the time of determination and (b) all
shares of Common Stock issuable upon the exercise, conversion or
exchange of any Equity Equivalents outstanding at the time of
determination.
"Investment Agreement" has the meaning ascribed to it
in the recitals hereto.
"Long-Form Registration" has the meaning ascribed to
it in Section 2.1(a).
"Piggyback Holders" has the meaning ascribed to it in
Section 3.1.
"Piggyback Registration" has the meaning ascribed to
it in Section 3.l.
"Other Piggyback Holders" has the meaning ascribed to
it in Section 2.5(a).
"Registration Expenses" has the meaning ascribed to
it in Section 7.l.
"Registrable Securities" means, at any time, (a) the
shares of Common Stock issued to REI pursuant to the Investment
Agreement and the shares of Common Stock issued or issuable upon the
conversion, exercise or exchange of the Warrants, (b) any then
outstanding securities into which shares of Common Stock referred to in
clause (a) above shall have been changed and (c) any then outstanding
securities resulting from any reclassification or recapitalization of
Common Stock; provided, however, that "Registrable Securities" shall
not include any shares of Common Stock or other securities obtained or
transferred pursuant to an effective registration statement under the
Securities Act; and provided further, that "Registrable Securities"
shall not include any shares of Common Stock or other securities which
are held by a Person who is not an REI Shareholder.
"REI" has the meaning ascribed to it in the
introductory paragraph of this Agreement.
"REI Shareholders" means (a) REI and (b) any Person
who is a transferee of Registrable Securities held by an REI
Shareholder pursuant to Section 12.5, in each case, (i) for so long as
such Person shall hold Registrable Securities and (ii) the provisions
of this Agreement applicable to REI Shareholders are applicable to such
Person.
3
<PAGE>
"Requesting Investors" means, with respect to any
Demand Registration, the Required REI Shareholders that have requested
such Demand Registration in accordance with Section 2.1(a).
"Required REI Shareholders" means, as of the date of
any determination thereof, REI Shareholders which then hold Registrable
Securities representing at least a majority (by number of shares) of
the Registrable Securities, on a Fully Diluted basis, then held by all
REI Shareholders.
"Requisite Requesting Investors" means, as of the
date of any determination thereof with respect to any Demand
Registration, Requesting Investors of such Demand Registration which
then hold at least 66-2/3% (by number of shares) of the Registrable
Securities, on a Fully Diluted basis, then held by all Requesting
Investors of such Demand Registration.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission issued
thereunder.
"Shelf-Registration" has the meaning ascribed to it
in Section 2.8.
"Short-Form Registration" has the meaning ascribed to
it in Section 2.1(a).
"Warrants" has the meaning ascribed to it in the
Investment Agreement.
ARTICLE II
DEMAND REGISTRATIONS
II.1 Requests for Registration. (a) Subject to
Sections 2.2, 2.3 and 2.7, at any time from and after the date hereof,
any or all of the Required REI Shareholders may request registration
under the Securities Act of all or part of their Registrable Securities
(i) on Form S-1 or S-2 or any similar long-form registration statement
(any such registration, a "Long-Form Registration") or (ii) on Form S-3
or any similar short-form registration statement (any such
registration, a "Short-Form Registration"), if the Company qualifies to
use such short form. Within 10 days after its receipt of any such
request, the Company shall give written notice of such request to all
other REI Shareholders. Thereafter, the Company shall use its best
efforts to effect the registration under the Securities Act on the form
requested by the Requesting Investors, and to include in such
registration, (x) all Registrable Securities which the Requesting
Investors have so requested to be included therein and (y) all other
Registrable Securities with respect to which the Company has received
written requests for inclusion therein by the REI Shareholders within
30 days after their receipt of the Company's notice, subject in each
case to the provisions of Section 2.5.
(b) Any Requesting Investors which request a Demand
Registration pursuant to Section 2.1(a) may, at any time prior to the
effective date of the registration statement relating to such Demand
Registration, revoke such request by providing written notice to the
Company; provided, however, that notwithstanding such revocation, such
Demand Registration shall be deemed a request for purposes of Section
2.2 unless, after consultation with the Company and any proposed
4
<PAGE>
underwriter, the Requesting Investors in good faith determine that the
Registrable Securities which they have requested to be registered would
not be sold pursuant to such Demand Registration at a price falling
within the range estimated at the time the request for the Demand
Registration was given by such Requesting Investors.
(c) Any request for a Demand Registration pursuant to
this Article II shall specify the number of Registrable Securities
proposed to be sold by the Requesting Investors and the intended method
of disposition thereof.
II.2. Long-Form Registrations. The Required REI
Shareholders shall be entitled to request pursuant to Section 2.1(a) up
to three Long-Form Registrations; provided, however, that such number
will be increased by one for each Long-Form Registration with respect
to which any other Person exercises "piggyback" or similar rights
requesting registration of shares which equal 5% or more of the
Registrable Securities requested to be registered by REI Shareholdes
under such Long-Term Registration. The Company will pay all
Registration Expenses in connection with such Long-Form Registration.
All Long-Form Registrations (unless otherwise requested by the relevant
Requesting Investor) shall be underwritten registrations.
II.3 Short-Form Registrations. In addition to
theLong-Form Registrations contemplated by Section 2.2, the Required
REI Shareholders shall be entitled to request an unlimited number of
Short-Form Registrations, on behalf of the REI Required Shareholders,
in which the Company shall pay all Registration Expenses; provided,
however, that (i) the Company shall have no obligation to file such
Short-Form Registration unless the reasonable anticipated aggregate
price to the public would exceed $500,000, and (ii) the Company shall
not be required to file more than one such Short-Form Registration in
any consecutive 12 month period. Demand Registrations will be
Short-Form Registrations whenever the Company is qualified to use Form
S-3 or any similar short form registration statement. The Company shall
use its best efforts to make Short-Form Registrations available for the
sale of Registrable Securities.
II.4. Effective Registration Statement. No Demand
Registration shall be deemed to have been requested or effected for
purposes of Section 2.2:
(a) unless a registration statement with
respect thereto has been declared effective by the Commission
and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto (other
than in connection with a revocation notice delivered pursuant
to Section 2.1(b));
(b) if, after a registration statement has
become effective, any stop order, injunction or other order or
requirement of the Commission or any other governmental agency
or court for any reason, affecting any of the Registrable
Securities covered by such registration statement, is
threatened in writing or issued by the Commission or other
governmental agency or court;
5
<PAGE>
(c) if the conditions to closing specified
in the purchase agreement or underwriting agreement entered
into in connection with such Demand Registration are not
satisfied by reason of a failure by or inability of the
Company to satisfy any of such conditions, or the occurrence
of an event outside the reasonable control of the relevant
Requesting Investors;
(d) if the Requesting Investors have made
the determination contemplated by the proviso to Section
2.1(b) with respect to such Demand Registration and have
notified the Company of such determination in a revocation
notice delivered in accordance with Section 2.1(b);
(e) if the Requesting Investors are not able
to register and sell the at least 90% of the amount of
Registrable Securities which they requested to be included in
such registration; or
(f) the registration statement with respect
thereto does not remain effective for a period of at least 180
days beyond the effective date thereof or, with respect to an
underwritten offering of Registrable Securities, until 45 days
after the commencement of the distribution by the holders of
the Registrable Securities included in such Registration
Statement
provided, however, that the Company shall pay all Registration Expenses
in connection with any Demand Registration if pursuant to this Section
2.4 the registration is deemed not to have been requested or effected.
II.5 Priority on Demand Registrations
(a) The Company shall not include in any Demand
Registration any securities which are not Registrable Securities (other
than securities with respect to which any Person exercises "piggyback"
or similar rights as described on Exhibit B attached hereto, such
Persons being "Other Piggyback Holders") without the written consent of
the Requisite Requesting Investors.
(b) If the Requesting Investors and other holders of
Registrable Securities request Registrable Securities to be included in
a Demand Registration which is an underwritten offering and the
managing underwriters advise the Company in writing that in their
opinion the number of Registrable Securities requested to be included
exceeds the number of Registrable Securities which can be sold in such
offering within a price range reasonably acceptable to the Requisite
Requesting Investors, the Company shall include any securities to be
sold in such Demand Registration in the following order: (i) first, the
Registrable Securities requested to be included in such registration by
the Requesting Investors, pro rata, based upon their total ownership,
on a fully diluted basis, of Registrable Securities; (ii) second,
subject to Section 2.5(a), the securities which the Company proposes to
sell and (iv) third, any securities other than Registrable Securities
to be sold by Persons other than the Company included pursuant to
Section 2.5(a). If securities of Other Piggyback Holders are to be
included in such Demand Registration, the Company shall use its best
efforts to
6
<PAGE>
effect the priority required by this Section with respect to the
Requesting Investors and such Other Piggyback Holders.
(c) Any Person (other than REI Shareholders)
including any securities in a Demand Registration shall pay its share
of the Registration Expenses as provided in Article VII.
II.6 Selection of Underwriters. The Requisite
Requesting Investors shall have the right to select the underwriters
and the managing underwriter to administer any Demand Registration
(which underwriters and managing underwriter shall be reasonably
acceptable to the Company).
II.7 Other Registration Rights. Except as provided in
this Agreement, without the written consent of the Required REI
Shareholders, the Company will not grant to any Person the right to
request the Company to register any equity securities of the Company,
or any securities convertible, exchangeable or exercisable for or into
such securities, other than piggyback registration rights entitling the
holder thereof to participate in Company-initiated registrations,
subject to the prior rights of holders of Registrable Securities.
II.8 Additional Shelf Registration. In addition to
the other rights of the holders of Registrable Securities under this
Agreement, at any time from and after the date hereof, the Company
shall, at the request of the Required REI Shareholders, file and use
its best efforts to have declared effective a "shelf" registration
statement (the "Shelf Registration") on any appropriate form pursuant
to Rule 415 under the Securities Act and/or any similar rule that may
be adopted by the Commission, with respect to all Registrable
Securities. The Company shall use its best efforts to keep such Shelf
Registration continuously effective for a period of two (2) years
following the date on which the Shelf Registration is declared
effective or until all Registrable Securities included therein have
been sold (the "Effective Period"). If necessary, the Company shall
supplement or amend the Shelf Registration, as required by the
registration form used by the Company or by the instructions applicable
to such registration form or by the Securities Act and in any event the
Company shall so supplement or amend (including through the
incorporation by reference of reports filed by the Company pursuant to
the Exchange Act, if permitted by applicable forms) the Shelf
Registration at least on a quarterly and annual basis and at any other
time if necessary to keep such Shelf Registration current and the
Company shall furnish to the holders of the Registrable Securities
copies of any such supplement or amendment prior to or simultaneously
with its being used and/or filed with the Commission. The Company shall
pay all Registration Expenses in connection with the Shelf
Registration, whether or not it becomes effective. The Company shall
make available to the holders of Registrable Securities, as soon as
reasonably practicable, an earnings statement covering a period of
twelve (12) months, beginning within three (3) months after the
effective date of the Shelf Registration, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder. The provisions of Articles V, VI, VII, VIII, IX
and XI shall apply to such Shelf Registration as if it were a Demand
Registration.
7
<PAGE>
ARTICLE III
PIGGYBACK REGISTRATIONS
III.1 Right to Piggyback. Whenever the Company
proposes (other than pursuant to a Demand Registration) to register (a
"Piggyback Registration") any of its equity securities under the
Securities Act (whether for the Company's own account (other than on
Forms S-4 or S-8 or any successor forms) or for the account of any
other Person), the Company shall give prompt written (in any event
within three Business Days after its receipt of Notice of any exercise
of other demand rights) notice to all REI Shareholders (the "Piggyback
Holders") of its intention to effect such a registration, and such
notice shall offer each Piggyback Holder the opportunity to register on
the same terms and conditions such number of such Piggyback Holder's
Registrable Securities as such Piggyback Holder may request. The
Company shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for
inclusion therein by the Piggyback Holders within 30 days after their
receipt of the Company's notice, subject to the provisions of Sections
3.3 and 3.4.
III.2 Piggyback Expenses. The Registration Expenses
of the holders of Registrable Securities shall be paid by the Company
in all Piggyback Registrations.
III.3 Priority on Primary Registrations. If a
Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company
in writing that in their reasonable opinion the number of securities
requested to be included in such registration are such that the success
of the offering would be materially and adversely affected, the Company
shall include any securities to be sold in such Piggyback Registration
in the following order: (a) first, the securities which the Company
proposes to sell, (b) second, the Registrable Securities requested to
be included in such registration by the Piggyback Holders in accordance
with Section 3.1, provided that if the managing underwriters determine
in good faith that a lower number of Registrable Securities should be
included, then the Company shall be required to include in such
registration only that lower number of Registrable Securities, and such
Piggyback Holders shall participate in such registration on a pro rata
basis in accordance with the number of Registrable Securities requested
to be included in such registration by each such Piggyback Holder, and
(c) third, any other securities proposed to be included in such
registration. If securities of Other Piggyback Holders are to be
included in such Piggyback Registration, the Company shall use its best
efforts to effect the priority required by this Section with respect to
the Piggyback Holders and the Other Piggyback Holders.
III.4 Priority on Secondary registrations. If a
Piggyback Registration is an underwritten secondary registration on
behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their good faith
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 on whose behalf the
registration is being made, the Company shall include any securities to
be sold in such registration in the following order: (a) first, the
securities which such holders propose to sell, (b) second, the
Registrable Securities requested to be included in such registration by
the Piggyback Holders in accordance with Section
8
<PAGE>
3.1, provided that if the managing underwriters determine in good faith
that a lower number of Registrable Securities should be included, then
the Company shall be required to include in such registration only that
lower number of Registrable Securities, and such Piggyback Holders
shall participate in such registration on a pro rata basis in
accordance with the number of Registrable Securities requested to be
included in such registration by each such Piggyback Holder, and (c)
third, any other securities proposed to be included in such
registration. If securities of Other Piggyback Holders are to be
included in such Piggyback Registration, the Company shall use its best
efforts to effect the priority required by this Section with respect to
the Piggyback Holders and the Other Piggyback Holders.
ARTICLE IV
OTHER REGISTRATIONS
-------------------
IV.1 Other Registrations. If the Company has
previously filed a registration statement with respect to Registrable
Securities pursuant to Article II or III of this Agreement, and if such
previous registration has not been withdrawn or abandoned, the Company
will not file or cause to be effected any other registration of any of
its equity securities or securities convertible, exchangeable or
exercisable for or into its equity securities under the Securities Act
(except on Form S-4 or 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 the earlier of (i) the date on which the Registrable
Securities included therein have been sold or (ii) 6 months from such
effective date.
ARTICLE V
HOLDBACK AGREEMENTS
V.1 Holdback. Each holder of Registrable Securities
agrees not to effect any public sale or distribution of Registrable
Securities, or any securities convertible, exchangeable or exercisable
for or into Registrable Securities, during the seven days prior to, and
the 90-day period beginning on, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
such holder had an opportunity to participate without cutback under
Article III hereof, unless the managing underwriters of such
underwritten Demand Registration or underwritten Piggyback Registration
otherwise agree.
9
<PAGE>
V.2 Company Holdback. The Company agrees (a) not to
effect any public sale or distribution of its equity securities, or any
securities convertible, exchangeable or exercisable for or into such
securities, during the 14 days prior to, and during the 90-day period
beginning on, the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which
holders of Registrable Securities are selling stockholders (except as
part of such underwritten registration or pursuant to registration on
Form S-4 or S-8 or any similar successor form), unless the managing
underwriters of such underwritten Demand Registration or underwritten
Piggyback Registration otherwise agree, and (b) to use all reasonable
efforts to cause each holder of at least 5% (on a fully-diluted basis)
of its equity securities to agree not to effect any public sale or
distribution of any such equity securities or any securities
convertible, exchangeable or exercisable for or into such equity
securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the managing underwriters
of such underwritten Demand Registration or underwritten Piggyback
Registration otherwise agree.
ARTICLE VI
REGISTRATION PROCEDURES
VI.1 Registration Procedures. Whenever the Required
REI Stockholders have requested that any Registrable Securities be
registered in accordance with Article II or III, the Company shall use
its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of
disposition thereof and pursuant thereto the Company shall as
expeditiously as possible (or, in the case of clause (p) below, shall
not):
(a) promptly prepare and file with the Commission a
registration statement with respect to such Registrable Securities
(such registration statement to include in each case all information
which the holders of the Registrable Securities to be registered
thereby shall reasonably request) and use its best efforts to cause
such registration statement to become effective, provided that as
promptly as practicable before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
(i) furnish copies of all such documents proposed to be filed to one
counsel selected by the Requesting Investors, and in each case the
Company shall not file any such documents to which any such relevant
counsel shall have reasonably objected on the grounds that such
document does not comply in all material respects with the requirements
of the Securities Act, (ii) notify each holder of Registrable
Securities covered by such registration statement of (x) any request by
the Commission to amend such registration statement or amend or
supplement any prospectus or (y) any stop order issued or threatened by
the Commission and (iii) take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(b) (i) 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 at all times during the period
commencing on the effective date of such registration statement and
ending, if other than a Shelf Registration, on the earlier of (A) the
first date as of which all Registrable Securities covered by such
registration statement are sold in accordance with the intended plan of
distribution set forth in such registration
10
<PAGE>
statement, or (B) 180 days following the effective date of such
registration statement (except that such period shall be extended (x)
by the length of any period that a stop order or similar proceeding is
in effect which prohibits the distribution of the Registrable
Securities, and (y) by the number of days during the period from and
including the date on which each seller of Registrable Securities shall
have received a notice delivered pursuant to clause (f) below until the
date when such seller shall have received a copy of the supplemented or
amended Prospectus contemplated by clause (f) below) and (ii) comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(c) furnish, without charge, to each seller of
Registrable Securities covered by such registration statement, such
number of conformed copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus and, in
each case, including all exhibits thereto and documents incorporated by
reference therein) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as any
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect and to 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 any such
Registrable Securities owned by such seller; provided, however, that
the Company shall 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 clause (d), (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process in
any such jurisdiction;
(e) furnish to each seller of the Registrable
Securities covered by such registration statement a signed copy,
addressed to such seller (and the underwriters, if any), of an opinion
of counsel for the Company, dated the effective date of such
registration statement (and, if such registration statement includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such seller, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) as
are customarily covered in opinions of issuer's counsel delivered to
the underwriters in underwritten public offerings, and such other legal
matters as the seller (or the underwriters, if any) may reasonably
request;
(f) notify each seller of Registrable Securities
covered by such registration statement, at a time when a prospectus
relating to such Registrable Securities is required to be delivered
under the Securities Act, of the occurrence of any event known to the
Company as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made; and, at the
request of any seller of Registrable Securities covered by such
registration statement, the
11
<PAGE>
Company shall prepare and furnish 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
Registrable 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;
(g) cause the Registrable Securities covered by such
registration statement to be listed on each securities exchange or
automated quotation system on which similar securities issued by the
Company are then listed or the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market, if requested by the
Required REI Shareholders, and to enter into such customary agreements
as may be required in furtherance thereof, including listing
applications and indemnification agreements in customary form;
(h) provide a transfer agent, registrar and CUSIP
number for the Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement;
(i) enter into such customary arrangements and take
all such other actions (including participating in "road shows") as the
holders of a majority (by number of shares) of the Registrable
Securities covered by such registration statement or the underwriters,
if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including using its best
efforts to effect a stock split or a combination of shares);
(j) make available for inspection by any seller of
Registrable Securities covered by such registration statement, any
underwriter participating in any disposition of securities 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 the Company,
and cause the Company'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;
(k) subject to other provisions hereof, use all
reasonable efforts to cause the Registrable Securities covered by such
registration statement to be registered with or approved by such
governmental agencies or authorities or self-regulatory organizations
as may be necessary to enable the sellers thereof to consummate the
disposition of such Registrable Securities;
(l) use reasonable best efforts to obtain a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement, addressed
to the Company, to each seller of the Registrable Securities covered by
such registration statement, and to the underwriters, if any, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and with respect to
events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters
12
<PAGE>
delivered to the underwriters in underwritten public offerings of
securities and such other financial matters as any such seller or the
underwriters, if any, may reasonably request;
(m) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its security holders, in each case as soon as practicable, an
earnings statement covering a period of at least 12 months, beginning
with the first month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(n) permit any holder of Registrable Securities
covered by such registration statement which (in the sole good faith
judgment of such holder) might be deemed to be a controlling person of
the Company (within the meaning of the Securities Act or the Exchange
Act) to participate in the preparation of such registration statement
and to include therein material, furnished to the Company in writing,
which in the reasonable judgment of such holder should be included and
which is reasonably acceptable to the Company;
(o) promptly notify the holders of the Registrable
Securities covered by such registration statement of the issuance of
any stop order by the Commission or the issuance by any state
securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of
the Registrable Securities under state securities or "blue sky" laws,
and use all reasonable efforts to obtain the lifting at the earliest
possible time of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use
of any preliminary prospectus included therein;
(p) at any time file or make any amendment to such
registration statement, or any amendment of or supplement to the
prospectus included therein (including amendments of the documents
incorporated by reference into the prospectus), (i) of which each
seller of Registrable Securities covered by such registration statement
or the managing underwriters, if any, shall not have previously been
advised and furnished a copy or (ii) to which the sellers of a majority
(by number of shares) of the Registrable Securities covered by such
registration statement, the managing underwriters (if any) or counsel
for such sellers or any such managing underwriters shall reasonably
object;
(q) make such representations and warranties (subject
to appropriate disclosure schedule exceptions) to the sellers of the
Registrable Securities covered by such registration statement and the
underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters and selling holders, as the case may
be, in underwritten public offerings of substantially the same type;
(r) during the period when the prospectus is required
to be delivered under the Securities Act, promptly file all documents
required to be filed with the Commission pursuant to Sections 12(a),
13(c), 14 or 15(d) of the Exchange Act; and
13
<PAGE>
(s) if such registration statement refers to any
seller of Registrable Securities covered thereby by name or otherwise
as the holder of any securities of the Company, then (whether or not
such seller is or might be deemed to be a controlling person of the
Company) (i) at the request of such seller, insert therein language, in
form and substance reasonably satisfactory to such seller, the Company
and the managing underwriters, if any, to the effect that the holding
by such seller of such securities is not to be construed as a
recommendation by such seller of the investment quality of the
Registrable Securities or the Company's other securities covered
thereby and that such holding does not imply that such seller will
assist in meeting any future financial requirements of the Company, and
(ii) in the event that such reference to such seller by name or
otherwise is not required by the Securities Act, any similar federal or
state statute, or any rule or regulation of any regulatory body having
jurisdiction over the offering, at the request of such seller, delete
the reference to such seller.
ARTICLE VII
REGISTRATION EXPENSES
VII.1 Fees Generally. All expenses incident to the
Company's performance of or compliance with this Agreement, including
without limitation internal expenses (including without limitation all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance, the expenses and fees
for listing securities on one or more securities exchanges, all
registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding
underwriting fees, discounts and commissions) and other Persons
retained by the Company (all such expenses being herein called
"Registration Expenses") shall be borne by the Company, except that
each REI Stockholder shall pay any underwriting fees, discounts or
commissions attributable to the sale of its Registrable Securities.
VII. Counsel Fees. In connection with each Demand
Registration, the Company shall reimburse the Requesting Investors for
the reasonable fees and disbursements of one counsel selected by the
Requisite Requesting Investors.
14
<PAGE>
ARTICLE VIII
UNDERWRITTEN OFFERINGS
VIII.1 Demand Underwritten Offerings. If requested by
the underwriters for any underwritten offering of Registrable
Securities pursuant to a Demand Registration, the Company shall enter
into an underwriting agreement with such underwriters for such
offering, provided that such agreement shall (a) be satisfactory in
substance and form to the Requesting Investor requesting such Demand
Registration and the underwriters and (b) contain such representations
and warranties by the Company and such other terms as are generally
included in agreements of this type, including indemnities customarily
included in such agreements. The holders of the Registrable Securities
to be distributed by such underwriters shall cooperate in good faith
with the Company in the negotiation of the underwriting agreement. The
holders of the 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 of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement also be conditions precedent to the
obligations of such holders of Registrable Securities. The Company
shall cooperate with any such holder of Registrable Securities in order
to limit any representations or warranties to, or agreements with, the
Company or the underwriters to be made by such holder only to
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities, such holder's intended method of
distribution and any other representation required by applicable law.
VIII.2 Incidental Underwritten Offerings. If the
Company at any time proposes to register any of its equity securities
under the Securities Act as contemplated by Article III and such equity
securities are to be distributed by or through one or more
underwriters, the Company, if requested by any Piggyback Holder as
provided in Article III, shall arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such Piggyback
Holder, subject to the limitations set forth in Article III, among the
securities to be distributed by such underwriters. The holders of the
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 of Registrable
Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also
be conditions precedent to the obligations of such holders of
Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations
or warranties to, or agreements with, the Company or the underwriters
to be made by such holder only to representations, warranties or
agreements regarding such holder, such holder's Registrable Securities,
such holder's intended method of distribution and any other
representation required by applicable law.
ARTICLE IX
INDEMNIFICATION
15
<PAGE>
IX.1 Indemnification by the Company. The Company
agrees to indemnify and hold harmless, to the fullest extent permitted
by law, each of the holders of any Registrable Securities covered by a
registration statement that has been filed with the Commission pursuant
to this Agreement, each other Person, if any, who controls such holder
within the meaning of the Securities Act or the Exchange Act, and each
of their respective directors, partners (general and limited),
stockholders, members, managers, officers, employees and agents, as
follows:
(a) against any and all loss, liability, claim,
damage, cost or expense (other than amounts paid in settlement)
incurred by such Person arising out of or based upon an untrue
statement or alleged untrue statement of a material fact contained in
such registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or in any
preliminary prospectus or prospectus included therein (or any amendment
or supplement thereto) or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(b) against any and all loss, liability, claim,
damage, cost and expense incurred by such Person to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body, in each
case whether commenced or threatened, or of any claim whatsoever, that
arises out of or is based upon any such untrue statement or omission or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company (which consent shall
not be unreasonably withheld or delayed); and
(c) against any and all expense incurred by such
Person in connection with investigating, preparing or defending against
any litigation or any investigation or proceeding by any governmental
agency or body, in each case whether commenced or threatened in
writing, or against any claim whatsoever, that arises out of or is
based upon any such untrue statement or omission or any such alleged
untrue statement or omission, to the extent that any such expense is
not paid under clause (a) or (b) above;
provided, however, that this indemnity does not apply to any loss,
liability, claim, damage, cost or expense to the extent arising out of
or based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
such holder expressly for use in the preparation of any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or in any preliminary
prospectus or prospectus included therein (or any amendment or
supplement thereto); and provided further, however, that the Company
will not be liable to any holder of Registrable Securities (or any
other indemnified Person) under the indemnity agreement in this Section
9.1, with respect to any preliminary prospectus to the extent that any
such loss, liability, claim, damage, cost or expense of such holder (or
other indemnified Person) results from the fact that such holder sold
Registrable Securities to a Person to whom there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the
final prospectus, if the
16
<PAGE>
Company has previously and timely furnished copies thereof to such
holder, and if such final prospectus would have corrected such untrue
statement or omission. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
holder or any other Person eligible for indemnification under this
Section 8.1, and shall survive the transfer of such securities by such
seller.
IX.2 Indemnification by a Selling Stockholder. In
connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder agrees to
indemnify and hold harmless (in the same manner and to the same extent
as set forth in Section 9.1 of this Agreement), to the extent permitted
by law, the Company and its directors, officers and controlling
Persons, and their respective directors, officers and general partners,
with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary,
final or summary prospectus included therein, or any amendment or
supplement thereto, or to any such prospectus, if such statement or
alleged statement or omission or alleged omission was made in reliance
upon and in conformity with written information that relates only to
such holder or the plan of distribution that is expressly furnished to
the Company by or on behalf of such holder for use in the preparation
of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on
behalf of the Company, or such holder, as the case may be, or any of
their respective directors, officers, or controlling Persons and shall
survive the transfer of Registrable Securities by such holder. With
respect to each claim pursuant to this Section 9.2, each holder's
maximum liability under this Section 9.2 shall be limited to an amount
equal to the net proceeds actually received by such holder (after
deducting any underwriting fees, discount and expenses) from the sale
of Registrable Securities being sold pursuant to such registration
statement or prospectus by such holder.
IX.3 Indemnification Procedure. Within 10 days after
receipt by an indemnified party hereunder of written notice of the
commencement of any action or proceeding involving a claim referred to
in Section 9.1 or Section 9.2, 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, however, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 9.1 or Section 9.2 except to the extent
that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action or proceeding is brought against
an indemnified party, the indemnifying party will 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 will not be liable to such indemnified party for any legal fees
and expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's reasonable judgment
an actual or potential conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, in which
case the indemnifying party shall not be liable for the fees and
expenses of (i) in the case of a claim referred to in Section 9.1, more
than one counsel (in addition to any local counsel) for all indemnified
parties selected by (x) REI, if REI is defending against such claim, or
(y) the holders of
17
<PAGE>
a majority (by number of shares) of the Registrable Securities held by
such indemnified parties, if REI is not defending against such claim,
or (ii) in the case of a claim referred to in Section 9.2, more than
one counsel (in addition to any local counsel) for the Company, in each
case in connection with any one action or separate but similar or
related actions or proceedings. An indemnifying party who is not
entitled to (pursuant to the immediately preceding sentence), or elects
not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of 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 an actual or potential
conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels as may be reasonable in
light of such conflict. The indemnifying party will not, without the
prior written consent of each indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened
claim, action, suit, investigation or proceeding in respect of which
indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is
a party to such claim, action, suit, investigation or proceeding),
unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability arising out of
such claim, action, suit, investigation or proceeding and such
settlement, compromise or consent involves only the payment of money
and such money is actually paid by the indemnifying party. Whether or
not the defense of any claim or action is assumed by the indemnifying
party, such indemnifying party will not be subject to any liability for
any settlement made without its consent, which consent will not be
unreasonably withheld. Notwithstanding anything to the contrary set
forth herein, and without limiting any of the rights set forth above,
in any event any indemnified party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
IX.4 Underwriting agtreement. The Company, and each
holder of Registrable Securities requesting registration of all or any
part of such holder's Registrable Securities pursuant to Article II or
Article III, shall provide for the foregoing indemnity (with
appropriate modifications as may be reasonably requested by the
managing underwriter) in any underwriting agreement entered into in
connection with a Demand Registration or a Piggyback Registration with
respect to any required registration or other qualification of
Registrable Securities under any federal or state law or regulation of
any governmental authority.
IX.5 Contribution. If the indemnification provided
for in Section 9.1 or 9.2 is unavailable to hold harmless an
indemnified party under such Section, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages, liabilities and
expenses referred to in Section 9.1 or Section 9.2, as the case may be,
in such proportion as is appropriate to reflect the relative fault of
such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as
well as any other relevant equitable considerations, including the
relative benefits received by each party from the offering of the
securities covered by the relevant registration statement, the parties'
relative knowledge and access to information concerning the matter with
respect to which the relevant claim was asserted and the parties'
relative opportunities to correct and prevent any relevant statement or
omission. Without limiting the generality of the foregoing, the
parties' relative fault shall be determined by reference to,
18
<PAGE>
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access
to relevant information and opportunity to correct or prevent any such
untrue statements or omission. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 9.5
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first and second sentences of this
Section 9.5. The amount paid by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to in the
first sentence of this Section 9.5 shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending the relevant action or
proceeding and shall be limited as provided in Section 9.3 if the
indemnifying party has assumed the defense of the relevant action or
proceeding in accordance with the provisions of Section 9.3. Promptly
after receipt by an indemnified party under this Section 9.5 of notice
of the commencement of any action or proceeding against such party in
respect of which a claim for contribution may be made against an
indemnifying party under this Section 9.5, such indemnified party shall
notify the indemnifying party in writing of the commencement thereof if
the notice specified in Section 9.3 has not been given with respect to
such action or proceeding; provided, however, that the omission to so
notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may otherwise have to any indemnified party
under this Section 9.5, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. The
Company and each holder of Registrable Securities agrees with each
other and the underwriters of the Registrable Securities, if requested
by such underwriters, that (i) the underwriters' portion of the
contribution paid to such holders pursuant to this Section 9.5 shall
not exceed the total underwriting fees, discounts and commissions in
connection with the relevant offering and (ii) that the total amount of
any such holder's contributions under this Section 9.5 shall not exceed
an amount equal to the net proceeds actually received by such holder
from the sale of Registrable Securities in the offering to which the
losses, liabilities, claims, damages or expenses of the indemnified
parties relate. 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.
IX.6 Periodic Payments. The indemnification required
by this Article IX shall be made by periodic payments of the amount
thereof during the course of the relevant investigation or defense, as
and when bills are received or expense, loss, damage or liability is
incurred.
ARTICLE X
RULE 144
X.1 Rule 144. The Company covenants that it shall
file the reports required to be filed by it under the Securities Act
and the Exchange Act (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to
enable such holder to sell shares of Registrable Securities without
registration under the Securities Act in compliance with (a) Rule
19
<PAGE>
144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder (x) a written statement as to
whether it has complied with such requirements and (y) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company under the Exchange Act.
ARTICLE XI
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
XI.1 Participation in Underwritten Registrations. No
holder of Registrable Securities may participate in any underwritten
registration hereunder unless such holder (a) agrees to sell such
holder's Registrable 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, escrow agreements and other documents reasonably required
under the terms of such underwriting arrangements and consistent with
the provisions of this Agreement.
ARTICLE XII
MISCELLANEOUS
XII.1 No Inconsistent Agreements. Except for the
arrangements described in Exhibit A attached hereto, the Company
represents and warrants that it is not currently a party to, and
covenants that it will not hereafter enter into, any agreement which is
inconsistent with, or would otherwise restrict the performance by the
Company of, its obligations hereunder.
XII.2 Adjustments Affecting Registerable Securities.
The Company will not take any action, or fail to take any action which
it may properly take, with respect to its securities if such action or
failure to act would adversely affect (a) the ability of the holders of
Registrable Securities to include Registrable Securities in a
registration undertaken pursuant to this Agreement or (b) to the extent
within the Company's control, would adversely affect the marketability
of such Registrable Securities in any such registration (it being
understood that the actions referred to in this Section 11.2 include
effecting a stock split or a combination of shares).
XII.3 Specific Performance. In the event of a breach
by any party to this Agreement of its obligations under this Agreement,
any party injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such
provision will be inadequate compensation for any loss and that any
defense in any action for specific performance that a remedy at law
would be adequate is waived.
20
<PAGE>
XII.4 Actions Taken; Amendments and Waivers. Except
as otherwise provided herein, no modification, amendment or waiver of
any provision of this Agreement will be effective against the Company
or any holder of Registrable Securities, unless such modification,
amendment or waiver is approved in writing by the Company, and the
Required REI Stockholders. The failure of any party hereto to enforce
any of the provisions of this Agreement will in no way be construed as
a waiver of such provisions and will not affect the right of such party
thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
XII.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or
holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities, except
to the extent reserved to or by the transferor in connection with any
such transfer; provided, however, that the benefits of this Agreement
shall inure to and be enforceable by any transferee of Registrable
Securities only if such transferee shall have executed a Registration
Rights Joinder Agreement substantially in the form of Exhibit A hereto.
XII.6 Notices. (a) All notices, requests and other
communications hereunder must be in writing and will be deemed to have
been duly given only if delivered personally against written receipt or
by facsimile transmission against facsimile confirmation or mailed (by
registered or certified mail, postage prepaid, return receipt
requested) or delivered by reputable overnight courier, fee prepaid, to
the parties at the following addresses or facsimile numbers:
If to any REI Stockholder, to:
Recovery Equity Investors II, L.P.
901 Mariner's Island Blvd., Suite 465
San Mateo, CA 94404
Facsimile No.: (650) 578-9842
Attn: Joseph J. Finn-Egan
Jeffrey A. Lipkin
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
21
<PAGE>
If to the Company, to:
Chadmoore Wireless Group, Inc.
2875 East Patrick Lane
Suite G
Las Vegas, Nevada 89120
Facsimile No.: (702) 891-5255
Attn: President & CEO
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, California 95814-4411
Facsimile No.: (916) 441-6700
Attn: Gilles S. Attia, Esq.
(b) All such notices, requests and other
communications will (w) if delivered personally to the address as
provided in this Section 12.6, be deemed given upon delivery, (x) if
delivered by facsimile transmission to the facsimile number as provided
in this Section 12.6, be deemed given upon receipt by the sender of
confirmation of such transmission, and (y) if delivered by mail in the
manner described above to the address as provided in this Section 12.6
upon the earlier of the third Business Day following mailing or upon
receipt and (z) if delivered by overnight courier to the address as
provided in this Section 12.6, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or
upon receipt, (in each case regardless of whether such notice, request
or other communication is received by any other Person to whom a copy
of such notice is to be delivered pursuant to this Section 12.6). Any
party hereto may from time to time change its address, facsimile number
or other information for the purpose of notices to such party by giving
notice specifying such change to the other parties hereto in accordance
with Section 12.6(a).
XII.7 Headings; Certain Conventions. The headings of
the various Articles and Sections of this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any
of the terms or provisions hereof. Unless the context otherwise
expressly requires, all references herein to Articles, Sections and
Exhibits are to Articles and Sections of, and Exhibits to, this
Agreement. The words "herein," "hereunder" and "hereof" and words of
similar import refer to this Agreement as a whole and not to any
particular Section or provision. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation".
XII.8 Gender. Whenever the pronouns "he" or "his" are
used herein they shall also be deemed to mean "she" or "hers" or "it"
or "its" whenever applicable. Words in the singular shall
22
<PAGE>
be read and construed as though in the plural and words in the plural
shall be construed as though in the singular in all cases where they
would so apply.
XII.9 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any
present or future law, and if the rights or obligations of any party
hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, by) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance here from and (d) in lieu
of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
XII.10 Governing Laws. This Agreement shall be
governed by and construed in accordance with the domestic laws of the
State of New York applicable to a contract executed and performed in
such State without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
XII.11 Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. EACH OF
THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. 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 AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH OF THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT 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 THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
XII.12 Counterparts. This Agreement may be executed
in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
23
<PAGE>
XII.13 Entire Agreement. This Agreement supersedes
all prior discussions and agreements between the parties with respect
to the subject matter hereof and contains the sole and entire agreement
among the parties hereto with respect to the subject matter hereof.
[Signature page to follow]
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
CHADMOORE WIRELESS GROUP, INC.
By:
--------------------------
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By Recovery Equity Partners II, L.P.,
its general partner
By:
--------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:
--------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
[Registration Rights Agreement]
<PAGE>
Form of Registration Rights Joinder Agreement
For Permitted Transferees
Exhibit A to
Registration Rights Agreement
CHADMOORE WIRELESS GROUP, INC.
4720 Polaris Street
Las Vegas, California 89103
Attention: Chief Executive Officer
Ladies & Gentlemen:
In consideration of the transfer to the undersigned of
[describe security being transferred] of CHADMOORE WIRELESS GROUP,
INC., a Colorado corporation (the "Company"), the undersigned
represents that it is a transferee of [insert name of transferor] and
agrees that, as of the date written below, [he][she][it] shall become a
party to that certain Registration Rights Agreement dated as of
, 1998, as such agreement may have been amended from time to time
(the "Agreement"), between the Company and the persons named therein,
and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Agreement that were applicable to the
undersigned's transferor, as though an original party thereto and shall
be deemed a REI Stockholder for all purposes thereof.
Executed as of the day of , .
SIGNATORY:
Address:
ACKNOWLEDGED AND ACCEPTED:
CHADMOORE WIRELESS GROUP, INC.
By:
--------------------------
Name:
Title:
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS......................................................2
1.1 Definitions......................................2
ARTICLE II DEMAND REGISTRATIONS............................................4
2.1 Requests for Registration........................4
2.2 Long-Form Registrations..........................5
2.3 Short-Form Registrations.........................5
2.4 Effective Registration Statement.................5
2.5 Priority on Demand Registrations.................6
2.6 Selection of Underwriters........................7
2.7 Other Registration Rights........................7
2.8 Additional Shelf Registration....................7
ARTICLE III PIGGYBACK REGISTRATIONS........................................8
3.1 Right to Piggyback...............................8
3.2 Piggyback Expenses...............................8
3.3 Priority on Primary Registrations................8
3.4 Priority on Secondary Registrations..............9
ARTICLE IV OTHER REGISTRATIONS.............................................9
4.1 Other Registrations..............................9
ARTICLE V HOLDBACK AGREEMENTS..............................................9
5.1 Holdback.........................................9
5.2 Company Holdback................................10
ARTICLE VI REGISTRATION PROCEDURES........................................10
6.1 Registration Procedures.........................10
ARTICLE VII REGISTRATION EXPENSES.........................................14
7.1 Fees Generally..................................14
7.2 Counsel Fees....................................15
ARTICLE VIII UNDERWRITTEN OFFERINGS.......................................15
8.1 Demand Underwritten Offerings...................15
8.2 Incidental Underwritten Offerings...............15
ARTICLE IX INDEMNIFICATION................................................16
9.1 Indemnification by the Company..................16
9.2 Indemnification by a Selling Stockholder........17
9.3 Indemnification Procedure.......................17
<PAGE>
9.4 Underwriting Agreement..........................18
9.5 Contribution....................................19
9.6 Periodic Payments...............................20
ARTICLE X RULE 144........................................................20
10.1 Rule 144........................................20
ARTICLE XI PARTICIPATION IN UNDERWRITTEN REGISTRATIONS....................20
11.1 Participation in Underwritten Registrations.....20
ARTICLE XI MISCELLANEOUS..................................................20
12.1 No Inconsistent Agreements......................20
12.2 Adjustments Affecting Registrable Securities....21
12.3 Specific Performance............................21
12.4 Actions Taken; Amendments and Waivers...........21
12.5 Successors and Assigns..........................21
12.6 Notices.........................................21
12.7 Headings; Certain Conventions...................23
12.8 Gender..........................................23
12.9 Invalid Provisions..............................23
12.10 Governing Law...................................23
12.11 Waiver of Jury Trial............................23
12.12 Counterparts....................................24
12.13 Entire Agreement................................24
<PAGE>
Exhibit A Form of Registration Rights Joinder Agreement
Exhibit B Other Piggyback Holders
Exhibit 7
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated as of May 1, 1998, between RECOVERY
EQUITY INVESTORS II, L.P., a Delaware limited partnership (the "Consultant"),
and CHADMOORE WIRELESS GROUP, INC., a Colorado corporation (the "Company").
WHEREAS, the Consultant and the Company are parties to that
certain Investment Agreement, dated as of May 1, 1998 (as the same may be
amended, supplemented, or otherwise modified from time to time, the "Investment
Agreement"), between the Consultant and the Company;
WHEREAS, the Consultant has staff specially skilled in corporate
finance, strategic planning, and other management skills and services;
WHEREAS, prior to the date hereof, the Consultant has become
familiar with the operations, business, assets, and liabilities of the Company
as a result of its involvement in planning, structuring, and negotiating the
Investment Agreement and the transactions contemplated by the Investment
Agreement;
WHEREAS, following the consummation of the transactions
contemplated by the Investment Agreement, the Company will require the
Consultant's special skills and management advisory services in connection with
its general business operations; and
WHEREAS, the Consultant is willing to provide such skills and
services to the Company on the terms and conditions set forth below.
NOW THEREFORE, in consideration of the mutual rights and
obligations set forth herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. Engagement. The Company hereby engages the Consultant for the
Term (as hereinafter defined) upon the terms and conditions set forth herein to
provide consulting and management advisory services to the Company. These
services will be in the field of financial and strategic corporate planning and
such other management areas as the Consultant and the Company shall mutually
agree ("Services"). In consideration of the compensation specified herein, the
Consultant accepts such engagement and agrees to perform the Services, in each
case upon the terms and conditions set forth herein.
2. Term. The engagement hereunder shall be for a term (the
"Term") commencing on the date hereof and ending on the fifth anniversary of the
date hereof.
3. Services to be Performed. The Consultant shall devote such
time and efforts to the performance of the Services as the Consultant deems
necessary or appropriate to the
<PAGE>
performance of such services. However, no precise number of hours is to be
devoted by the Consultant on a weekly or monthly basis. The Consultant may
perform the Services directly, through its employees or agents or, with the
approval of the Company, which shall not be unreasonably withheld, with such
outside consultants as the Consultant may engage for such purpose. The Company
acknowledges that, subject to compliance with Section 4 of this Advisory
Agreement, the Consultant's services to it are not exclusive and that the
Consultant, its Affiliates, and their respective partners, officers, directors,
employees, representatives, and agents will render similar services to other
Persons.
4. Confidentiality. The Consultant shall maintain secrecy with
respect to all non-public information of the Company which may come into its
possession as a result of performance of services under this Advisory Agreement,
and shall use its best efforts to ensure that its Affiliates, officers,
directors, employees, representatives, and agents also maintain the secrecy of
such information, except for any such information which, as determined by the
Consultant in its reasonable discretion, is required to be disclosed by the
Consultant or any such Affiliate, officer, director, employee, representative,
or agent pursuant to any subpoena, order, law, or regulation.
5. Compensation; Expense Reimbursement.
5.1. Advisory Fee. In consideration of the Consultant's provision
of the Services to the Company, the Company shall pay the Consultant an annual
fee of $312,500, which shall be paid in advance, in equal monthly installments,
on the first day of each month during the Term, commencing on the first
anniversary hereof; provided, however, such annual fee shall be reduced by the
amount of cash dividends paid to Consultant as holder of shares of Purchased
Preferred Stock during the twelve-month period immediately preceding the
twelve-month period during which the annual fee is to be paid.
5.2. Expenses. The Company shall reimburse the Consultant for all
out-of-pocket expenses incurred by the Consultant in connection with the
Services provided hereunder, including without limitation all travel, lodging,
and similar out-of-pocket costs incurred by the Consultant in connection with,
or on account of, the performance of such services.
6. Indemnification. The Company agrees to indemnify the
Consultant and its affiliates in accordance with Schedule A attached hereto.
7. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by prepaid first class certified mail,
return receipt requested, or mailed by overnight courier prepaid, to the parties
at the following addresses or facsimile numbers:
(i) If to the Consultant, to:
Recovery Equity Investors II, L.P.
-2-
<PAGE>
901 Mariner's Island Boulevard
Suite 465
San Mateo, CA 94404
Facsimile No.: (650) 578-9842
Attn: Joseph J. Finn-Egan
Jeffrey A. Lipkin
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: 212-309-6273
Attn: Ira White, Esq.
(ii) If to the Company, to:
Chadmoore Wireless Group, Inc.
2875 East Patrick Lane
Suite G
Las Vegas, NV 89120
Facsimile No.: (702) 891-5255
Attn: Robert W. Moore, President and
Chief Executive Officer
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, CA 95814-4411
Facsimile No.: (916) 441-6700
Attn: Gilles S. Attia, Esq.
All such notices will (a) if delivered personally to the address as provided in
this Section 7, be deemed given upon delivery, (b) if delivered by facsimile
transmission to the facsimile number as provided in this Section 7, be deemed
given upon facsimile confirmation, (c) if delivered by mail in the manner
described above to the address as provided in this Section 7, be deemed given on
the earlier of the third Business Day following mailing and the date on which
received, and (d) if delivered by overnight courier to the address as provided
in this Section, be deemed given on the earlier of the first Business Day
following the date sent by such overnight courier or upon receipt (in each case
regardless of whether such notice is received by any other Person to whom a copy
of such notice is to be delivered pursuant to this Section 7). Any party hereto
may from time to time change its address, facsimile number, or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
-3-
<PAGE>
8. Modifications. This Advisory Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral,
with respect to such subject matter. This Advisory Agreement may not be amended
or modified except by a writing signed by the parties hereto.
9. Successors and Assigns. This Advisory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto.
10. Captions. Captions have been inserted solely for the
convenience of reference and in no way define, limit, or describe the scope or
substance of any provisions of this Advisory Agreement.
11. Severability. The provisions of this Advisory Agreement are
severable, and the invalidity of any provision shall not affect the validity of
any other provision.
12. Governing Law. This Advisory Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
13. Counterparts. This Advisory Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
14. Definitions. Capitalized terms used in this Advisory
Agreement and not otherwise defined herein shall have the respective meanings
ascribed to them in the Investment Agreement.
[Remainder of page intentionally left blank.]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Advisory
Agreement as of the date first above written.
CHADMOORE WIRELESS GROUP, INC.
By:
----------------------------------
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By: Recovery Equity Partners II, L.P.,
its General Partner
By:
----------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:
----------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
[Advisory Agreement]
<PAGE>
SCHEDULE A
to ADVISORY AGREEMENT
May 1, 1998
Indemnification Agreement
-------------------------
Recovery Equity Investors II, L.P.
901 Mariner's Island Boulevard
Suite 465
San Mateo, CA 94404
Gentlemen:
As part of the consideration for the agreement of Recovery Equity
Investors II, L.P., a Delaware limited partnership (the "Consultant"), to
furnish its services to Chadmoore Wireless Group, Inc., a Colorado corporation
(the "Company"), pursuant to the terms of the Advisory Agreement, dated as of
May 1, 1998, between the Consultant and the Company (as the same may be amended,
supplemented, or otherwise modified from time to time, the "Advisory
Agreement"), the Company agrees to indemnify and hold harmless the Consultant,
its affiliates, their respective partners, officers, directors, employees, and
agents, and all other persons controlling the Consultant or any of its
affiliates within the meaning of either (i) Section 15 of the Securities Act of
1933, as amended, or (ii) Section 20 of the Securities Exchange Act of 1934, as
amended (individually, an "Indemnified Party" and collectively, the "Indemnified
Parties"), from and against, and the Company agrees that no Indemnified Person
shall have any liability to the Company or its affiliates, security holders, or
creditors for, all claims, liabilities, fees, penalties, expenses, losses, and
damages (including without limitation the reasonable fees, charges, and
disbursements of counsel) (collectively, "Losses") related to or arising out of
actions taken (or omitted to be taken) by any of the Indemnified Parties
pursuant to the Advisory Agreement or any Indemnified Party's role in connection
therewith, and whether or not incurred in connection with any action or
proceeding relating to any such act or omission; provided, however, that the
Company shall not be responsible for any Losses to the extent that it is finally
judicially determined that they result solely from actions taken or omitted to
be taken by an Indemnified Party due to such Indemnified Party's gross
negligence or willful misconduct.
If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then
the Company shall contribute to the amount paid or payable by such Indemnified
Party as a result of such Loss in such proportion as is appropriate to reflect
not only the relative benefits received (or contemplated to be received) by the
Company on the one hand and such Indemnified Party on the other hand or, if such
allocation is judicially
<PAGE>
determined unavailable, in such proportion as is appropriate to reflect other
equitable considerations such as the relative fault of the Company on the one
hand and of such Indemnified Party on the other hand, subject to the limitation
that in any event an Indemnified Party's aggregate contribution to all Losses
shall not exceed the amount of fees actually received by such Indemnified Party
pursuant to the Advisory Agreement.
Promptly after receipt by an Indemnified Party of notice of any
complaint or the commencement of any action or proceeding with respect to which
indemnification may be sought against the Company hereunder, such Indemnified
Party will notify the Company in writing of the receipt or commencement thereof,
but failure to notify the Company will relieve the Company from any liability
which it may have hereunder only if, and to the extent that, such failure
results in the forfeiture of substantial rights and defenses on the part of such
Indemnified Party, and will not in any event relieve the Company from any other
obligation to any Indemnified Party. The Company shall assume the defense of
such action or proceeding (including without limitation payment of reasonable
fees, charges, and disbursements of counsel) insofar as such action or
proceeding shall relate to any alleged Loss in respect of which indemnity may be
sought against the Company. An Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees, charges and disbursements of such counsel shall be at the expense
of such Indemnified Party unless employment of such counsel has been
specifically authorized by the Company in writing.
The Company shall authorize separate counsel for an Indemnified
Party if the named parties to any action or proceeding (including any impleaded
parties) include the Company (or any of the directors of the Company) and such
Indemnified Party, and (i) in the good faith judgment of such Indemnified Party
(as advised by counsel) the use of joint counsel would present such counsel with
an actual or potential conflict of interest or (ii) an Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company (or its directors(s)).
The Company will reimburse each Indemnified Party for all
expenses (including without limitation the reasonable fees, charges, and
disbursements of counsel authorized by the Company) as they are incurred by such
Indemnified Party in connection with investigating, preparing for, or defending
any action, claim, or proceeding ("Action") referred to above (or enforcing this
Indemnification Agreement or the Advisory Agreement) whether or not any
Indemnified Party is or becomes a party to such Action, and whether or not such
Action is initiated or brought by the Consultant. The Company further agrees
that the Company will not settle, compromise, or consent to the entry of any
judgment in any pending or threatened Action in respect of which indemnification
may be sought hereunder (whether or not an Indemnified Party is a party thereto)
unless the Company has given the Consultant reasonable prior written notice
thereof and obtained an unconditional release of each Indemnified Party from all
liability arising therefrom. No Indemnified Party shall admit any liability with
respect to, settle, compromise, or consent to the entry of any judgment in any
pending or threatened Action in respect of which indemnification is being sought
hereunder without the prior written consent of the Company (which consent shall
not be unreasonably withheld or delayed). An Indemnified Party shall not be
liable to the Company or to any other person in connection with the
-2-
<PAGE>
services which it renders pursuant to the Advisory Agreement, except for such
Indemnified Party's gross negligence or willful misconduct judicially determined
as aforesaid. The indemnification, contribution, and expense reimbursement
obligations that the Company has under this Indemnification Agreement shall be
in addition to any liability the Company may otherwise have. THE CONSULTANT
HEREBY AGREES, AND THE COMPANY HEREBY AGREES ON ITS OWN BEHALF AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SECURITY HOLDERS, TO WAIVE
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM, OR ACTION
ARISING OUT OF THE ADVISORY AGREEMENT, THE CONSULTANT'S PERFORMANCE THEREUNDER,
OR THIS INDEMNIFICATION AGREEMENT.
The provisions of this Indemnification Agreement shall apply to
the Consultant's services under the Advisory Agreement and shall remain in full
force and effect regardless of the completion or termination of the Advisory
Agreement or any amendment, supplement, or other modification to or of the
Advisory Agreement. This Indemnification Agreement and any other agreements
relating hereto shall be governed by and construed in accordance with the
domestic laws
-3-
<PAGE>
of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
Very truly yours,
CHADMOORE WIRELESS GROUP, INC.
By:
----------------------------------
Name:
Title:
Agreed to and accepted
this 1st day of May, 1998
RECOVERY EQUITY INVESTORS II, L.P.
By Recovery Equity Partners II, L.P.,
its General Partner
By:
--------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:
--------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
Exhibit 8
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF
SERIES C PREFERRED STOCK OF
CHADMOORE WIRELESS GROUP, INC.
The undersigned duly authorized officer of CHADMOORE
WIRELESS GROUP, INC., a company organized and existing under the Corporation
Laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY:
That the Certificate of Incorporation of the Company
authorized the creation of up to forty million (40,000,000) shares of the
Company's preferred stock (the "Preferred Stock"); and
That pursuant to the authority conferred upon the Board of
Directors (the "Board") by the Articles of incorporation of the Company, on
April 30, 1998, the Board adopted a resolution creating Series C Preferred Stock
consisting of ten million one hundred nineteen thousand six hundred fourteen
(10,119,614) shares of Preferred Stock, the preferences, limitations, and
relative rights of which are set forth below:
A. Designation. There shall be a series of Preferred Stock designated as
"Series C Preferred Stock" (the "Series C Preferred Stock"). The number
of shares initially constituting the Series C Preferred Stock shall be
ten million one hundred nineteen thousand six hundred fourteen
(10,119,614).
B. Rank. The Series C Preferred Stock shall, with respect to dividend and
other distribution rights, and rights on liquidation, dissolution and
winding up, rank (I) pari passu with any class or series of capital stock
hereafter created which expressly provides that it ranks pari passu with
the Series C Preferred Stock as to dividends, other distributions,
liquidation preference and/or otherwise (collectively, the "Series C
Parity Securities"), (ii) senior to the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock, the Common Stock and any
other class or series of capital stock hereafter created which does not
expressly provide that it ranks senior to or pari passu with the Series C
Preferred Stock as to dividends, other distributions, liquidation
preference and/or otherwise (collectively, the "Series C Junior
Securities") and (iii) junior to any other class or series of capital
stock hereafter created which expressly provides that it ranks senior to
the Series C Preferred Stock as to dividends, other distributions,
liquidation preference and/or otherwise (collectively, the "Series C
Senior Securities"). The terms "Series C Parity
1
<PAGE>
Securities," "Series C Junior Securities" and "Series C Senior
Securities" as used herein with respect to any class or series of capital
stock shall only be deemed to refer to such class or series to the extent
it ranks (I) pari passu with, (ii) not senior to or pari passu with, as
applicable, or (iii) senior to, the Series C Preferred Stock with respect
to dividends, other distributions, liquidation preferences or otherwise.
C. Dividends.
1. When, as and if declared by the Board, to the extent funds are legally
available therefor in accordance with the Business Corporation Act,
dividends will be payable at the Dividend Rate on each share of Series C
Preferred Stock, in cash, as provided herein. Dividends on shares of
Series C Preferred Stock will be payable at a rate per annum equal to 4%
of the Stated Value thereof (the "Dividend Rate"). To the extent
declared, such dividends shall be payable semi-annually on June 30 and
December 31 of each year, commencing on June 30, 1998 (each such date
hereinafter referred to as a "Dividend Payment Date" and each such
dividend period hereinafter referred to as a "Dividend Period"), except
that if such date is not a Business Day, then such dividend shall be
payable on the next succeeding Business Day, to the holders of record as
they appear on the register of the Corporation for the shares of Series C
Preferred Stock five (5) Business Days prior to such Dividend Payment
Date.
2. Dividends on the shares of Series C Preferred Stock shall be
accumulating and shall accrue from the Issue Date, without
interest, whether or not such dividends have been declared. Unpaid
dividends, whether or not declared, shall compound annually at the
Dividend Rate from the Dividend Payment Date on which such dividend
was payable as herein provided until payment of such dividend.
Dividends payable on the Series C Preferred Stock shall be computed
on the basis of a 360-day year and the actual number of days
elapsed in such period.
3. For so long as any shares of Series C Preferred Stock shall be
outstanding, no dividend or distribution, whether in cash, stock or other
property, shall be paid, declared and set apart for payment or made on
any date on or in respect to any Series C Junior Security as to dividends
or distributions of assets upon liquidation, dissolution or winding up,
and no payment on account of the redemption, purchase or other
acquisition or retirement for value by the Corporation shall be made on
any date of any Series C Junior Security unless, in each case, (A) the
full amount of unpaid dividends accrued on all outstanding shares of
Series C Preferred Stock shall have been paid or contemporaneously are
declared and paid and (B) if an event shall have occurred requiring the
2
<PAGE>
Corporation to redeem any or all of the Series C Preferred Stock, all
shares of Series C Preferred Stock tendered for redemption shall have
been redeemed in accordance with the terms thereof.
4. If the Corporation pays any dividend on the Series C Preferred
Stock which is less than the total amount of accrued and unpaid
dividends on such series, such payment will be distributed ratably
among the holders of such series based on the aggregate accrued but
unpaid dividends on the shares of such series held by each such
holder.
D. Preference on Liquidation.
1. In the event that the Corporation shall liquidate, dissolve or wind
up, whether voluntarily or involuntarily, no distribution shall be made
to the holders of shares of Common Stock or other Series C Junior
Securities (and no monies shall be set apart for such purpose) unless
prior thereto, the holders of shares of Series C Preferred Stock shall
have received an amount per share equal to the sum of the Stated Value of
the Series C Preferred Stock plus all accrued and unpaid dividends
thereon through the date of distribution (the "Liquidation Preference").
2. If, upon any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference
for each share of Series C Preferred Stock then outstanding and the full
liquidating payments on all Series C Parity Securities, then the assets
of the Corporation remaining after the distribution to holders of all
Series C Senior Securities, if any, of the full amounts to which they may
be entitled shall be ratably distributed among the holders of Series C
Preferred Stock and of any Series C Parity Securities in proportion to
the full amounts to which they would otherwise be respectively entitled
if all amounts thereon were paid in full.
3. Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property or assets of the Corporation nor the
consolidation, merger or other business combination of the
Corporation with or into one or more corporations or other entities
shall be deemed to be a liquidation, dissolution or winding-up,
voluntary or involuntary, of the Corporation for purposes of this
Section D.
E. Voting; Consents.
3
<PAGE>
1. Except as required by law, and except as otherwise specifically
provided in this Section E, the holders of the Series C Preferred Stock
shall not be entitled to vote on any matter.
2. So long as any shares of Series C Preferred Stock shall be
outstanding, the Corporation shall not, without the affirmative written
consent of at least a majority in number of shares of Series C Preferred
Stock then outstanding, (I) amend, alter or repeal any of the provisions
of the Articles of Incorporation so as to affect adversely the
preferences, special rights or powers of the Series C Preferred Stock,
(ii) issue any Series C Senior Securities or Series C Parity Securities
(other than in connection with options, the grant of which was approved
by the holders of the Series C Preferred Stock), (iii) issue shares of
Preferred Stock, (iv) increase or decrease the aggregate number of
authorized shares of Preferred Stock or Common Stock, or increase or
decrease the par value of the Corporation's Preferred Stock, (v)
consummate a Sale of the Corporation unless the consideration received
per share of Series C Preferred Stock pursuant to such Sale of the
Corporation is at least equal to the Liquidation Preference or (vi) make
a payment of dividends or other distribution to holders of Series C
Junior Securities: provided, however, that the Corporation may issue
shares of "New Preferred Stock" in accordance with the terms of the
"First Warrant," as such terms are defined in the Investment Agreement,
dated as of May 1, 1998, between Recovery Equity Investors II, L.P. and
the Corporation.
F. Redemption.
1. Redemption by Corporation. To the extent funds are legally available
therefor at any time and from time to time, from and after the earlier of
(I) May 1, 2003 and (ii) the occurrence of a Redemption Event, each
holder of Series C Preferred Stock then outstanding shall have the right
to require the Corporation to purchase all or a part of such holder's
shares of Series C Preferred Stock at the Redemption Price by giving
written notice to the Corporation specifying the number of shares to be
redeemed and the Redemption Date (as defined below) therefor. The
Corporation shall give prompt notice, and in any event within three days,
of the occurrence of a Redemption Event to each holder of Series C
Preferred Stock. The date on which shares are redeemed pursuant to this
Section F is referred to herein as a "Redemption Date." If on a
Redemption Date there shall be insufficient funds of the Corporation
legally available for such redemption, such amount of the funds as is
legally available shall be used for the redemption requirement. Such
redemption requirement shall be cumulative so that if such requirement
shall not be fully discharged for any reason, funds
4
<PAGE>
legally available therefor shall immediately be applied thereto upon
receipt by the Corporation until such requirement is discharged.
2. Payment of Redemption Price. On a Redemption Date, the Corporation
shall pay to the holder of each share being redeemed, upon
surrender by such holder at the Corporation's principal executive
office of the certificate representing such share, duly endorsed in
blank or accompanied by an appropriate form of assignment, the
Redemption Price.
3. Redeemed or Otherwise Acquired Shares Not to be Reissued. All shares
redeemed pursuant to this Section F or otherwise acquired by the
Corporation shall be retired and shall not thereafter be reissued as
shares of such series. In case less than all the shares represented by
any certificate are redeemed, a new certificate representing the
unredeemed shares shall be issued to the holder thereof without cost to
such holder.
4. Determination of Number of Each Holder's Shares to be Redeemed. If
less than all of the outstanding shares of any Series C Preferred
Stock are to be redeemed pursuant to this Section F, the
Corporation shall determine, as nearly as practicable on a pro rata
basis, the shares held by each holder to be redeemed.
G. Definitions. The following terms shall have the respective meanings set
forth below:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not
limited to all directors and officers of such Person), controlled
by, or under direct or indirect common control with such Person.
For purposes of this definition, "controlling" (including with its
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 (I) to vote or
direct the vote of 10% or more of the securities having ordinary
voting power for the election of directors of such corporation or
(ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of
securities, by contract of otherwise.
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be
closed in either the State of California or the State of Nevada.
5
<PAGE>
"Issue Date" means as to any shares of Series C Preferred
Stock, the date of issuance thereof by the Corporation.
"National Securities Exchange" means the New York Stock
Exchange, American Stock Exchange, other national or regional
securities exchange or National Association of Securities Dealers
Automated Quotations System, but does not include the NASD
Electronic Bulletin Board.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or
partnership, proprietorship, other business organization, trust,
union, association or governmental or regulatory authority.
"Redemption Event" means (I) the listing of the
Corporation's Common Stock on a National Securities Exchange or
(ii) an equity financing by the Corporation that results in gross
proceeds in excess of $2 million.
"Redemption Price" means, with respect to each share of
Series C Preferred Stock, the Stated Value thereof, plus all
accrued and unpaid dividends thereon through the Redemption Date.
"Sale of the Corporation" means the sale of the Corporation
(whether by merger, consolidation, recapitalization,
reorganization, sale of securities, sale of assets or otherwise) in
one transaction or series of related transactions to any Person or
Persons pursuant to which such Person or Persons (together with its
Affiliates) acquires (I) securities representing at least a
majority of the voting power of all securities of the Corporation,
assuming the conversion, exchange or exercise of all securities
convertible, exchangeable or exercisable for or into voting
securities, or (ii) all or a material portion of the Corporation's
assets on a consolidated basis.
"Series A Convertible Preferred Stock" means the series of
Preferred Stock designated "Series A Convertible Preferred Stock"
by the Board on April 1, 1997.
"Series B Convertible Preferred Stock" means the series of
Preferred Stock designated "Series B Convertible Preferred Stock"
by the Board on December 9, 1997.
6
<PAGE>
"Stated Value" means $1.00 per share of Series C Preferred
Stock (subject to appropriate adjustment for stock splits, reverse
stock splits and similar events affecting the Series C Preferred
Stock).
7
<PAGE>
IN WITNESS WHEREOF, Chadmoore Wireless Group, Inc. has caused this
Certificate to be signed by its President, and attested to by its Treasurer,
this 30th day of April, 1998.
CHADMOORE WIRELESS GROUP, INC.
By:___________________________________
Robert W. Moore, President
Attest:
- --------------------------
Jan S. Zwaik, Treasurer
