<PAGE> 1
Page 1 of 16 pages
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)
Ira White, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Tel. No.: 212-309-6000
(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> 2
CUSIP No. 157259 10 2 13D Page 2 of 16 pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Recovery Equity Investors II, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER(1)
NUMBER OF 22,974,276
SHARES ---------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER(1)
OWNED BY
EACH 0
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER(1)
22,974,276
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER(1)
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON(1)
22,974,276
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Does not include 14,612,796 shares of Common Stock of Chadmoore
Wireless Group, Inc., a Colorado corporation ("Chadmoore"), that are
acquirable pursuant to the terms and conditions of a Stock Purchase
Warrant, dated May 1, 1998 (the "Eleven-Year Warrant"). The Eleven-Year
Warrant is not exercisable until the tenth anniversary of its date of
issuance (May 1, 1998), except to the extent that Chadmoore issues
shares of Common Stock in connection with certain specified securities
and then only to the extent of three shares for each four shares of
Common Stock so issued. Does not include shares required to be issued
to Recovery Equity Investors II, L.P. ("REI") in the event that
Chadmoore issues shares of Common Stock to holders of shares of one of
its subsidiaries, in which event, REI would receive three shares for
every four shares so issued. Does not include any shares of Common
Stock owned by Robert Moore, with whom the Reporting Persons may be
deemed to be acting as a group and with whom REI has entered into a
Shareholders Agreement which requires REI and Mr. Moore to vote for
directors in a certain manner and which restricts certain dispositions
of shares.
<PAGE> 3
CUSIP No. 157259 10 2 13D Page 3 of 16 pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Recovery Equity Partners II, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER(1)
NUMBER OF 22,974,276
SHARES ---------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER(1)
OWNED BY
EACH 0
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER(1)
22,974,276
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER(1)
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON(1)
22,974,276
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.6 %
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Does not include 14,612,796 shares of Common Stock of Chadmoore
Wireless Group, Inc., a Colorado corporation ("Chadmoore"), that are
acquirable pursuant to the terms and conditions of a Stock Purchase
Warrant, dated May 1, 1998 (the "Eleven-Year Warrant"). The Eleven-Year
Warrant is not exercisable until the tenth anniversary of its date of
issuance (May 1, 1998), except to the extent that Chadmoore issues
shares of Common Stock in connection with certain specified securities
and then only to the extent of three shares for each four shares of
Common Stock so issued. Does not include shares required to be issued
to Recovery Equity Investors II, L.P. ("REI") in the event that
Chadmoore issues shares of Common Stock to holders of shares of one of
its subsidiaries, in which event, REI would receive three shares for
every four shares so issued. Does not include any shares of Common
Stock owned by Robert Moore, with whom the Reporting Persons may be
deemed to be acting as a group and with whom REI has entered into a
Shareholders Agreement which requires REI and Mr. Moore to vote for
directors in a certain manner and which restricts certain dispositions
of shares.
<PAGE> 4
CUSIP No. 157259 10 2 13D Page 4 of 16 pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Joseph James Finn-Egan
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER(1)
NUMBER OF 0
SHARES ---------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER(1)
OWNED BY
EACH 22,974,276
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER(1)
0
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER(1)
22,974,276
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON(1)
22,974,276
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
(1) Does not include 14,612,796 shares of Common Stock of Chadmoore
Wireless Group, Inc., a Colorado corporation ("Chadmoore"), that are
acquirable pursuant to the terms and conditions of a Stock Purchase
Warrant, dated May 1, 1998 (the "Eleven-Year Warrant"). The Eleven-Year
Warrant is not exercisable until the tenth anniversary of its date of
issuance (May 1, 1998), except to the extent that Chadmoore issues
shares of Common Stock in connection with certain specified securities
and then only to the extent of three shares for each four shares of
Common Stock so issued. Does not include shares required to be issued
to Recovery Equity Investors II, L.P. ("REI") in the event that
Chadmoore issues shares of Common Stock to holders of shares of one of
its subsidiaries, in which event, REI would receive three shares for
every four shares so issued. Does not include any shares of Common
Stock owned by Robert Moore, with whom the Reporting Persons may be
deemed to be acting as a group and with whom REI has entered into a
Shareholders Agreement which requires REI and Mr. Moore to vote for
directors in a certain manner and which restricts certain dispositions
of shares.
<PAGE> 5
CUSIP No. 157259 10 2 13D Page 5 of 16 pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jeffrey A. Lipkin
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER(1)
NUMBER OF 0
SHARES ---------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER(1)
EACH
REPORTING 22,974,276
PERSON WITH ---------------------------------------------------------
9 SOLE DISPOSITIVE POWER(1)
0
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER(1)
22,974,276
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON1/
22,974,276
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) Does not include 14,612,796 shares of Common Stock of Chadmoore
Wireless Group, Inc., a Colorado corporation ("Chadmoore"), that are
acquirable pursuant to the terms and conditions of a Stock Purchase
Warrant, dated May 1, 1998 (the "Eleven-Year Warrant"). The Eleven-Year
Warrant is not exercisable until the tenth anniversary of its date of
issuance (May 1, 1998), except to the extent that Chadmoore issues
shares of Common Stock in connection with certain specified securities
and then only to the extent of three shares for each four shares of
Common Stock so issued. Does not include shares required to be issued
to Recovery Equity Investors II, L.P. ("REI") in the event that
Chadmoore issues shares of Common Stock to holders of shares of one of
its subsidiaries, in which event, REI would receive three shares for
every four shares so issued. Does not include any shares of Common
Stock owned by Robert Moore, with whom the Reporting Persons may be
deemed to be acting as a group and with whom REI has entered into a
Shareholders Agreement which requires REI and Mr. Moore to vote for
directors in a certain manner and which restricts certain dispositions
of shares.
<PAGE> 6
Page 6 of 16 pages
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:
a. Recovery Equity Investors II, L.P., a Delaware limited partnership
("REI"). REI is a private venture capital partnership. The business
address of REI is 901 Mariner's Island Blvd., Suite 465, San Mateo,
California 94404-1592.
b. Recovery Equity Partners II, L.P., a Delaware limited partnership
("REP"). REP is REI's sole general partner. REP's sole function is to
act as the general partner of REI. The business address of REP is 901
Mariner's Island Blvd., Suite 465, San Mateo, California 94404-1592.
c. Joseph J. Finn-Egan, a general partner of REP. Mr. Finn-Egan's
principal occupation is his position as general partner of REP. The
address of Mr. Finn-Egan's principal business and his principal office
is 901 Mariner's Island Blvd., Suite 465, San Mateo, California
94404-1592. Mr. Finn-Egan is a United States citizen.
d. Jeffrey A. Lipkin, a general partner of REP. Mr. Lipkin's principal
occupation is his position as a general partner of REP. The address of
Mr. Lipkin's principal business and of his principal office is 901
Mariner's Island Blvd., Suite 465, San Mateo, California 94404-1592.
Mr. Lipkin is a United States citizen.
During the past five (5) years, none of REI, REP, Mr. Finn-Egan and Mr.
Lipkin has 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. SOURCE 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 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 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.
<PAGE> 7
Page 7 of 16 pages
The funds used to purchase the Common Purchased Stock, the Preferred
Purchased Stock and Warrants were obtained, and it is currently anticipated that
the funds, if any, used to purchase any securities underlying the Warrants will
be obtained, from the working capital of REI.
ITEM 4. PURPOSE OF TRANSACTION.
Except as described in this Schedule 13D, REI entered into the
Investment Agreement and the related agreements, described below, and acquired
the Common Purchased Stock, the Preferred Purchased Stock and the Warrants for
investment purposes. REI intends to review from time to time its investment in
Chadmoore and depending on such review may consider from time to time various
alternative courses of action. In addition, depending on prevailing conditions
from time to time, including, without limitation, price and availability of
shares, future evaluations by REI of the business and prospects of Chadmoore,
regulatory requirements, other investment opportunities available to REI and
general stock market and economic conditions, REI may determine to increase its
investment or sell all or part of its investment in Chadmoore through
open-market purchases, privately negotiated transactions, a tender or exchange
offer or otherwise.
Except as set forth in this Schedule 13D, REI 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.
The Investment Agreement contains various covenants restricting or
prohibiting Chadmoore from taking certain actions without the prior written
consent of REI, including, without limitation, the following:
a. For so long as REI, any partner of REI, or any affiliate or
associate of REI (an "Investor Party") holds any Common Purchased
Stock, Preferred Purchased Stock, Warrants or shares of Common Stock or
Preferred 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):
(1) Prior to issuing any New Common Stock, as defined in the
Investment Agreement, (a "New Common Stock Offer"), Chadmoore
must offer each of the Investor Parties an opportunity to
purchase in cash any or all of its pro rata portion of such
New Common Stock on the same terms and conditions as the New
Common Stock being offered.
(2) Chadmoore may not, and must cause each of its subsidiaries
not to, enter into any of the following transactions without
the majority approval of Chadmoore's Board of Directors (which
approval, with respect to the items specified in items (i),
(iii), (v), (vi), (vii), (ix), (x), (xi) and (xii), shall
include the affirmative vote of a majority of the REI
Directors (as defined in the Shareholders Agreement)): (i) any
(A) merger, consolidation or combination, (B) sale, dividend,
split or other disposition of any capital stock or other
equity interests, (C) tender offer (including a self tender),
exchange offer, recapitalization, liquidation, dissolution or
similar transaction, (D) sale, dividend or other disposition
of all or a material portion of assets or (E) entering into of
any agreement or understanding, or the granting of any rights
or options, with respect to foregoing, of Chadmoore or any of
its subsidiaries; (ii) any sale, lease, exchange or other
disposition by Chadmoore or any of its subsidiaries of a
significant portion of its assets, in a single transaction or
a series of related transactions; (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 Chadmoore or any of its subsidiaries (except as
required by the transactions contemplated by the Investment
Agreement); (iv) any acquisition by Chadmoore or any of its
subsidiaries
<PAGE> 8
Page 8 of 16 pages
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
Chadmoore or such subsidiary; (v) any increase (other than in
connection with an issuance permitted under the Investment
Agreement) or reduction in excess of 5% of the amount of
capital stock outstanding on the Closing Date of either
Chadmoore or any of its subsidiaries or the creation of any
additional class of capital stock of Chadmoore or any of its
subsidiaries, or the issuance (or entering into of any
agreement, arrangement or understanding) by Chadmoore or any
of its subsidiaries of capital stock or options, warrants, or
similar rights to acquire equity securities; (vi) the
incurrence after the Closing Date by Chadmoore or any of its
subsidiaries 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 Chadmoore or any of its subsidiaries, the
adoption of a plan of liquidation by Chadmoore or any of its
subsidiaries, any action by Chadmoore or any of its
subsidiaries 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 Chadmoore or such
subsidiary, or seeking to adjudicate Chadmoore or such
subsidiary a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to Chadmoore or such
subsidiary, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for Chadmoore or such
subsidiary or for all or any substantial part of Chadmoore's
or such subsidiary's assets, or making a general assignment
for the benefit of the creditors of Chadmoore 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 Chadmoore or any of its subsidiaries and (A)
any affiliate or officer or director of Chadmoore 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 of the Investment Agreement, which
provides that neither Chadmoore 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; (xi) any
material deviation from Chadmoore's core business as stated in
its business plan; and (xii) any discretionary declaration or
payment of any dividend or other distribution on the shares of
capital stock of Chadmoore.
b. Chadmoore must 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 its business plan.
c. Chadmoore must continue in the core lines of business contemplated
by its business plan.
d. If and whenever Chadmoore issues any shares of Common Stock to any
of the stockholders of Chadmoore Communications, Inc., other than
Chadmoore, then immediately upon such issuance and upon payment by REI
of a sum equal to the product of the par value per share of Common
Stock and the number of shares issued to REI, Chadmoore must issue to
REI three shares of Common Stock for each four shares of Common Stock
issued to such stockholders.
The Preferred Purchased Stock has a liquidation preference equal to
$0.3953 per share ($4,000,283 in the aggregate) and is entitled to dividends
equal, on an annual basis, to four percent of the
<PAGE> 9
Page 9 of 16 pages
liquidation preference, payable semi-annually. At the option of the holder, the
Preferred Purchased Stock may be redeemed at a redemption price per share equal
to the liquidation preference on or after the occurrence of the earlier of (i)
May 1, 2003, (ii) the listing of Chadmoore's Common Stock on a national or
regional securities exchange or the National Association of Securities Dealers
Automated Quotations System (other than the NASD Electronic Bulletin Board) and
(iii) an equity financing by Chadmoore that results in gross proceeds in excess
of $2 million. So long as any shares of Preferred Stock of the same series as
the Preferred Purchased Stock ("Series C Preferred Stock") are outstanding,
Chadmoore may 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 of
Chadmoore so as to affect adversely the preferences, special rights or powers of
the Series C Preferred Stock, (ii) issue any securities that are senior or equal
to the Series C Preferred Stock with respect to dividends, other distributions,
liquidation preference and/or otherwise, (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 Chadmoore's
Preferred Stock, (v) consummate a sale of Chadmoore unless the consideration
received per share of Series C Preferred Stock pursuant to such sale of
Chadmoore is at least equal to the liquidation preference, or (vi) make a
payment of dividends or other distribution to holders of securities that are
junior to the Series C Preferred Stock with respect to dividends, other
distributions, liquidation preference and/or otherwise; provided, however, that
Chadmoore may issue shares of Preferred Stock in accordance with the terms of
the Eleven-Year Warrant.
The Warrants set forth the terms and conditions on which REI may
exercise its right to purchase additional shares of Common Stock or other
securities of Chadmoore. Prior to the tenth anniversary of the initial issuance
of the Eleven-Year Warrant, it may be exercised, in whole or in part, only up to
the extent of 75% of the shares issued by Chadmoore upon the exercise, exchange
or satisfaction of certain specified options, warrants and convertible
securities currently outstanding. Thereafter, up until the eleventh anniversary
of the date of issuance, it may be exercised, in whole or in part, for all
shares issuable thereunder. The Three-Year Warrant may be exercised, in whole or
in part, at any time and from time to time, commencing May 1, 1998, the date of
issuance, through 5:00 p.m., Nevada time, on the third anniversary of issuance
of such Warrant. Subject to the satisfaction of certain conditions (which
include that (A) there are not material defaults or breaches by Chadmoore under
(i) the Investment Agreement, Shareholders Agreement and Warrants, (ii) any
indebtedness of Chadmoore in excess of $100,000, (iii) Chadmoore's licenses and
agreements relating to its SMR System business, (B) there are no actions,
proceedings or orders pending or threatened against Chadmoore which could have a
material adverse effect, (C) there are no final judgments against Chadmoore or
any subsidiary of Chadmoore in excess of $100,000, (D) neither Chadmoore nor any
subsidiary has commenced or has a bankruptcy action pending against it, (E)
Chadmoore has not experienced a material shortfall from specified projections
((A)-(E) being, collectively, "Triggering Events"), and (F) the fair market
value of the Common Stock is at least equal to $1.75 and at least 10% of
Chadmoore's outstanding Common Stock traded in the preceding 40 trading days,
excluding certain block trades, Chadmoore may, at any time after May 1, 1999,
purchase the entire unexercised portion of the Three-Year Warrant from REI. The
purchase price is equal to the product of the then-current exercise price and
the number of shares remaining under the Three-Year Warrant. In addition, under
the Three-Year Warrant, the holder may elect to receive, in lieu of Common
Stock, (i) shares of preferred stock of Chadmoore, with identical terms as the
Series C Preferred Stock, except as to liquidation value, which will be the
exercise price then in-effect under the Three-Year Warrant, and (ii) a new
warrant, with substantially similar terms to the Three-Year Warrant, other than
exercise price, term (which will be five and one-half years from the date of
issuance) and that the shares issued thereunder will not be subject to
repurchase by Chadmoore. The Five and One-Half Year Warrant may be exercised, in
whole or in part, at any time and from time to time, commencing May 1, 1998, the
date of issuance, through 5:00 p.m., Nevada time, on October 31, 2003.
Under a Shareholders Agreement, dated as of the Closing Date, by and
among Chadmoore, REI, and Robert W. Moore, the current President and Chief
Executive Officer of Chadmoore (the "Shareholders Agreement"), REI and Mr. 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
<PAGE> 10
Page 10 of 16 pages
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. 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) Robert W. 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.
REI understands that Chadmoore may present to its shareholders, for
their approval, an amendment to the Articles of Incorporation of Chadmoore 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 REI, it
anticipates that it will vote for such amendment.
In addition, under an Advisory Agreement, dated as of the Closing Date,
by and between REI and Chadmoore (the "Advisory Agreement"), REI will provide
consulting and management advisory services to Chadmoore in the field of
financial and strategic corporate planning. REI will be paid $312,500 per year
(reduced by any cash dividends REI receives on the Preferred Purchased Stock) as
a management fee, commencing one year after the date of the Advisory Agreement
and ending five years after such date.
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.
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 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
each reporting person as of May 4, 1998 is 22,974,276, or approximately
47.6% of the outstanding shares of Common Stock, not including any
securities owned by Robert Moore, with respect to which shares REI and
Mr. Moore have agreed to vote in a certain manner and may be deemed to
be acting as a group. The number of shares of Common Stock, and the
percentage of such securities, beneficially owned by each of REI, REP,
Mr. Finn-Egan, and Mr. Lipkin stated above reflects the exercise in
full of the Warrants, other than the Eleven- Year Warrant which is not
exercisable until the tenth anniversary of its date of issuance (May 1,
1998), except to the extent Chadmoore issues shares of Common Stock in
connection with certain specified securities and then only to the
extent of three shares for each four shares of Common Stock so issued.
Without taking into account the exercise of the Warrants and
acquisition of the underlying shares of Common Stock, the aggregate
number of shares of Common Stock beneficially owned by each reporting
person as of May 4, 1998 is 8,854,662, or approximately 25.9% of such
securities.
<PAGE> 11
Page 11 of 16 pages
b. The responses of each reporting person 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 such reporting person are
incorporated herein by reference.
c. Other than as reported in this Schedule 13D, none of the Reporting
Persons has effected a transaction in shares of Common Stock during the
past 60 days.
d. No person other than the Reporting Persons 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.)
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).
<PAGE> 12
Page 12 of 16 pages
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 and agrees that this statement may be filed jointly
with Recovery Equity Partners II, L.P., Joseph J. Finn-Egan and Jeffrey A.
Lipkin.
Dated: May 11, 1998
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS II, L.P.,
its General Partner
By: /s/ Joseph J. Finn-Egan
--------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By: /s/ Jeffrey A. Lipkin
--------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
<PAGE> 13
Page 13 of 16 pages
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 and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Joseph J. Finn-Egan and Jeffrey A.
Lipkin.
Dated: May 11, 1998
RECOVERY EQUITY PARTNERS II, L.P.
By: /s/ Joseph J. Finn-Egan
--------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By: /s/ Jeffrey A. Lipkin
--------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
<PAGE> 14
Page 14 of 16 pages
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 and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Recovery Equity Partners II, L.P. and
Jeffrey A. Lipkin.
Dated: May 11, 1998
By: /s/ Joseph J. Finn-Egan
--------------------------------
Name: Joseph J. Finn-Egan
<PAGE> 15
Page 15 of 16 pages
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 and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Recovery Equity Partners II, L.P. and
Joseph J. Finn-Egan.
Dated: May 11, 1998
By: /s/ Jeffrey A. Lipkin
--------------------------------
Name: Jeffrey A. Lipkin
<PAGE> 16
Page 16 of 16 pages
EXHIBIT INDEX
Exhibit No. Description
1 Investment Agreement, dated as of May 1, 1998, by and between
Chadmoore and REI (with Exhibits attached thereto).
2 Stock Purchase Warrant, Certificate No. 1, dated May 1, 1998
(included as Exhibit G-1 to Exhibit 1 hereto).
3 Stock Purchase Warrant, Certificate No. 2, dated May 1, 1998
(included as Exhibit G-2 to Exhibit 1 hereto).
4 Stock Purchase Warrant, Certificate No. 3, dated May 1, 1998
(included as Exhibit G-3 to Exhibit 1 hereto).
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).
6 Registration Rights Agreement, dated as of May 1, 1998, by and
between Chadmoore and REI (included as Exhibit E to Exhibit 1
hereto).
7 Advisory Agreement, dated as of May 1 1998, by and between REI
and Chadmoore (included as Exhibit C to Exhibit 1 hereto).
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).
<PAGE> 1
INVESTMENT AGREEMENT
DATED AS OF MAY 1, 1998
BETWEEN
RECOVERY EQUITY INVESTORS II, L.P.
AND
CHADMOORE WIRELESS GROUP, INC.
<PAGE> 2
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> 3
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
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> 5
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> 6
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> 7
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 WARRANTS; CLOSING
1.1 Purchase and Sale. 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> 8
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
2
<PAGE> 9
and conditions specified in the Amended Charter, and (ii) the outstanding
capital stock of the 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
3
<PAGE> 10
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 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
4
<PAGE> 11
of the Common Purchased Stock, the Preferred Purchased Stock, the New Preferred
Stock and the 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.
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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, 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
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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 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;
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(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 due 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.
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<PAGE> 15
(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.
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(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 of
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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:
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(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
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(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.
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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
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each of the 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;
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(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
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any 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.
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2.21 Affiliate 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.
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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.
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(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 Customers 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
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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.
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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
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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.
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(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.
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Except as set forth on Section 2.35(c) of the Disclosure Schedule, the 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
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Agreement. No representation or warranty contained in this Agreement, and no
statement contained in the 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.
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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.
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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)
331/3% 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.
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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;
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(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) 331/3% 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
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management's discussion and analysis of such 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.
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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
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make such 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,
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whether or not such meetings or reviews are held at the Company's principal
office or at the offices of any 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;
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(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
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evidencing such shares, shall transfer to Investor good and valid title to such
shares free and clear of all Liens
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
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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.
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
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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, 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.
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ARTICLE VI
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
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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 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.
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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
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 Claims. 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
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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 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:
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(a) at any time before the Closing, by mutual written agreement of the
Company and Investor;
(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.
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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
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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.
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"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.
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"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
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investigation 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)
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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
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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.
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"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.
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"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
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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.
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"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
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or officer or director of the 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
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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:
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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
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communication is received by any other 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
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been (a) previously known by the party receiving such documents or information,
(b) in the public domain (either prior to or after 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 Further 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 Assignment; 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.
59
<PAGE> 66
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 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> 67
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:/s/ Robert Moore
----------------
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS, II L.P.,
its General Partner
By:/s/ Joseph J. Finn-Egan
-----------------------
Name: Joseph J. Finn-Egan
Title: General Partner
By:/s/ Jeffrey A. Lipkin
---------------------
Name: Jeffrey A. Lipkin
Title: General Partner
[Investment Agreement]
61
<PAGE> 68
Exhibit C
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.
<PAGE> 69
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 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:
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<PAGE> 70
(i) If to the Consultant, 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.
(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
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<PAGE> 71
(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.
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.]
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<PAGE> 72
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> 73
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
<PAGE> 74
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 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
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<PAGE> 75
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 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
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<PAGE> 76
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
<PAGE> 77
Exhibit D
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 eleven million (11,000,000) 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 eleven million (11,000,000).
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 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.
<PAGE> 78
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 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,
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<PAGE> 79
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.
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
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<PAGE> 80
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 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.
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<PAGE> 81
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.
"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.
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<PAGE> 82
"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.
"Stated Value" means $0.3953 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).
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<PAGE> 83
IN WITNESS WHEREOF, Chadmoore Wireless Group, Inc. has caused this
Certificate to be signed by its President, and attested to by its Treasurer,
this 1st day of May, 1998.
CHADMOORE WIRELESS GROUP, INC.
By: /s/ Robert W. Moore
-----------------------------------
Robert W. Moore, President
Attest:
/s/ Jan S. Zwaik
Jan S. Zwaik, Treasurer
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<PAGE> 84
Exhibit E
CHADMOORE WIRELESS GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 85
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
<PAGE> 86
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
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 XII
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
Exhibit A Form of Registration Rights Joinder Agreement
Exhibit B Other Piggyback Holders
<PAGE> 87
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 XV
DEFINITIONS
1.1 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.
<PAGE> 88
"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.
"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.
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<PAGE> 89
"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.
"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
2.1 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
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<PAGE> 90
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 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.
2.2 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.
2.3 Short-Form Registrations. In addition to the Long-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.
2.4 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
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<PAGE> 91
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;
(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.
2.5 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
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<PAGE> 92
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 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.
2.6 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).
2.7 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.
2.8 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
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<PAGE> 93
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.
ARTICLE III
PIGGYBACK REGISTRATIONS
3.1 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.
3.2 Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
3.3 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
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<PAGE> 94
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.
3.4 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 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
4.1 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
5.1 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
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<PAGE> 95
Article III hereof, unless the managing underwriters of such underwritten Demand
Registration or underwritten Piggyback Registration otherwise agree.
5.2 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
6.1 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;
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<PAGE> 96
(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 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;
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(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 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;
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<PAGE> 98
(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 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;
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<PAGE> 99
(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
(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
7.1 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.
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<PAGE> 100
7.2 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.
ARTICLE VIII
UNDERWRITTEN OFFERINGS
8.1 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.
8.2 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
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<PAGE> 101
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
9.1 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
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<PAGE> 102
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 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.
9.2 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.
9.3 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,
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<PAGE> 103
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 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.
9.4 Underwriting Agreement. 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.
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9.5 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, 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.
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9.6 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
10.1 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 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
11.1 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
12.1 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.
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12.2 Adjustments Affecting Registrable 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).
12.3 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.
12.4 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.
12.5 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.
12.6 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:
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<PAGE> 107
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.
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
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<PAGE> 108
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).
12.7 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".
12.8 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 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.
12.9 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.
12.10 Governing Law. 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.
12.11 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
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<PAGE> 109
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.
12.12 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.
12.13 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]
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<PAGE> 110
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> 111
EXHIBIT A TO
REGISTRATION RIGHTS AGREEMENT
Form of Registration Rights Joinder Agreement
For Permitted Transferees
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> 112
Exhibit F
SHAREHOLDERS AGREEMENT
BY AND AMONG
CHADMOORE WIRELESS GROUP, INC. ,
RECOVERY EQUITY INVESTORS II, L.P.,
AND
ROBERT W. MOORE
<PAGE> 113
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
<PAGE> 114
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
1.1. 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> 115
"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.
"Management Directors" has the meaning ascribed to it in Section 2.1.
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<PAGE> 116
"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.
"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).
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<PAGE> 117
"Warrants" has the meaning ascribed to it in the Investment Agreement.
ARTICLE II
CORPORATE GOVERNANCE
2.1. 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.
2.2. 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
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<PAGE> 118
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.
2.3. 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.
2.4. 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
3.1. 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.
3.2. 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 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.
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<PAGE> 119
ARTICLE IV
CERTAIN COVENANTS OF THE PARTIES
4.1. 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
5.1. 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.
5.2. 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.
5.3. 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 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.
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<PAGE> 120
5.4. Certain Actions. Unless otherwise expressly provided herein, whenever
any action is required under this Agreement by:
i. 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);
ii. 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
iii. 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).
5.5. 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.
5.6. 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.
5.7. 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.
5.8. 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
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<PAGE> 121
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.
5.9. 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.
5.10. 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".
5.11. 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.
5.12. 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.
5.13. 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 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.
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<PAGE> 122
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.
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<PAGE> 123
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.
5.14. 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]
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<PAGE> 124
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> 125
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.
By:_____________________________________
Name:
Title:
<PAGE> 126
________________________________________
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
A-2
<PAGE> 127
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.
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<PAGE> 128
Exhibit G-1
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:
SECTION 1. Exercise of Warrant.
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<PAGE> 129
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 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
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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).
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.
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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 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
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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 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
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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 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
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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 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,
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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 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
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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 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:
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"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.
"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.
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"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:
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
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general assignment for the benefit of its creditors, or (5) generally is unable
to pay its debts as the same become due; or
vii. a court of competent jurisdiction enters an order or decree 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.
"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
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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).
"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.
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"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, 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.
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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. 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.
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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.
* * * * *
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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> 145
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> 146
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
<PAGE> 147
Exhibit G-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 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> 148
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 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
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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.
(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).
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(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 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.
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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 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
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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 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)
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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.
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
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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, 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.
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"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 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
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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.
"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.
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"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 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
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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 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
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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.
* * * * *
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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> 161
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> 162
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 ________________________________
Dated: Signature ________________________________
________________________________
Witness ________________________________
<PAGE> 163
Exhibit G-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 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 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").
<PAGE> 164
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 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
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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 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.
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(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 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
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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 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
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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 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
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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.
(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
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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 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
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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 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"
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(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.
"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.
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"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.
"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.
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"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 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.
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"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.
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."
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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.
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.
* * * * *
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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> 178
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> 179
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 ________________________________
