UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)*
WorldPort Communications, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
98155 J 10 5
(CUSIP Number)
Michael E. Heisley, Sr.
The Heico Companies, LLC
5600 Three First National Plaza
Chicago, Illinois 60602
312-419-8220
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 31, 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 that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-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 Section 240.13d-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>
SCHEDULE 13D
CUSIP No. 98155 J 10 5
- ---------------------------------------------------------------------------
1 Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (entities only)
Michael E. Heisley, Sr.
- ---------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
- ---------------------------------------------------------------------------
3 SEC Use Only
- ---------------------------------------------------------------------------
4 Source of Funds (See Instruction)
BK
- ---------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
/ /
- ---------------------------------------------------------------------------
6 Citizenship or Place of Organization
United States
- ---------------------------------------------------------------------------
7 Sole Voting Power
Number of Shares 15,685,166
Beneficially _____________________________________________________
Owned by 8 Shared Voting Power
Each -0-
Reporting _____________________________________________________
Person 9 Sole Dispositive Power
With 15,685,166
----------------------------------------------------
10 Shared Dispositive Power
-0-
- ---------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
15,685,166
- ---------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
/ /
- ---------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
46.9%
- ---------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
- ---------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
CUSIP No. 98155 J 10 5
- ---------------------------------------------------------------------------
1 Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (entities only)
The Heisley Companies, LLC
- ---------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
- ---------------------------------------------------------------------------
3 SEC Use Only
- ---------------------------------------------------------------------------
4 Source of Funds (See Instruction)
BK
- ---------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
/ /
- ---------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- ---------------------------------------------------------------------------
7 Sole Voting Power
Number of Shares 15,685,166
Beneficially _____________________________________________________
Owned by 8 Shared Voting Power
Each -0-
Reporting _____________________________________________________
Person 9 Sole Dispositive Power
With 15,685,166
-----------------------------------------------------
10 Shared Dispositive Power
-0-
- ---------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
15,685,166
- ---------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
/ /
- ---------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
46.9%
- ---------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO (limited liability company)
- ---------------------------------------------------------------------------
<PAGE>
Schedule 13D of
Michael E. Heisley, Sr.
and The Heico Companies, LLC
with respect to the Common Stock, par value $0.0001 per share
of WorldPort Communications, Inc.
ITEM 1. SECURITY AND ISSUER.
Common Stock, par value $0.0001 per share ("WorldPort Common
Stock")
WorldPort Communications, Inc. ("WorldPort")
1825 Barrett Lakes Blvd.
Kennesaw, Georgia 30144
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by Michael E. Heisley, Sr.
("Heisley") and The Heico Companies, LLC ("Heico"). Information regarding the
address and principal occupation of Heisley and Heico follows. In addition, such
information is presented for each of the other managers and executive officers
of Heico (each, a "Heico Reporting Person"). Heisley is the sole person who
controls Heico. Heisley and each Heico Reporting Person are citizens of the
United States. Heico is a Delaware limited liability company.
Name and Address Title and Principal Occupation
- ---------------- ------------------------------
Michael E. Heisley, Sr. Manager and President of Heico
The Heico Companies, LLC
5600 Three First National Plaza
Chicago, Illinois 60602
The Heico Companies, LLC Holding company controlling a
5600 Three First National Plaza diversified portfolio of
Chicago, Illinois 60602 manufacturing and distribution
companies
Stanley H. Meadows General Counsel and Assistant
5600 Three First National Plaza Secretary of Heico and partner at
Chicago, Illinois 60602 McDermott, Will & Emery
Larry W. Gies Executive Vice President, Chief
Financial Officer and Secretary
of Heico
Richard O. Dentner Executive Vice President of Heico
During the past five years, none of Heisley, Heico or any
Heico Reporting Person has been (i) convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which proceeding such individual or entity was or is subject to a
judgement, 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 CONSIDERATIONS.
On December 31, 1998, Heico (and Heisley, indirectly through
Heico) acquired securities convertible into 2,307,780 shares of WorldPort Common
Stock. The $7,500,000 purchase price for such securities was obtained by Heico
under its existing credit facilities, which are provided by a group of banks for
which Bank of America serves as agent. On December 31, 1998, Heico also (i)
committed to acquire securities convertible into 10,000,354 shares of WorldPort
Common Stock for an aggregate purchase price of $32,500,000 and (ii) received an
option to acquire securities convertible into 3,077,033 shares of WorldPort
Common Stock for an aggregate purchase price of $10,000,000. Heico intends to
fund such purchases with funds obtained through its existing credit facilities.
ITEM 4. PURPOSE OF TRANSACTION.
Heico acquired the securities described in Item 2 above for
investment purposes and in order to provide WorldPort with the financing
necessary to satisfy certain obligations. As described in Item 2, in addition to
acquiring securities convertible into 2,307,780 shares of WorldPort Common
Stock, Heico has committed to acquire securities convertible into an additional
10,000,354 shares of WorldPort Common Stock and may, at its option acquire
additional securities convertible into an additional 3,077,033 shares of
WorldPort Common Stock.
In connection with the transactions described in the preceding
paragraph, Heico and WorldPort entered into an agreement (the "Stock Purchase
Agreement"), pursuant to which WorldPort took all necessary actions to increase
the size of its Board of Directors to eight members and to appoint four
individuals designated by Heico to serve as directors. WorldPort has also agreed
to cause Heico's designees to comprise at least one-half of the boards of
directors of each of its subsidiaries. In addition, WorldPort amended its Bylaws
to provide that at least one of Heico's designees must approve any proposed
action in order for such to be properly approved by the Board of Directors.
In addition to the Stock Purchase Agreement, Heico, WorldPort
and certain stockholders of WorldPort entered into a Shareholder Agreement
pursuant to which those stockholders (i) agreed to not to vote certain of their
shares of capital stock of WorldPort in favor of certain financing proposals or
other items without Heico's consent and (ii) granted to Heico a proxy with
respect to such capital stock for Heico's use in limited matters. Pursuant to
the Shareholder Agreement, Heico and the stockholders have also agreed to
certain restrictions on the transfer of certain of their shares of WorldPort
capital stock.
Neither Heisley nor Heico presently has any definitive plans
or proposals regarding an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving WorldPort or its subsidiaries or a sale
or transfer of a material amount of assets of WorldPort or any of its
subsidiaries.
Heisley and Heico reserve the right to acquire additional
shares of WorldPort Common Stock, to dispose of shares of WorldPort Common Stock
or to formulate other purposes, plans or proposals deemed advisable regarding
WorldPort.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
In addition to the securities described in Item 2 above, Heico
(and Heisley, indirectly through his control of Heico) also owns 300,000 shares
of WorldPort Common Stock. Set forth below is a description of the WorldPort
Common Stock beneficially owned by Heisley, Heico and each Heico Reporting
Person.
<TABLE>
<CAPTION>
Shares of WorldPort Common Stock Beneficially Owned
--------------------------------------------------------------------------------------------------
Name Sole Voting Power Shared Voting Power Sole Dispositive Power Shared Dispositive Power
- ---- ----------------- ------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Michael E. Heisley, Sr. 2,607,780 -0- 2,307,780 -0-
10,000,354(1) 10,000,354(1)
3,077,033 (2) 3,077,033 (2)
The Heico Companies, LLC 2,307,780 -0- 2,307,780 -0-
10,000,354(1) 10,000,354(1)
3,077,033 (2) 3,077,033 (2)
Stanley H. Meadows 64,854 -0- 64,854 -0-
Larry W. Gies -0- -0- -0- -0-
Richard O. Dentner -0- -0- -0- -0-
(1) Represents shares which Heico has committed to acquire upon satisfaction of
regulatory requirements and certain other customary conditions. Such acquisition
is expected to occur prior to the end of January 1999.
(2) Represents shares which Heico has an option to acquire.
</TABLE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
As described in Item 4 above, in connection with Heico's
purchase of securities, on December 31, 1998, Heico, WorldPort and Paul A.
Moore, Phillip S. Magiera, Theodore H. Swindells and Maroon Bells Capital
Partners, Inc. (the "Stockholders") entered into a Shareholder Agreement
pursuant to which the Stockholders (i) agreed to not to vote certain of their
shares of capital stock of WorldPort in favor of certain financing proposals or
other items without Heico's consent and (ii) granted to Heico a proxy with
respect to such capital stock for Heico's use in limited matters. Pursuant to
the Shareholder Agreement, Heico and the Stockholders have also agreed to
certain restrictions on the transfer of certain of their shares of WorldPort
capital stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint filing statement.
2. Series C Preferred Stock Purchase Agreement, dated
December 31, 1998, by and between The Heico Companies, LLC and WorldPort
Communications, Inc.
3. Shareholder Agreement, dated December 31, 1998, by and among
The Heico Companies, LLC, WorldPort Communications, Inc., Paul A. Moore, Phillip
S. Magiera, Theodore H. Swindells and Maroon Bells Capital Partners, Inc.
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 8, 1999
/s/ Michael E. Heisley, Sr.
---------------------------
Michael E. Heisley, Sr.
The Heico Companies, LLC
By: /s/ Michael E. Heisley, Sr.
---------------------------
Michael E. Heisley, Sr.
Manager and President
Exhibit 1
to Schedule 13D
Dated December 31, 1998
Michael E. Heisley, Sr.
And
The Heico Companies, LLC
JOINT FILING AGREEMENT
Michael E. Heisley, Sr. ("Heisley") and The Heico Companies, LLC, a
Delaware limited liability company ("Heico") hereby agree that the Schedule 13D
to which this statement is attached is filed on behalf of Heisley and Heico and
that any amendments to this amendment to Schedule 13D may be filed on behalf of
Heisley and Heico.
January 8, 1999
/s/ Michael E. Heisley, Sr.
----------------------------
Michael E. Heisley, Sr.
The Heico Companies, LLC
By: /s/ Michael E. Heisley, Sr.
---------------------------
Michael E. Heisley, Sr.
Manager and President
SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is
made as of December 31, 1998, by and between WorldPort Communications, Inc., a
Delaware corporation (the "CORPORATION"), and The Heico Companies, LLC (the
"PURCHASER").
RECITALS
A. The Corporation is a facilities-based multinational
telecommunications carrier.
B. The Purchaser desires to purchase from the Corporation, and the
Corporation desires to issue and sell to the Purchaser, 212,405 shares of Series
C Convertible Preferred Stock of the Corporation, $.0001 par value per share
(the "SERIES C PREFERRED STOCK") for an aggregate purchase price of $7,500,000.
In addition, the Purchaser has committed to purchase an additional 920,419
shares of Series C Preferred Shares and has an option to purchase a separate
283,206 shares of Series C Preferred Shares, all on the terms and conditions set
forth herein.
AGREEMENTS
In consideration of the recitals and the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the capitalized terms defined elsewhere
in this Agreement, the following capitalized terms shall have the following
meanings when used in this Agreement:
"AFFILIATE" as applied to any Person means any other Person, directly
or indirectly, controlling, controlled by, or under common control with, that
Person. The term "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 10% or more of the
voting power (or in the case of a Person which is not a corporation, 10% or more
of the ownership interest, beneficial or otherwise) of such Person or the power
otherwise to direct or cause the direction of the management and policies of
that Person, whether through voting, by contract or otherwise. For purposes of
this paragraph, "voting power" of any Person means the total number of votes
which may be cast by the holders of the total number of outstanding shares of
stock of any class or classes of such Person in any election of directors of
such Person. All of the Corporation's Executive Officers and directors and any
Family Member of any Executive Officer or director, and any Affiliate of such
Executive Officer, director or individual, shall be deemed to be Affiliates of
the Corporation for purposes of this Agreement.
"ANDERLIT" means Anderlit Ltd.
"ANDERLIT PROXY" means a proxy pursuant to which Paul Moore is given
the right to vote all 746,269 of Anderlit's shares of Series B Preferred Stock.
"BT LOAN" means the loans made to WorldPort International, Inc. ("WPI")
pursuant to the Credit Agreement.
"BT SIDE LETTER" means that certain letter agreement dated November 13,
1998 among the Corporation, the MBCP Group and Bankers Trust Company pursuant to
which the Corporation and the MBCP Group agree to cooperate with Bankers Trust
Company respecting the sale of the Corporation.
"CERTIFICATE OF DESIGNATION" means the Corporation's Certificate of
Designations, Preferences and Rights of Series C Convertible Preferred Stock, in
the form of Exhibit A.
"CLOSING" means the closing of the purchase and sale of Series C
Preferred Shares pursuant to Section 2.2 of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SHARES" means shares of the common stock of the Corporation,
$.0001 par value per share.
"COMPANY REPORTS" has the meaning set forth in Section 4.27 hereof.
"CREDIT AGREEMENT" means that certain Credit Agreement dated June 23,
1998 by and among the Corporation, WPI, Bankers Trust Company, as Administrative
Agent and the financial institutions party thereto as lenders.
"DISCLOSURE SCHEDULE" means a separate written schedule delivered by
the Corporation to the Purchaser on or before the date of this Agreement which
sets forth various information regarding the Corporation and its Subsidiaries.
"ENVIRONMENTAL LAWS" means all federal, state and local laws,
ordinances and rules of common law relating to environmental, safety or health
matters, including those relating to fines, orders, injunctions, penalties,
damages, contribution, cost recovery compensation, losses or injuries resulting
from the release or threatened release of Hazardous Substances and the
generation, use, storage, transportation or disposal of Hazardous Substances in
any manner applicable to the Corporation, any of its Subsidiaries or their
assets, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.), the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. Sections 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42
U.S.C. Sections 7401 et seq.), the Toxic Substances Control Act of 1976 (15
U.S.C. Sections 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Sections
300f- Sections 300j-11 et seq.), the Occupational Safety and Health Act of 1970
(29 U.S.C. Sections 651 et seq.) and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Sections 11001 et seq.), each as heretofore and
hereafter amended or supplemented, and any analogous federal, state or local
statutes, rules and regulations promulgated thereunder or pursuant thereto, and
any other law, ordinance, rule, regulation, permit order or directive addressing
environmental, safety or health issues, of or by the federal government, any
state or political subdivision thereof, or any agency, court or body of the
federal government or any state or political subdivision thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXECUTIVE OFFICERS" means, with respect to any corporation, its
executive officers as that term is defined in Rule 3b-7 of the regulations
promulgated under the Exchange Act.
"FAMILY MEMBER" means an individual's spouse, parents, children,
siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law,
brothers-in-law and sisters-in-law.
"GAAP" means generally accepted accounting principles, consistently
applied.
"HAZARDOUS SUBSTANCES" means (a) any chemical, material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste", "restricted
hazardous waste," "medical waste," "toxic pollutants," "contaminants,"
"pollutants," "toxic substances," or words of similar import under any
applicable Environmental Law, (b) any oil, petroleum, petroleum product or
petroleum derived substance, any flammable substances or explosives, any
radioactive materials, (c) asbestos and asbestos containing materials in any
form which is or could become friable, (d) radon gas, urea, formaldehyde, foam
insulation, dielectric fluid, and polychlorinated biphenyls, and (e) any other
chemical, material or substance which is prohibited, limited or regulated by any
governmental authority.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" of any Person shall mean the principal of, premium, if
any, and unpaid interest on (a) indebtedness for money borrowed from others; (b)
indebtedness guaranteed, directly or indirectly, in any manner by such Person,
or in effect guaranteed, directly or indirectly, in any manner by such Person
through an agreement, contingent or otherwise, to supply funds to, or in any
other manner invest in, the debtor, or to purchase indebtedness, or to purchase
and pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling the debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss; (c) all
indebtedness secured by any mortgage, lien, pledge, charge or other encumbrance
upon property owned by such Person, even though such Person has not in any
manner become liable for the payment of such indebtedness; (d) all indebtedness
of such Person created or arising under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security agreement
with respect to property acquired by such Person even though the rights and
remedies of the seller, lessor or lender under such agreement or lease in the
event of default may be limited to repossession or sale of such property; and
(e) renewals, extensions and refunding of any such indebtedness.
"INVESTMENT" as applied to any Person means (a) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, partnership interests, stock, securities or ownership interest of
any other Person and (b) any capital contribution by such Person to any other
Person.
"IRREVOCABLE PROXY" means the Irrevocable Proxy by the MBCP Group with
respect to their Series B Preferred Stock in the form of Exhibit B, the entering
into of which is a condition to Closing by the Purchaser.
"LENDER" means the "Lenders" as that term is used in the Credit
Agreement.
"MANAGEMENT GROUP" means the MBCP Group, all Executive Officers and
directors of the Corporation or any Subsidiary, all consultants to the
Corporation or any Subsidiary, and any Person who has an employment agreement or
arrangement with the Corporation or any Subsidiary that cannot be terminated at
will by the Corporation or the Subsidiary (without such termination constituting
a breach or violation of contract or otherwise being unlawful).
"MATERIAL ADVERSE CHANGE" has the meaning set forth in Section 4.9
hereof.
"MBCP GROUP" means Maroon Bells Capital Partners, Inc., Paul A. Moore,
Phillip S. Magiera and Theodore H. Swindells.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"PLAN" has the meaning ascribed to it by ERISA.
"PREFERRED STOCK" means the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock.
"PROPRIETARY RIGHTS" means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information, (vii) other
intellectual property rights, and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"PURCHASERS' DIRECTORS" means the directors of the Corporation elected
pursuant to the Shareholder Agreement.
"REGISTRATION AGREEMENT" means the Registration Rights Agreement by and
between the Corporation and the Purchaser in the form of Exhibit C, the entering
into of which is a condition to Closing by the Purchaser.
"RELATED AGREEMENTS" means the Registration Agreement, the Shareholder
Agreement and the Irrevocable Proxy.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPTEMBER BALANCE SHEET" means the Corporation's unaudited
consolidated balance sheet as of September 30, 1998, as contained in the Company
Reports.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock of the
Corporation, $.0001 par value per share.
"SERIES B PREFERRED STOCK" means the Series B Convertible Preferred
Stock of the Corporation, $.0001 par value per share.
"SERIES C PREFERRED SHARES" means the shares of Series C Preferred
Stock of the Corporation.
"SHAREHOLDER AGREEMENT" means the Shareholder Agreement by and among
the Purchaser and the MBCP Group in the form of Exhibit D, the entering into of
which is a condition to Closing by the Purchaser.
"SUBSIDIARY" means any corporation, association or other business
entity of which securities or other ownership interests representing more than
fifty percent (50%) of the ordinary voting power are, at the time as of which
any determination is being made, owned or controlled by the Corporation or one
or more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"UNDERLYING SHARES" means (a) Common Shares issued or issuable upon
conversion of the Series C Preferred Shares and (b) any Common Shares issued or
issuable with respect to the securities referred to in clause (a) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who holds shares of Series C Preferred Stock shall be
deemed to be a holder of Underlying Shares.
1.2 RULES OF CONSTRUCTION. The following provisions shall be applied
wherever appropriate herein:
(a) all accounting terms not specifically defined herein shall
be construed in accordance with GAAP;
(b) neither this Agreement nor any other agreement, document
or instrument referred to herein or executed and delivered in
connection herewith shall be construed against either party as the
principal draftsperson hereof or thereof;
(c) the Disclosure Schedule and all of the Exhibits attached
hereto are incorporated herein by reference and shall be considered an
integral part of this Agreement; and
(d) for purposes of the representations and warranties of the
Corporation set forth herein, the Corporation shall be deemed to have
knowledge of any fact or matter known to an Executive Officer or
director of any of its Subsidiaries.
<PAGE>
ARTICLE II
AUTHORIZATION AND SALE OF PREFERRED SHARES
2.1 AUTHORIZATION. The Corporation will, prior to the Closing, (a)
cause the Certificate of Incorporation of the Corporation to be duly amended by
the adoption and filing of the Certificate of Designation, (b) duly authorize
the issuance to the Purchaser of 1,450,000 Series C Preferred Shares, and (c)
duly authorize and reserve for issuance upon conversion of Series C Preferred
Shares 15,385,155 Common Shares.
2.2 SALE OF PREFERRED SHARES TO THE PURCHASER. Subject to the
satisfaction of the terms and conditions herein set forth and in reliance upon
the respective representations and warranties of the parties set forth herein or
in any document delivered pursuant hereto, at the Closing, the Corporation
agrees to sell to the Purchaser, free and clear of any liens, claims, charges or
encumbrances whatsoever, and the Purchaser agrees to purchase from the
Corporation, 212,405 Series C Preferred Shares at the purchase price of $35.31
per share for an aggregate purchase price of $7,500,000.
2.3 COMMITMENT TO BUY ADDITIONAL SHARES.
(a) Subject to the conditions set forth in Section 2.4(a) below, on or
before January 25, 1999 (the "ADDITIONAL SHARES CLOSING DATE"), the Purchaser
agrees to purchase an additional 920,419 shares of Series C Preferred Stock (the
"ADDITIONAL SHARES") at the purchase price of $35.31 per share for an aggregate
purchase price of $32,500,000. At the closing of any such purchase and sale, the
Corporation will deliver to the Purchaser a certificate, duly executed and
registered in the name of the Purchaser or the Purchaser's nominee, for the
number of Additional Shares being purchased and the Purchaser shall pay the
purchase price of the shares by wire transfer of funds to an account designated
by the Corporation. The Corporation agrees that the Additional Shares will be
free and clear of any liens, claims, charges or encumbrances whatsoever.
(b) The Purchaser may, at its option, purchase any or all of the
Additional Shares prior to January 25, 1999 and without regard to whether the
conditions set forth in Section 2.4(a) have been satisfied. The Purchaser may
exercise this option by giving written notice thereof to the Corporation at any
time, or from time to time, prior to January 21, 1999. The closing of any such
purchase and sale will be held on the date specified by the Purchaser, which
shall be within 10 days after the date of the Purchaser's written notice, but
not later than January 25, 1999. At the closing of any such purchase and sale,
the Corporation will deliver to the Purchaser a certificate, duly executed and
registered in the name of the Purchaser or the Purchaser's nominee, for the
number of Additional Shares being purchased and the Purchaser shall pay the
purchase price of the shares by wire transfer of funds to an account designated
by the Corporation. The Corporation agrees that the Additional Shares will be
free and clear of any liens, claims, charges or encumbrances whatsoever.
(c) If, on the Additional Shares Closing Date, the condition set forth
in Section 2.4(a)(1) has not been satisfied, then the Purchaser shall have the
continuing obligation (subject to the conditions set forth in Section 2.4(a)
hereof) to purchase and the Corporation shall have the continuing obligation
(subject to the conditions set forth in Section 2.4(b) hereof) to sell the
Additional Shares on the terms set forth in Section 2.3(a) until the earlier of
(i) March 1, 1999 or (ii) the fifth day after the satisfaction of the condition
contained in Section 2.4(a)(1) (the "EXTENDED CLOSING DATE"). The Corporation
covenants and agrees to use reasonable efforts to satisfy each of the conditions
contained Section 2.4(a), and the Purchaser covenants and agrees to use
reasonable efforts to obtain the approval referenced in Section 2.4(a)(1).
2.4 CONDITIONS PRECEDENT.
(a) The Purchaser's obligations set forth in Section 2.3 above and the
Corporation's option set forth in Section 2.5 below are subject to the
satisfaction (or written waiver by Purchaser) of each of the following
conditions on and as of the Additional Shares Closing Date or any Extended
Closing Date:
(1) HSR Approval. The Purchaser's acquisition of the
Additional Shares has been approved pursuant to the HSR Act,
or all applicable waiting periods (and any extensions thereof)
under the HSR Act have expired or otherwise been terminated.
(2) Representations and Warranties Correct. The
representations and warranties made by the Corporation in
Article IV shall be true and correct in all material respects
when made, and shall be true and correct in all material
respects as of the Additional Shares Closing Date or the
Extended Closing Date, as applicable.
(3) Performance. All covenants, agreements and
conditions contained in this Agreement to be performed or
complied with by the Corporation at or prior to the Additional
Shares Closing Date or the Extended Closing Date, as
applicable shall have been performed or complied with in all
material respects.
(4) Legal Investment. The purchase of Series C
Preferred Shares (including the Additional Shares) by the
Purchaser hereunder shall be legally permitted by all laws and
regulations to which the Purchaser and the Corporation are
subject, except that the voting rights of the Series C
Preferred Stock may violate the Marketplace Rules of the
NASDAQ Stock Market.
(5) Qualifications. All consents, authorizations,
approvals or permits of, or filings with, any governmental
authority, including state securities or "BLUE SKY" offices,
that are required by law in connection with the lawful sale
and issuance of the Additional Shares, the conversion of the
Additional Shares into Common Shares and the issuance of
Common Shares upon conversion of the Additional Shares shall
have been duly obtained by the Corporation, and shall be
effective as of the Additional Shares Closing Date or the
Extended Closing Date.
(6) No Injunction. As of the Additional Shares
Closing Date or the Extended Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or
order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for in
this Agreement or the Related Agreements not be consummated as
so provided or imposing any conditions on the consummation of
the transactions contemplated hereby or thereby.
(7) Consents. All consents, approvals or other
authorizations required in order to avoid a violation of, or
the creation of any rights under, any material contract to
which the Corporation is a party as a result of the purchase
of the Additional Shares shall have been obtained.
(8) No Default. No event of default on the part of
the Corporation or any of the MBCP Group, and no event that,
with the giving of notice, the passage of time or both, would
become such an event of default, shall have occurred and be
continuing (or would occur as a result of the Purchaser's
purchase of Additional Shares) under the Credit Agreement,
this Agreement or any of the Related Agreements and the
Purchaser shall continue to have and be entitled to exercise
the voting rights granted to it pursuant to the Shareholder
Agreement and the Irrevocable Proxy.
(9) No Adverse Changes. Since the date of this
Agreement, there has not been any material adverse change in
the business, assets, prospects, operations, or condition,
financial or otherwise, of the Corporation.
(10) Board of Directors. As of the Additional Shares
Closing Date and any Extended Closing Date, the Purchaser's
Directors comprise at least one-half of the board of directors
of the Corporation and each of its Subsidiaries.
(11) Certificate of Officer. The Corporation has
delivered to the Purchaser a certificate signed by an
Executive Officer to the effect that all of the conditions set
forth in Section 2.4(a) are satisfied in all respects.
(12) Opinion of Counsel. The Corporation has
delivered to the Purchaser a "clean" opinion of the
Corporation's counsel that, under Delaware law and the
Corporation's Certificate of Incorporation and By-Laws, the
resolution of the Corporation's Board of Directors dated
December 29, 1998 purporting to increase the number of
directors on the Corporation's Board of Directors was legally
effective to increase the size of the Corporation's Board of
Directors to eight members, without an amendment to the
Corporation's Certificate of Incorporation.
(b) The Corporation's obligations to sell the Additional Shares are
subject to the satisfaction (or written waiver by the Corporation) of each of
the following conditions on and as of the Additional Shares Closing Date or any
Extended Closing Date:
(1) HSR Approval. The Purchaser's acquisition of the
Additional Shares has been approved pursuant to the HSR Act,
or all applicable waiting periods (and any extensions thereof)
under the HSR Act have expired or otherwise been terminated.
(2) Representations and Warranties Correct. The
representations and warranties made by the Purchaser in
Article V shall be true and correct in all material respects
when made, and shall be true and correct in all material
respects as of the Additional Shares Closing Date or the
Extended Closing Date, as applicable.
(3) Performance. All covenants, agreements and
conditions contained in this Agreement to be performed or
complied with by the Purchaser at or prior to the Additional
Shares Closing Date or the Extended Closing Date shall have
been performed or complied with in all material respects.
(4) Legal Investment. The purchase of Series C
Preferred Shares (including the Additional Shares) by the
Purchaser hereunder shall be legally permitted by all laws and
regulations to which the Purchaser and the Corporation are
subject, except that the voting rights of the Series C
Preferred Stock may violate the Marketplace Rules of the
NASDAQ Stock Market.
(5) Qualifications. All consents, authorizations,
approvals or permits of, or filings with, any governmental
authority, including state securities or "BLUE SKY" offices,
that are required by law in connection with the lawful sale
and issuance of the Additional Shares, the conversion of the
Additional Shares into Common Shares and the issuance of
Common Shares upon conversion of the Additional Shares shall
have been duly obtained by the Corporation, and shall be
effective as of the Additional Shares Closing Date or the
Extended Closing Date.
(6) No Injunction. As of the Additional Shares
Closing Date or the Extended Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or
order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for in
this Agreement or the Related Agreements not be consummated as
so provided or imposing any conditions on the consummation of
the transactions contemplated hereby or thereby.
(7) No Default. No event of default on the part of
the Purchaser shall have occurred and be continuing under this
Agreement or any of the Related Agreements.
2.5 OPTIONAL REDEMPTION. If all of the conditions precedent set forth
in Section 2.4(a) above have been satisfied as of January 25, 1999 (or, in the
case of the condition set forth in Section 2.4(a)(1), such condition has been
satisfied by March 1, 1999) but the Purchaser has failed to purchase the
Additional Shares in accordance with Section 2.3, then the Corporation shall
have an option to redeem all (but not less than all) of the Purchaser's Series C
Preferred Shares at a purchase price of $35.31 per share. The Corporation may
exercise this option by giving written notice thereof to the Purchaser within 21
days after the applicable date referred to in the preceding sentence, after
which date the Corporation's option shall expire. The closing of any such
purchase and sale will be held within ten days after the date of the
Corporation's written notice. At the closing, the Purchaser will deliver to the
Corporation a certificate and an assignment separate from certificate, duly
executed by Purchaser, transferring the shares to the Corporation or its
nominee, and the Corporation shall pay the purchase price of the shares by wire
transfer to an account designated by the Purchaser. The Purchaser agrees that
such Series C Preferred Shares will be free and clear of any liens, claims,
charges or encumbrances whatsoever arising by or on account of the acts of the
Purchaser or anyone claiming by or through the Purchaser.
2.6 OPTION TO BUY ADDITIONAL SHARES. The Corporation hereby grants to
the Purchaser an option (the "ADDITIONAL SHARES OPTION") to purchase up to an
additional 283,206 shares of Series C Preferred Stock (the "OPTION SHARES") at
the purchase price of $35.31 per share for an aggregate purchase price of up to
$10,000,000. The Purchaser may exercise this option by giving written notice
thereof to the Corporation at any time, or from time to time, on or before the
date on which the BT Loan is fully repaid or refinanced, after which date the
Purchaser's option shall expire. The closing of any such purchase and sale will
be held within ten days after the date of the Purchaser's written notice. At the
closing, the Corporation will deliver to the Purchaser a certificate, duly
executed and registered in the name of Purchaser or the Purchaser's nominee, for
the number of Option Shares being purchased and the Purchaser shall pay the
purchase price of the shares by wire transfer of funds to an account designated
by the Corporation. The Corporation agrees that the Option Shares will be free
and clear of any liens, claims, charges or encumbrances whatsoever.
ARTICLE III
INITIAL CLOSING; DELIVERY
3.1 CLOSING. The Closing of the purchase and sale contemplated by
Section 2.2 will be held on December 31, 1998 or such other date and at such
time and place as may be agreed to by the Corporation and the Purchaser (the
"CLOSING DATE").
3.2 DELIVERIES AT CLOSING. At the Closing, the Corporation will deliver
to the Purchaser a certificate, duly executed and registered in the name of
Purchaser or the Purchaser's nominee, for 212,405 Series C Preferred Shares
against payment by the Purchaser of the aggregate purchase price therefor by
wire transfer of funds to an account designated by the Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
As of the date of this Agreement, and as of the Closing, the
Corporation hereby represents and warrants to the Purchaser as follows:
4.1 ORGANIZATION AND STANDING. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Corporation has the requisite legal and corporate power to own all
the properties owned by it, and to conduct its business as presently being and
as proposed to be conducted by it.
4.2 CORPORATE POWER. The Corporation has all requisite legal and
corporate power to enter into this Agreement and the Related Agreements, to
issue and sell the Series C Preferred Shares and the Common Shares issuable upon
conversion of the Series C Preferred Shares and to carry out and perform its
obligations under the terms of this Agreement and the Related Agreements.
4.3 SUBSIDIARIES. Except as set forth in the Company Reports, the
Corporation has no Subsidiaries and does not own of record or beneficially any
capital stock or equity interest or investment in any Person.
4.4 CAPITALIZATION. As of the Closing, the Corporation's authorized
capital stock will consist of 65,000,000 Common Shares and 10,000,000 shares of
Preferred Stock, of which (i) 750,000 shares have been designated Series A
Preferred Stock, (ii) 3,000,000 shares have been designated Series B Preferred
Stock and (iii) 1,450,000 shares have been designated Series C Preferred Stock
(of which no shares have yet been issued). After giving effect to the
consummation of the transactions contemplated by this Agreement at the Closing,
the only shares of capital stock issued and outstanding, reserved for issuance
or committed to be issued will be:
(a) 18,059,620 fully paid and non-assessable Common Shares,
duly issued and outstanding;
(b) 493,889 fully paid and non-assessable shares of Series A
Preferred Stock duly issued and outstanding;
(c) 2,962,687 fully paid and non-assessable shares of Series B
Preferred Stock duly issued and outstanding;
(d) 212,405 fully paid and non-assessable Series C Preferred
Shares duly issued and outstanding and owned of record by the
Purchaser;
(e) 1,975,556 Common Shares reserved for issuance upon
conversion of the Series A Preferred Stock;
(f) 11,850,748 Common Shares reserved for issuance upon
conversion of the Series B Preferred Stock;
(g) 15,385,155 Common Shares reserved for issuance upon
conversion of the Series C Preferred Stock; and
(h) 10,236,000 Common Shares reserved for issuance upon
exercise of options and warrants.
Except as set forth in this Section 4.4, there are no outstanding securities of
the Corporation which are convertible into or exchangeable for any shares of the
Corporation's capital stock or contain any capital appreciation or profit
participation features, there is no existing contract, option, warrant, call or
other commitment or right of any character granted or issued by the Corporation
calling for or relating to the issuance or transfer of shares of capital stock
or any other securities of the Corporation and there are no stock appreciation
rights or phantom stock plans. As of the Closing, before and after giving effect
to the transactions contemplated hereby, the Corporation will not be subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock, except pursuant to the Corporation's Certificate
of Incorporation. There are no statutory or contractual preemptive rights or
rights of refusal with respect to (i) the issuance of the Series C Preferred
Shares hereunder, (ii) the issuance of Common Shares upon conversion of the
Series C Preferred Shares, or (iii) the issuance of any other shares of capital
stock or other securities or rights of the Corporation. The Corporation has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock. Other than the Anderlit
Proxy, the BT Side Letter and the Shareholder Agreement, there are no agreements
between the MBCP Group and the Corporation's other shareholders with respect to
the voting or transfer of the Corporation's capital stock or with respect to any
other aspect of the Corporation's affairs.
4.5 AUTHORIZATION. All corporate action on the part of the Corporation,
its directors and shareholders necessary for the authorization, execution,
delivery and performance by the Corporation of this Agreement and the Related
Agreements, and the consummation of the transactions contemplated hereby and
thereby, and for the authorization, issuance and delivery of the Series C
Preferred Shares, has been taken. This Agreement and the Related Agreements have
been duly executed and delivered and are legal, valid and binding obligations of
the Corporation, enforceable against the Corporation in accordance with their
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally or by the
availability of equitable remedies.
4.6 VALIDITY OF SHARES. The Series C Preferred Shares, when issued,
sold and delivered in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid and non-assessable, will be free and clear of all
liens, charges, claims and encumbrances and will not be subject to any
preemptive rights. The Common Shares issuable upon conversion of the Series C
Preferred Shares have been duly and validly reserved and, upon issuance in
accordance with the conversion provisions of the Series C Preferred Shares, will
be duly and validly issued, fully paid, non-assessable and free and clear of all
liens, charges, claims and encumbrances.
4.7 FINANCIAL STATEMENTS. The financial statements contained in the
Company Reports have been prepared in accordance with GAAP and fairly and
accurately present the financial position of the Corporation and the results of
its operations and cash flow for the periods indicated, subject in the case of
interim financial statements, to normal year-end adjustments and the absence of
footnotes.
4.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
Company Reports or in the Disclosure Schedule, and except for liabilities
incurred after September 30, 1998 in the ordinary course of business, the
Corporation and its Subsidiaries have no material liabilities (fixed or
contingent, including without limitation, any tax liabilities due or to become
due) which are, or Indebtedness which is, not fully reflected or provided for in
the September Balance Sheet. The Corporation does not know of any basis for the
assertion against the Corporation or any Subsidiary as of the date hereof of any
material liabilities not adequately reflected or reserved against on the
September Balance Sheet. Except for approximately $100,000 of accumulated
dividends owed to the holders of the Series A Preferred Stock, there are
currently no accumulated and unpaid dividends with respect to any of the
securities of the Corporation.
4.9 NO ADVERSE CHANGES. Except as set forth in the Company Reports or
in the Disclosure Schedule, since September 30, 1998, there has not been any
material adverse change in the business, assets, prospects, operations, or
condition, financial or otherwise, of the Corporation or any of its Subsidiaries
(a "MATERIAL ADVERSE CHANGE") and, except as contemplated by this Agreement or
the Related Agreements or as set forth in the Disclosure Schedule, since
September 30, 1998 the Corporation and its Subsidiaries have not:
(a) issued, sold or delivered, or agreed to issue, sell or
deliver, any of its stock, bonds, evidences of indebtedness or other
securities (whether authorized or unissued or held in its treasury);
(b) discharged or satisfied any material lien or encumbrance
or paid any material Indebtedness, other than in the ordinary course of
business;
(c) declared or made or set aside, or agreed to declare or
make or set aside, any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock;
(d) granted any increase in the wages or salaries of any of
the Management Group;
(e) paid or accrued any bonus or made any similar payment or
accrual to or with respect to any of the Management Group;
(f) except in the ordinary course of business, sold, assigned,
transferred or granted any right under any concession, lease, license,
agreement, patent, trademark, service mark, trade name, copyright,
software or other similar assets, except for fair consideration or
prudent business reasons;
(g) sold, assigned, or transferred any other material asset or
property of any nature whatsoever (other than in the ordinary course),
whether real, personal or mixed, tangible or intangible;
(h) directly or indirectly paid or made a commitment to pay
any severance or termination pay to any of the Management Group;
(i) made any material change in its method of accounting;
(j) made any Investment or commitment therefor in any Person;
or
(k) other than this Agreement, entered into any other material
transaction except in the ordinary course of business.
4.10 CONTRACTS. As used herein, the term "MATERIAL CONTRACT" means any
oral or written contract to which the Corporation or any Subsidiary is a party
or by which it or its property is bound which would be required to be disclosed
pursuant to Item 601 of Regulation S-K promulgated by the Commission. Except as
set forth in the Company Reports or in the Disclosure Schedule, and except that
the Corporation's payments of certain of its trade payables are overdue, neither
the Corporation nor any of its Subsidiaries is in default, and neither have been
notified by any other party that it is in default under any material contract
and, to the best knowledge of the Corporation, no other party to any such
material contract is in default thereunder, except where the default would not
result in a Material Adverse Change. The Disclosure Schedule contains a list of
every material contract entered into after September 30, 1998 and every
amendment entered into after September 30, 1998 of a material contract existing
prior to September 30, 1998.
4.11 ERISA.
(i) Multiemployer Plans. The Corporation and its Subsidiaries
have no obligation to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) any
"MULTIEMPLOYER PLAN" (as defined in Section 3(37) of ERISA).
(ii) Employee Benefit and Retiree Welfare Plans. The
Corporation and its Subsidiaries do not maintain or have any obligation
to contribute to (or any other liability with respect to) any defined
benefit plan (as defined by ERISA), defined contribution plan (as
defined by ERISA) or any plan or arrangement whether or not terminated,
which provides medical, health, life insurance or other welfare-type
benefits for current or future retired or terminated employees (except
for limited continued medical benefit coverage required to be provided
under Section 4980B of the Code).
(iii) Other Plans. Except as set forth in the Disclosure
Schedule, and except for customary fringe benefits provided to its
employees, the Corporation and its Subsidiaries do not maintain,
contribute to or have any liability under (or with respect to) any plan
or arrangement providing benefits to current or former employees,
including any bonus plan (formal or informal), plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated. Such plans and other
arrangements are referred to as the "OTHER PLANS."
(iv) The Corporation. For purposes of this Section 4.11, the
term "CORPORATION" includes all organizations under common control with
the Corporation pursuant to Section 414 of the Code.
4.12 ARRANGEMENTS WITH OFFICERS, DIRECTORS AND OTHERS. Except as set
forth in the Company Reports or in the Disclosure Schedule, there are no
existing contracts or arrangements or proposed transactions between the
Corporation and any Affiliate of the Corporation or any of the Management Group.
4.13 TAX LIABILITIES. The Corporation and its Subsidiaries have filed
all federal, state, county, local and foreign tax reports and returns required
by any law or regulation to be filed by it except for extensions duly obtained;
such returns are true, correct and complete and accurately reflect the tax
liabilities of the Corporation and its Subsidiaries; the Corporation and its
Subsidiaries have either timely paid all taxes, duties and charges indicated due
on the basis of such returns and reports, or will have made adequate provision
for the payment thereof; and the assessment of any material amount of additional
taxes in excess of those paid and reported is not reasonably expected. The
reserves for taxes reflected on the September Balance Sheet are adequate in
amount for the payment of all liabilities for all taxes (whether or not
disputed) of the Corporation and its Subsidiaries accrued through the date of
such balance sheet. The Corporation and its Subsidiaries have paid all taxes
owed by the Corporation and its Subsidiaries and have withheld and paid over all
taxes which it was obligated to withhold from amounts owing to any employee,
creditor or third party. The federal income tax returns of the Corporation and
its Subsidiaries have not been audited by the Internal Revenue Service and no
controversy with respect to taxes of any type is pending or, to the best
knowledge of the Corporation, threatened. The Corporation has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
The Corporation has never filed an election pursuant to Section 1362 of the Code
that it be taxed as an S corporation.
4.14 INSURANCE. The Corporation and its Subsidiaries maintain in effect
with insurers rated A or above by A.M. Best insurance on its assets, and upon
its business and operations, against loss or damage, risks, hazards and
liabilities of the kinds customarily insured against by corporations engaged in
the same or similar businesses in adequate amounts. The Corporation and its
Subsidiaries maintain in effect with insurers rated A or above by A.M. Best all
insurance required to be carried by law or by any contract to which it is a
party.
4.15 LITIGATION. Except as set forth in the Disclosure Schedule, there
are no actions, suits, proceedings or investigations (whether or not purportedly
on behalf of the Corporation) pending or to the Corporation's knowledge
threatened (nor, to the best knowledge of the Corporation does any basis exist
therefor) against or affecting the Corporation or any of its Subsidiaries at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, agency or instrumentality, domestic
or foreign. No action, suit, proceeding or investigation set forth in the
Disclosure Schedule could reasonably be expected to, alone or in the aggregate,
result in a Material Adverse Change or have a material adverse effect on the
Corporation's ability to carry out the transactions contemplated by this
Agreement or the Related Agreements. Neither the Corporation nor any of its
Subsidiaries are operating under or subject to, or in default with respect to,
any order, writ, injunction or decree of any court or federal, state, municipal
or other governmental department, commission, board, agency or instrumentality,
foreign or domestic, and neither the Corporation nor any of its Subsidiaries
have been charged or threatened with a charge of violation, or under
investigation with respect to possible violation, of any provision of any
federal, state or local law or administrative ruling or regulation relating to
its or their business, affairs, assets, prospects, operations, employee
relations, rights or condition, financial or otherwise.
4.16 CONSENTS. Subject in part to the truth and accuracy of the
representations of the Purchaser set forth in this Agreement, and except for (a)
matters set forth in the Disclosure Schedule or (b) the approval required under
the HSR Act with respect to the sale of Additional Shares, all consents,
approvals, qualifications, orders or authorizations of, or filings with, any
governmental authority, including state securities or Blue Sky offices, required
prior to the sale of the Series C Preferred Shares pursuant to Section 2.2, in
connection with the Corporation's valid execution, delivery or performance of
this Agreement and the Related Agreements, the offer, sale and issuance of the
Series C Preferred Shares, the conversion of the Series C Preferred Shares, the
issuance of the Common Shares issuable upon conversion of the Series C Preferred
Shares, and the consummation of any other transaction contemplated on the part
of the Corporation hereby have been obtained or made.
4.17 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The September Balance
Sheet reflects all of the assets of the Corporation and its Subsidiaries as of
the date thereof that are required to be reflected by GAAP. Except (a) as
disclosed in the Company Reports, and (b) for liens in connection with lease
financing incurred in the ordinary course of business (the liability for which
is reflected in the September Balance Sheet or was incurred in the ordinary
course of business after September 30, 1998), the Corporation and its
Subsidiaries have good and marketable title to (or, with respect to those assets
reflected as being held pursuant to a capital lease, have a valid leasehold
interest in) all of the assets reflected in the September Balance Sheet (except
as disposed of in the ordinary course of business since the date of the
September Balance Sheet), free and clear of any mortgage, pledge, lien, security
interest, conditional sale agreement, claim, encumbrance or charge except for
the liens held by the Lenders. Except (a) as disclosed in the Company Reports,
and (b) for liens in connection with lease financing incurred in the ordinary
course of business (the liability for which is reflected in the September
Balance Sheet or was incurred in the ordinary course of business after September
30, 1998), the Corporation and its Subsidiaries have good and marketable title
to (or, with respect to those assets reflected as being held pursuant to a
capital lease, have a valid leasehold interest in) all of the assets used to
conduct their business as presently conducted, free and clear of any mortgage,
pledge, lien, security interest, conditional sale agreement, claim, encumbrance
or charge except for the liens held by the Lenders. All material fixed assets of
the Corporation and its Subsidiaries are in good operating condition and repair,
subject to normal wear and tear.
4.18 PROPRIETARY RIGHTS. Except as set forth in the Disclosure Schedule
and except for shrink-wrap software licenses and industry standard licensing
arrangements: (a) the Corporation and its Subsidiaries own and possess all
right, title and interest in and to, or has a valid and enforceable license to
use, the Proprietary Rights necessary for the operation of the business of the
Corporation and its Subsidiaries as currently conducted; (b) no claim by any
third Person contesting the validity, enforceability, use or ownership of any
Proprietary Rights has been made, is currently outstanding or, to the best
knowledge of the Corporation, is threatened; (c) to the best knowledge of the
Corporation, the loss or expiration of any Proprietary Rights is not threatened,
pending or reasonably foreseeable; (d) neither the Corporation nor any
Subsidiaries have received any notices of, any infringement or misappropriation
by, or conflict with, any other Person with respect to the Proprietary Rights
(including, but not limited to, any demand or request that the Corporation or
any Subsidiary license any rights from a third Person); and (e) to the best of
the Corporation's knowledge, neither the Corporation nor any of its Subsidiaries
has infringed, misappropriated or otherwise conflicted with any intellectual
property rights or other rights of any third Persons and the Corporation is not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the business of the Corporation or its
Subsidiaries as currently conduct or as proposed to be conducted.
4.19 OFFERING. Subject in part to the truth and accuracy of the
representations of the Purchaser set forth in this Agreement, the offer, sale
and issuance of the Series C Preferred Shares and the issuance of the Common
Shares issuable upon conversion of the Series C Preferred Shares as contemplated
by this Agreement are exempt from the registration requirements of the
Securities Act and the securities laws of the State of Illinois.
4.20 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. The Corporation and
each of its Subsidiaries has complied in all material respects with, and is
currently in compliance in all material respects with, the terms of its
certificate of incorporation and by-laws (or other organizational documents) and
the provisions of all mortgages, indentures, contracts, agreements, instruments,
judgments, decrees, orders, statutes, rules and regulations to which it is
subject or by which it or any of its property is bound. The Corporation and each
of its Subsidiaries has all franchises, permits, licenses and approvals
necessary to conduct its business as presently conducted. The Corporation and
its Subsidiaries are not in violation of any term or provision of any such
franchise, permit, license or approval. The Corporation has no knowledge of any
change to or proposals to change any law, statute, rule or regulation which
could adversely affect the ability of the Corporation or any of its Subsidiaries
to conduct its business as presently conducted or as proposed to be conducted.
4.21 NO VIOLATION. The execution and delivery of this Agreement and the
Related Agreements, the consummation of the transactions provided for herein and
therein or contemplated hereby and thereby, and the fulfillment by the
Corporation of the terms hereof or thereof, will not (a) conflict with or result
in a breach of any provision of the certificate of incorporation or by-laws (or
other organizational documents) of the Corporation, (b) except as set forth in
the Disclosure Schedule and except for the filing required pursuant to the HSR
Act with respect to the sale of the Additional Shares, to the Corporation's
knowledge, result in a material default or material breach, give rise to any
right of termination, cancellation or acceleration, or require any consent,
approval, authorization or permit of, or filing or notification to, any
governmental authority, any court or tribunal or any other Person (other than
approval of the Lenders, a copy of which approval is attached as Exhibit E, and
notification of the issuance of the Series C Preferred Shares in accordance with
Nasdaq requirements), under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, loan, factoring arrangement, license,
agreement, lease or other instrument or obligation to which the Corporation or
any of its Subsidiaries is a party or by which the Corporation, any Subsidiary
or any of their assets may be bound or (c) violate any law, judgment, order,
writ, injunction, decree, statute, rule or regulation of any court,
administrative agency, bureau, board, commission, office, authority, department
or other governmental entity applicable to the Corporation, any Subsidiary or
any of their assets.
4.22 REGISTRATION RIGHTS. Except as provided for in the Disclosures
Schedule or the Registration Agreement and effective upon execution thereof,
neither the Corporation nor any Subsidiary is under any obligation to register
under the Securities Act any of its currently unregistered outstanding
securities or any of its securities which may hereafter be issued, which would
materially affect the Corporation's ability to perform its obligations under the
Registration Agreement.
4.23 EMPLOYEE RELATIONS. There are no unfair labor practice charges or
grievances pending or in process or, to the best knowledge of the Corporation,
threatened by or on behalf of any employee of the Corporation or any Subsidiary,
nor any complaints received by the Corporation or any Subsidiary or, to the best
knowledge of the Corporation, threatened or on file, with any federal, state or
local governmental agencies alleging employment discrimination or other
violations of laws pertaining to such employees. The Corporation is not aware
that any officer or key employee of the Corporation or any Subsidiary or any
significant group of employees of the Corporation or any Subsidiary has any
plans to terminate employment with the Corporation or any Subsidiary. The
Corporation is not aware of any material labor relations problems (including any
union organization activities, threatened or actual strikes or work stoppages or
material grievances). Except for agreements between the Corporation or any
Subsidiary and its present and former employees, neither the Corporation, any
Subsidiary nor, to the best knowledge of the Corporation, any employees of the
Corporation or any Subsidiary is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements relating to,
affecting or in conflict with the present or proposed business activities of the
Corporation or any Subsidiary, which limit the ability of the Corporation or any
Subsidiary to conduct its business in any material respect or prohibit such
employee from being employed by the Corporation or any Subsidiary.
4.24 FEES AND COMMISSIONS. The Corporation has not retained a finder,
broker, agent, financial advisor or other intermediary (collectively
"INTERMEDIARY") in connection with the transactions contemplated by this
Agreement, and the Corporation agrees to indemnify and hold harmless the
Purchaser from liability for any compensation to any such Intermediary and the
fees and expenses of defending against such liability or alleged liability.
4.25 DISCLOSURE. This Agreement, the schedules and exhibits hereto, the
Company Reports and the financial statements included in the Company Reports,
when read together, do not contain any untrue statement of a material fact and
do not omit to state a material fact necessary in order to make the statements
contained therein or herein not misleading in the light of the circumstances
under which they were made. There is no fact known to the Corporation relating
to the business, affairs, assets, prospects, operations, employee relations,
rights or condition, financial or otherwise, of the Corporation or any
Subsidiary that is reasonably likely to materially adversely affect the same
which has not been disclosed in writing to the Purchaser by the Corporation.
4.26 ENVIRONMENTAL MATTERS. Neither the Corporation nor any Subsidiary
is currently being charged with a violation, or operating its business in
violation, of any applicable Environmental Law and neither the Corporation nor
any Subsidiary has received notice or correspondence from any governmental
agency that it may be in violation of, or potentially liable with respect to,
any Environmental Law. Neither the Corporation nor any Subsidiary is (i) the
subject of any "Superfund" investigation or any state lien environmental law or
(ii) the subject of any federal or state investigation or administrative
proceeding evaluating whether any remedial action is needed to respond to a
release or threatened release of any Hazardous Substance into the environment.
Except for violations which do not result in a Material Adverse Change (and, for
purposes of this Section 4.26, without limiting the scope thereof, a Material
Adverse Change will be deemed to include any cost, expense or liability to the
Corporation and its Subsidiaries in excess of $100,000), there are no physical
conditions existing on any portion of the real estate owned or leased by the
Corporation or any Subsidiary or any of the sites at which the business of the
Corporation or any Subsidiary is being conducted or has been conducted in the
past that constitute a violation of any Environmental Law. No expenditures in
excess of $100,000 in the aggregate will be required in order for the
Corporation or any Subsidiary to comply with any Environmental Law as a result
of the operation of its business, including, but not limited to, expenditures
relating to the clean-up or removal of any Hazardous Substance which may have
been discharged or released at any sites at which the Corporation or any
Subsidiary is conducting or has conducted its business activities. Neither the
Corporation nor any Subsidiary is in violation of any conditions or limitations
of any permit and has not exceeded any limitation contained in such permits
which could subject the Corporation or any Subsidiary to a surcharge. The
Corporation and each Subsidiary possesses all permits and licenses required to
operate its business as it is presently conducted the failure of which to
possess would result in a Material Adverse Change, and neither the Corporation
nor any Subsidiary is obligated to obtain any license, permit or permission
relevant to its operations as currently being conducted and relating to the
generation, handling, storage, transportation or disposal of any Hazardous
Substance.
4.27 SEC REPORTS. From January 1, 1998 to the date hereof, the
Corporation has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with the
Commission including, but not limited to, Forms 10-KSB, Forms 10-QSB and Forms
8-K (collectively, the "COMPANY REPORTS"). As of their respective dates (but
taking into account any amendments filed prior to the date of this Agreement),
the Company Reports complied in all material respects with all the rules and
regulations promulgated by the Commission and did not contain any 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, in the light of the
circumstances under which they were made, not misleading.
4.28 WAIVER BY SENIOR DEBT HOLDERS. There is no event of default, or
any event which with the giving of notice, the passage of time or both would
become an event of default under the Credit Agreement. Subject to the
Corporation's sale of at least $40,000,000 of equity securities on or before
January 25, 1999, the Lenders have waived any and all special dilution or
default rights that they may have pursuant to the Credit Agreement or otherwise
as set forth in Exhibit E. Such waiver is attached hereto as Exhibit E.
4.29 INCREASE IN SIZE OF BOARD OF DIRECTORS. The Corporation has taken
all action necessary to increase the size of its Board of Directors to eight and
to appoint to the Board the following individuals, who shall constitute the
initial Purchaser's Directors: Michael E. Heisley, Sr., Stanley H. Meadows,
Emily Heisley Stoeckel and Larry Gies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Corporation as of
the date hereof, and as of the Closing, as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the state of its organization and has all requisite power and
authority to carry on its business as now conducted and as proposed to be
conducted.
5.2 AUTHORITY. The Purchaser has full legal right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby. All actions required to
be taken by the Purchaser to authorize the execution, delivery and performance
of this Agreement and all transactions contemplated hereby have been duly and
properly taken.
5.3 VALIDITY. This Agreement has been duly executed and delivered by
the Purchaser and is the lawful, valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors rights generally and general
equitable principles regardless of whether such enforceability is considered in
a proceeding at law or in equity.
5.4 INVESTMENT REPRESENTATIONS. (a) The Purchaser acknowledges that the
Series C Preferred Shares have not been registered under the Securities Act, or
the securities laws of any state or regulatory body and are being offered and
sold in reliance upon exemptions from the requisite requirements of the
Securities Act and such laws and may not be transferred or resold without
registration under such laws unless an exemption is available. Each certificate
for Series C Preferred Shares received by Purchaser pursuant to this Agreement
will be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT
AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION,
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND STATE SECURITIES LAWS IS AVAILABLE.
(b) The Purchaser is acquiring the Series C Preferred Shares for
investment and not with a view to the resale or distribution thereof.
(c) The Purchaser is an "accredited investor" (as that term is defined
in Rule 501 of Regulation D promulgated under the Securities Act), is
sophisticated in financial matters and is familiar with the business of the
Corporation so that it is capable of evaluating the merits and risks of its
investment in the Corporation and has the capacity to protect its own interests.
The Purchaser has had the opportunity to investigate on its own the
Corporation's business, management and financial affairs and has had the
opportunity to review the Corporation's operations and facilities and to ask
questions and obtain whatever other information concerning the Corporation as
the Purchaser has deemed relevant in making its investment decision.
ARTICLE VI
REPORTING AND INSPECTION
6.1 ACCOUNTING. The Corporation will maintain a system of accounting
established and administered in accordance with GAAP and all financial
statements or information delivered under Section 6.2 will be prepared in
accordance with GAAP consistently applied.
6.2 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Corporation will
deliver to the Purchaser (so long as such Purchaser holds any of the Series C
Preferred Shares acquired by the Purchaser under this Agreement):
(a) within ninety (90) days after the end of each fiscal year
of the Corporation, consolidated income statements, statements of cash
flow and balance sheets of the Corporation and its Subsidiaries, for
such fiscal year, prepared in accordance with GAAP and setting forth in
each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified without qualification by an
independent certified public accounting firm of national standing;
(b) within forty-five (45) days after the end of each fiscal
quarter, consolidated income statements, statements of cash flow and
balance sheets of the Corporation and its Subsidiaries as of the end of
quarter and for the current fiscal year to date, prepared in accordance
with GAAP and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year;
(c) as soon as practicable following its receipt thereof,
copies of all management letters and all other reports, if any,
submitted to the Corporation by its independent public accountants;
(d) promptly after the filing thereof, a copy of each Company
Report, financial statement, report and return that the Corporation
files with the Commission or any stock exchange;
(e) promptly upon the occurrence thereof, notice of any event
which has had, or could reasonably be expected to result in, a Material
Adverse Change; and
(f) with reasonable promptness, such other data and
information as from time to time may be reasonably requested by the
Purchaser or holder and such data as the Corporation may from time to
time furnish to holders of its securities in their capacities as such.
Delivery of the financial statements and other information referred to above by
the Corporation to any of the Purchaser's Directors shall constitute delivery to
the Purchaser as required by this Section 6.2.
6.3 INSPECTION RIGHTS. The Corporation will permit (and will cause its
Subsidiaries to permit) an authorized representative designated by the
Purchaser, at the Purchaser's expense, to visit and inspect the properties of
the Corporation and its Subsidiaries, including their books and records (and to
make extracts therefrom or copies thereof) and to discuss their affairs,
finances and accounts with its officers, all at such reasonable times and as
often as such party may reasonably request.
ARTICLE VII
COVENANTS OF THE CORPORATION
7.1 INSURANCE. The Corporation and its Subsidiaries will maintain or
cause to be maintained with financially sound and reputable insurers rated A or
above by A.M. Best, insurance with respect to its assets and business against
loss or damage covering risks of such types and in such amounts which are
customary for similarly situated corporations of established reputation engaged
in the same or similar businesses, in adequate amounts, and at the request of
any Purchaser shall furnish such Purchaser with evidence of the same.
7.2 PAYMENT OF TAXES AND OTHER OBLIGATIONS. The Corporation and its
Subsidiaries will pay or cause to be paid all taxes, assessments and other
governmental charges levied upon any of its assets or in respect of its
franchises, businesses, income or profits, all trade accounts payable in
accordance with usual and customary business terms for the industry in which the
Corporation and its Subsidiaries operate, and all claims for work, labor or
materials, which if unpaid might become a lien or charge upon any asset of the
Corporation or any Subsidiary, before the same become delinquent except that
(unless and until foreclosure, distraint, sale or other similar proceedings
shall have been commenced) no such charge need be paid if it is being contested
in good faith and by appropriate measures promptly initiated and diligently
conducted if (a) such reserve or other appropriate provision, if any, as shall
be required by sound accounting practice consistent with GAAP shall have been
made therefor, and (b) such contest does not have a material adverse effect on
the financial condition of the Corporation or any Subsidiary or the ability of
the Corporation or any Subsidiary to pay any Indebtedness.
7.3 COMPLIANCE WITH LAWS. The Corporation and its Subsidiaries will
comply in all material respects with all laws, rules, regulations, judgments,
orders and decrees of any governmental or regulatory authority applicable to it
and its assets. Neither the Corporation nor anyone acting on its behalf will
take any action hereafter that could cause the loss of the exemption from the
registration requirements of the Securities Act for the sale and issuance of the
Series C Preferred Shares and the issuance of the Common Shares issuable upon
conversion of the Series C Preferred Shares. The Corporation shall timely file
all reports, registrations and statements, and any and all amendments thereto,
that are required to be filed with the Commission and any state securities
commission or agency, including, but not limited to, Forms 10-KSB, 10-QSB and
Forms 8-K, except where its noncompliance would not result in a Material Adverse
Change.
7.4 PRESERVATION OF CORPORATE EXISTENCE AND PROPERTY. The Corporation
will preserve, protect and maintain (a) its corporate existence, and (b) all
rights, franchises, accreditations, privileges and properties, the failure of
which to preserve, protect and maintain could result in a Material Adverse
Change.
7.5 DIRECTOR EXPENSES. The Corporation will promptly reimburse each of
the Purchaser's Directors for all reasonable out-of-pocket expenses incurred in
connection with attending meetings of the Board of Directors of the Corporation
or any committee thereof.
7.6 PROPRIETARY RIGHTS. The Corporation and its Subsidiaries will
possess and maintain all material Proprietary Rights necessary to the conduct of
their businesses and own all right, title and interest in and to, or have a
valid license for, all material Proprietary Rights used by the Corporation and
each Subsidiary in the conduct of its business. The Corporation will not (and
will not permit any Subsidiary to) take any action, or fail to take any action,
which would result in the invalidity, abuse, misuse or unenforceability of such
Proprietary Rights or which would infringe upon any rights of other Persons.
7.7 COMPLIANCE WITH AGREEMENTS. The Corporation will comply in all
material respects with all terms and provisions of, and perform and observe all
of its obligations set forth in, the Corporation's Certificate of Incorporation
and by-laws, the Registration Agreement, the Shareholder Agreement and all other
material contracts to which the Corporation is a party.
7.8 NO RESTRICTIONS. The Corporation will not enter into or become
subject to any agreement or instrument (a) the performance of which could result
in a breach of this Agreement, any of the Related Agreements or the
Corporation's Certificate of Incorporation or by-laws, or (b) with respect to
which the Corporation could become in default by virtue of complying with the
terms and provisions of this Agreement, the Related Agreements, and the
Corporation's Certificate of Incorporation and by-laws.
7.9 NEGATIVE COVENANTS. Without the prior approval, by vote or written
consent, of a majority of all of the members of the Board of Directors, which
approval shall in any event include the approval of at least one of the
Purchaser's Directors, the Corporation will not, and the Corporation will not
permit any Subsidiary to:
(a) enter into any proposed financings or refinancings by the
Corporation or any Subsidiary, including but not limited to financing
through the issuance of Indebtedness, reimbursement obligations with
respect to letters of credit, bankers' acceptances and surety bonds,
any obligation evidenced by a note, bond, debenture or similar
instrument, and any indebtedness secured by a lien or security interest
in any property of the Corporation or any Subsidiary (collectively
"DEBT FINANCINGS");
(b) enter into any proposed financing by the issuance or sale
of equity interests (or any security or interest that is convertible
into or exchangeable for equity interests) in the Corporation or any
Subsidiary ("EQUITY FINANCINGS");
(c) hire, fire or change the compensation or benefits payable
to, any of the Management Group; and
(d) directly or indirectly declare or pay any dividends (other
than stock dividends) on Common Shares at a time there are any
arrearages of dividends payable to holders of Series C Preferred
Shares;
(e) directly or indirectly redeem, purchase or otherwise
acquire any of the Corporation's equity securities;
(f) make any amendment to the Certificate of Designations;
(g) make or permit to exist any Investment in excess of
$100,000 other than: (i) Investments existing on the date hereof; (ii)
Investments in short-term obligations issued by, or guaranteed by, the
United States Government; (iii) Investments in negotiable certificates
of deposit, bankers' acceptances or money market securities issued by
any bank or branch of a bank having capital and surplus of at least
$300,000,000 in the aggregate at all times; and (iv) Investments in
commercial paper rated P1 or A1 by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, respectively;
(h) make any loans or advances to, or guarantees for the
benefit of, any Person, other than travel advances and similar loans to
employees not to exceed $10,000 at any one time in the aggregate;
(i) acquire any Subsidiaries for consideration with a value in
excess of $100,000;
(j) enter into the ownership, active management or operation
of any business other than the type of business conducted by the
Corporation and its Subsidiaries as of the date of the Closing;
(k) merge or consolidate with any Person;
(l) liquidate, dissolve or effect a recapitalization in any
form of transaction;
(m) sell, lease or otherwise dispose of 10% or more (based
upon the book values reflected on the Corporation's most recent audited
financial statement provided to the Purchaser) of the assets of the
Corporation in any transaction or series of related transactions;
(n) acquire any interest in any company or business (whether
by a purchase of assets (other than purchases of equipment, inventory,
supplies, etc. in the ordinary course of business), purchase of stock,
merger or otherwise) for consideration with a value in excess of
$100,000, or enter into any joint venture;
(o) enter into, amend, modify or supplement any contract,
transaction, commitment or arrangement with any Affiliate or any of the
Management Group or knowingly enter into, amend, modify or supplement
any contract, transaction, commitment or arrangement with any Family
Member of any of the Management Group or with any entity in which any
such Person owns a material beneficial interest except as otherwise
expressly contemplated by this Agreement and except upon fair and
reasonable terms no less favorable to the Corporation than would be
obtained by the Corporation in a comparable arm's-length transaction
with a Person who is not an Affiliate of the Corporation and which
terms have been approved by a majority of the disinterested directors;
(p) except for the BT Loan, create, incur, assume or suffer to
exist, Indebtedness exceeding an aggregate principal amount of $100,000
outstanding at any time on a consolidated basis;
(q) make capital expenditures during any fiscal year ending
after the Closing Date (including, without limitation, payments with
respect to capitalized leases, as determined in accordance with GAAP
consistently applied) more than $100,000 in excess of the amount
budgeted therefor in a budget that has been approved by the Board of
Directors;
(r) enter into any leases or other rental agreements after the
Closing (excluding capitalized leases, as determined in accordance with
GAAP consistently applied) under which the amount of the aggregate
lease payments for all such agreements on a consolidated basis exceeds
$100,000;
(s) enter into, modify or amend any employment agreements,
make any guarantee with respect to any obligation of an employee of the
Corporation, pay any bonus to, or hire, fire, or alter the compensation
(including salary, bonus, automobile allowances or other benefits) of
any of the Management Group or any Family Member of any of the
Management Group; or
(t) make any material changes in accounting methods, practices
or principles.
7.10 USE OF PROCEEDS. The Corporation will use the proceeds from the
sale of the Series C Preferred Shares hereunder (i) for the payment of the fees
and expenses identified in Section 7.11 and (ii) in a manner that is consistent
with the Corporation's business plan, unless otherwise approved by the Board of
Directors.
7.11 FEES AND EXPENSES. The Corporation will bear all of its own
expenses in connection with the preparation, negotiation and execution of this
Agreement, the Related Agreements and the Certificate of Designation, and the
transactions contemplated hereby and thereby, and will also reimburse the
Purchaser for, or pay, any reasonable, documented expenses it incurs (including,
without limitation, the legal fees and disbursements of counsel, which currently
is Much Shelist Freed Denenberg Ament & Rubenstein, P.C.) in connection with the
preparation, execution and negotiation of this Agreement, the Related Agreements
and the Certificate of Designation, and the transactions contemplated hereby and
thereby. The Corporation will also pay, or reimburse the Purchaser for, all fees
and expenses (including attorney's fees and expenses) incurred by the Purchaser
or any holder of the Series C Preferred Shares arising out of or in connection
with any breach of any representation, warranty or covenant by the Corporation
under, or the enforcement or preservation of any rights of the Purchaser under,
this Agreement, the Related Agreements and the Certificate of Incorporation of
the Corporation.
7.12 AMENDMENT TO CERTIFICATE OF INCORPORATION. If the Corporation has
not delivered to the Purchaser the opinion of counsel referred to in Section 2.4
(12) hereof on or before January 25, 1999, the Corporation shall, on or before
the date of the next scheduled meeting of its stockholders, cause its
Certificate of Incorporation to be amended to increase the size of the
Corporation's board of directors to eight directors.
7.13 SUBSIDIARY BOARDS. On or before January 25, 1999, the Corporation
will cause Purchaser's Directors to comprise at least one-half of the number of
directors on the board of directors of each of the Subsidiaries.
7.14 REORGANIZATION. On or before January 4, 1999, the Corporation will
cause Magiera to deliver to Purchaser an executed copy of his resignation from
the Corporation's board of directors, in the form attached hereto as Exhibit F.
7.15 RESOLUTIONS. On or before January 4, 1999, the Corporation will
deliver to the Purchaser a certificate of the Secretary of the Corporation,
certifying that, on December 31, 1998, the Corporation's board of directors
adopted an amendment to the Corporation's by-laws in the form attached hereto as
Exhibit G.
7.16 ANDERLIT PROXY. On or before January 4, 1999, the Corporation
shall deliver a copy of the Anderlit Proxy to the Purchaser and shall cause
Anderlit to deliver to the Purchaser a written agreement not to terminate or
revoke the Anderlit Proxy during the term of the Shareholder Agreement.
7.17 SERIES B CERTIFICATES. On or before January 11, 1999, the
Corporation shall deliver to the Purchaser copies of the stock certificates
representing all of the Series B Preferred Shares owned by the MBCP Group, each
of which shall be marked with a legend in the form required by Section 6(b) of
the Shareholder Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 CONSENT TO AMENDMENTS; WAIVERS. The provisions of this Agreement
may be amended, and the Corporation may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Corporation has obtained the written consent of the Purchaser. No other course
of dealing between the Corporation and the holders of any Series C Preferred
Shares or Underlying Shares or any delay in exercising any rights hereunder or
under the Certificate of Incorporation of the Corporation shall operate as a
waiver of any rights of any such holders. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(a) All representations and warranties contained herein or
made in writing by any party in connection herewith will survive the execution
and delivery of this Agreement.
(b) In consideration of the Purchaser's execution and delivery
of this Agreement and acquisition of the Series C Preferred Shares hereunder and
in addition to all of the Corporation's other obligations under this Agreement,
the Corporation shall defend, protect, indemnify and hold harmless the Purchaser
and each other holder of Series C Preferred Shares and/or Underlying Shares and
all of their officers, directors, employees and agents (collectively, the
"PURCHASER INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities, obligations and
damages, and expenses in connection therewith (irrespective of whether any such
Purchaser Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(collectively, the "PURCHASER INDEMNIFIED LIABILITIES"), incurred by the
Purchaser Indemnitees or any of them as a result of, or arising out of, or
relating to (i) any finder's or brokerage fees not disclosed by the Corporation,
or (ii) any material breach of, or inaccuracy of, any representation, warranty
or covenant of the Corporation contained in this Agreement. To the extent that
the foregoing undertaking by the Corporation may be unenforceable for any
reason, the Corporation shall make the maximum contribution to the payment and
satisfaction of each of the Purchaser Indemnified Liabilities which is
permissible under applicable law.
(c) In consideration of the Corporation's execution and
delivery of this Agreement and sale of the Series C Preferred Shares hereunder
and in addition to all of the Purchasers' other obligations under this
Agreement, the Purchaser shall defend, protect, indemnify and hold harmless the
Corporation and all of its officers, directors, employees and agents
(collectively, the "CORPORATION INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities, obligations and damages, and expenses in connection therewith
(irrespective of whether any such Corporation Indemnitee is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (collectively, the "CORPORATION INDEMNIFIED
LIABILITIES"), incurred by the Corporation Indemnitees or any of them as a
result of, or arising out of, or relating to (i) any finder's or brokerage fees
not disclosed by such Purchaser, or (ii) any material breach of, or inaccuracy
of, any representation, warranty or covenant of such Purchaser contained in this
Agreement. To the extent that the foregoing undertaking by the Purchaser may be
unenforceable for any reason, the Purchaser shall make the maximum contribution
to the payment and satisfaction of each of the Corporation Indemnified
Liabilities which is permissible under applicable law.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind the respective successors and inure to
the benefit of the respective permitted assigns of the parties hereto, whether
so expressed or not. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for the benefit of the
Purchaser or holders of Series C Preferred Shares or Underlying Shares are also
for the benefit of, and enforceable by, any subsequent holders of such shares,
except any subsequent holder who acquires any such security in a registered
public offering, and except any assignee who acquires such shares in violation
of the Shareholder Agreement.
8.4 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
8.5 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
8.6 NOTICES. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the following addresses,
or such other address as any party hereto designates by written notice to the
Corporation, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivered by overnight courier service.
IF TO THE CORPORATION, TO:
WorldPort Communications, Inc.
1825 Barrett Lakes Blvd.
Atlanta, Georgia 30144
Fax: (770) 792-0676
Attention: Chairman
WITH A COPY TO:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Fax: (312) 984-3669
Attention: Helen R. Friedli, P.C.
IF TO THE PURCHASER, TO:
The Heico Companies, LLC
70 West Madison Street, Suite 5600
Chicago, IL 60602
Attention: Michael E. Heisley, Sr.
WITH A COPY TO:
Much Shelist Freed Denenberg
Ament & Rubenstein, P.C.
200 North LaSalle Street
Suite 2100
Chicago, Illinois 60601
Attention: Lawrence H. Brenman
8.7 GOVERNING LAW AND FORUM. All questions concerning the
construction, validity and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by the internal law, and not the law of
conflicts of, the State of Illinois, and the performance of the obligations
imposed by this Agreement shall be governed by the laws of the State of Illinois
applicable to contracts made and wholly to be performed in that state. THE
CORPORATION IRREVOCABLY AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING AGAINST
IT WITH RESPECT TO ITS OBLIGATIONS, LIABILITIES OR ANY OTHER MATTER UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE RELATED AGREEMENTS
MAY BE BROUGHT IN THE UNITED STATES COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
OR IN THE COURTS OF THE STATE OF ILLINOIS LOCATED IN COOK COUNTY (AND THE
CORPORATION WAIVES ANY OTHER PREFERENTIAL JURISDICTION BY REASON OF ITS PRESENT
OR FUTURE DOMICILE OR OTHERWISE), AS THE PURCHASER MAY ELECT AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE CORPORATION HEREBY UNCONDITIONALLY AND
IRREVOCABLY ACCEPTS AND SUBMITS TO THE JURISDICTION OF EACH OF THE AFORESAID
COURTS IN PERSONAM, GENERALLY AND UNCONDITIONALLY WITH RESPECT TO ANY SUCH
ACTION, SUIT OR PROCEEDING FOR IT AND IN RESPECT OF ITS PROPERTIES, ASSETS AND
REVENUES. IN ADDITION, THE CORPORATION IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS, SUITS OR PROCEEDINGS BROUGHT IN ANY OF THE COURTS
REFERRED TO ABOVE, AND FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY OF
THE AFORESAID COURTS HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
THE CORPORATION AND THE PURCHASER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER,
OR REMEDY UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT OR
UNDER OR IN CONNECTION WITH ANY AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, AND AGREE THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
8.8 EXCHANGE OF CERTIFICATES. Upon surrender by any holder of Series C
Preferred Shares to the Corporation of any certificate or certificates
evidencing any shares of such stock of the Corporation, the Corporation at its
expense will issue in exchange therefor, and deliver to such holder, a new
certificate or certificates representing such shares of stock of the
Corporation, in such denomination or denominations as may be requested by such
holder. Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of any certificate representing any shares of
stock of the Corporation, and in case of any such loss, theft or destruction,
upon delivery of an indemnity agreement satisfactory to the Corporation, or in
case of any such mutilation, upon surrender and cancellation of such
certificate, the Corporation at its expense will issue and deliver to any such
holder a new certificate evidencing such shares of stock of the Corporation of
like tenor, in lieu of such lost, stolen, destroyed or mutilated certificate.
8.9 BREACH OF COVENANT. Without limiting the rights of the Purchaser to
pursue all other legal and equitable rights available to them for the
Corporation's failure to perform any of its obligations under this Agreement,
the Related Agreements or the Certificate of Designation, the parties hereto
acknowledge and agree that, while the Purchaser will be entitled to recover
damages and to exercise all other rights granted by law, the remedy at law for
any failure by the Corporation to perform any of such obligations may be
inadequate and that the Purchaser will be entitled to specific performance,
injunctive relief or other equitable remedies in the event of any such failure.
8.10 FINAL AGREEMENT. This Agreement, together with the Related
Agreements and the Certificate of Designation, constitutes the final agreement
of the parties concerning the matters referred to herein, and supersedes all
prior agreements and understandings.
8.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
* * *
<PAGE>
The parties hereto have executed this Agreement on the date first set
forth above.
WORLDPORT COMMUNICATIONS, INC.
By:
Its:
THE HEICO COMPANIES, LLC
By:
Its:
<PAGE>
EXHIBITS
A Form of Certificate of Designation
B Form of Irrevocable Proxy
C Form of Registration Agreement
D Form of Shareholder Agreement
E Consent of Lenders
F Form of Resignation
G Form of Bylaw Amendment
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "AGREEMENT"), dated as of December
31, 1998, by and among WorldPort Communications, Inc., a Delaware corporation
(the "CORPORATION"), The Heico Companies, LLC (the "INVESTOR") and Maroon Bells
Capital Partners, Inc. ("MBCP"), Paul A. Moore ("MOORE"), Phillip S. Magiera
("MAGIERA") and Theodore H. Swindells ("SWINDELLS").
RECITALS
A. The Investor has agreed to purchase shares of Series C Convertible
Preferred Stock of the Corporation pursuant to that certain Series C Preferred
Stock Purchase Agreement dated of even date herewith (as amended, modified,
supplemented or restated from time to time, to the "PURCHASE AGREEMENT")
provided that the parties hereto enter into this Agreement.
B. The Investor will not purchase the Series C Preferred Shares unless
it can protect its investment by obtaining the voting and other rights contained
herein.
C. The Corporation and the MBCP Group deem it desirable to enter into
this Agreement in order to induce the Investor to purchase the Series C
Preferred Shares.
AGREEMENTS
In consideration of the recitals and the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement:
"AFFILIATE" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. The term "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 50% or more of the
voting power (or in the case of a Person which is not a corporation, 50% or more
of the ownership interest, beneficial or otherwise) of such Person, or the
ability to otherwise direct or cause the direction of the management and
policies of that Person, whether through voting power, by contract or otherwise.
A Person will not be deemed to be an Affiliate of any other Person solely
because such Person was designated by that Person to be elected a director of
the Corporation pursuant to SECTION 3 hereof. For purposes of this paragraph,
"voting power" of any Person means the total number of votes which may be cast
by the holders of the total number of outstanding shares of stock of any class
or classes of such Person in any election of directors of such Person. All of
the Corporation's Executive Officers and directors and any Family Member of any
Executive Officer or director, and any Affiliate of such Executive Officer,
director or individual, shall be deemed to be Affiliates of the Corporation for
purposes of this Agreement.
"ANDERLIT" means Anderlit Ltd.
"ANDERLIT PROXY" means that certain proxy pursuant to which
Paul Moore is given the right to vote all 746,269 of Anderlit's shares of Series
B Preferred Stock.
"BT LOAN" means the loans made to WorldPort International,
Inc. ("WPI") pursuant to the Credit Agreement.
"CERTIFICATE OF DESIGNATIONS" means the Corporation's
Certificate of Designations, Preferences and Rights of Series C Convertible
Preferred Stock.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock of the Corporation,
$.0001 par value per share.
"CREDIT AGREEMENT" means that certain Credit Agreement dated
June 23, 1998 by and among the Corporation, WPI, Bankers Trust Company, as
Administrative Agent and the financial institutions party thereto as lenders.
"DISCHARGED" means the payment in full, discharge or
satisfaction of the BT Loan; PROVIDED that a refinancing of the BT Loan with any
Indebtedness that does not constitute a Qualified Refinancing Loan shall not be
considered a Discharge of the BT Loan.
"EXECUTIVE OFFICERS" means, with respect to any corporation,
its executive officers as that term is defined in Rule 3b-7 of the regulations
promulgated under the Exchange Act.
"FAMILY MEMBER" means an individual's spouse, parents,
children, siblings, mothers-in-law, fathers-in-law, sons-in-law,
daughters-in-law, brothers-in-law and sisters-in-law.
"GAAP" means generally accepted accounting principles,
consistently applied.
"HOLDER" means any holder (or deemed holder) of Preferred
Shares who is a party to this Agreement or is a successor or assign or
subsequent holder contemplated by SECTION 10 hereof.
"INDEBTEDNESS" of any Person shall mean the principal of,
premium, if any, and unpaid interest on (a) indebtedness for money borrowed from
others; (b) indebtedness guaranteed, directly or indirectly, in any manner by
such Person, or in effect guaranteed, directly or indirectly, in any manner by
such Person through an agreement, contingent or otherwise, to supply funds to,
or in any other manner invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or pay for services if not
performed, primarily for the purpose of enabling the debtor to make payment of
the indebtedness or to assure the owners of the indebtedness against loss; (c)
all indebtedness secured by any mortgage, lien, pledge, charge or other
encumbrance upon property owned by such Person, even though such Person has not
in any manner become liable for the payment of such indebtedness; (d) all
indebtedness of such Person created or arising under any conditional sale, lease
(intended primarily as a financing device) or other title retention or security
agreement with respect to property acquired by such Person even though the
rights and remedies of the seller, lessor or lender under such agreement or
lease in the event of default may be limited to repossession or sale of such
property; and (e) renewals, extensions and refunding of any such indebtedness.
"INVESTOR DIRECTORS" means the members of the board of
directors of the Corporation and each Subsidiary who are designated solely by
the holders of the Series C Preferred Shares.
"MBCP GROUP" means MBCP, Moore, Magiera and Swindells.
MANAGEMENT GROUP" means the MBCP Group, all Executive Officers
and directors of the Corporation or any Subsidiary, all consultants to the
Corporation or any Subsidiary, and any Person who has an employment agreement or
arrangement with the Corporation or any Subsidiary that cannot be terminated at
will by the Corporation or the Subsidiary (without such termination constituting
a breach or violation of contract or otherwise being unlawful).
"PERSON" means a natural person, a partnership, a corporation,
an association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
"PREFERRED SHARES" means the Series B Preferred Shares and the
Series C Preferred Shares.
"QUALIFIED REFINANCING LOAN" means a loan to the Corporation,
the maturity date of which is more than two (2) years from the date the loan
proceeds are advanced and the proceeds of which are used to repay the BT Loan
(or a prior refinancing of the BT Loan).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES B PREFERRED SHARES" means those shares of Series B
Convertible Preferred Stock of the Corporation, $.0001 par value per share.
"SERIES C PREFERRED SHARES" means those shares of Series C
Convertible Preferred Stock of the Corporation, $.0001 par value per share, of
the Corporation duly issued and outstanding on the date hereof.
"SUBSIDIARY" means any corporation, partnership, association
or other business entity of which securities or other ownership interests
representing more than fifty percent (50%) of the ordinary voting power or
equity are, at the time as of which such determination is being made, owned or
controlled by the Corporation or by the Corporation and one or more Subsidiaries
of the Corporation.
2. VOTING AGREEMENTS.
(a) Each member of the MBCP Group agrees that, without the
prior written consent of the Investor, he or it shall not vote, or give his or
its consent with respect to, his or its Series B Preferred Shares (or any Series
B Preferred Shares with respect to which he or it controls the vote, including
but not limited to the shares that Moore is entitled to vote pursuant to the
Anderlit Proxy), in favor of any of the following:
(i) Any proposed financings or refinancings by the
Corporation or any Subsidiary, including but not limited to financing through
the issuance of indebtedness, reimbursement obligations with respect to letters
of credit, bankers' acceptances and surety bonds, any obligation evidenced by a
note, bond, debenture or similar instrument, and any indebtedness secured by a
lien or security interest in any property of the Corporation or any Subsidiary
(collectively "DEBT FINANCINGS");
(ii) Any proposed financing by the issuance or sale
of equity interests (or any security or interest that is convertible into or
exchangeable for equity interests) in the Corporation or any Subsidiary ("EQUITY
FINANCINGS") (collectively Debt Financings and Equity Financings are referred to
as "FINANCINGS");
(iii) Any hiring or firing of, or change in the
compensation or benefits payable to,
any of the Management Group; and
(iv) Any acquisition of any debt or equity interest
in, investment in, loan to, sale or other disposition of any debt or equity
interest in, or joint venture or partnership arrangement with the Corporation,
any Subsidiary or any other Person, but only to the extent that the
Corporation's (or Subsidiary's) interest in such transaction has a value of at
least $100,000.
(b) Each of the MBCP Group agrees to take all action necessary
in his or its capacity as a stockholder, including, without limitation, the
voting of the Series B Preferred Shares which he or it owns or with respect to
which he or it controls the vote, as directed by the Investor with respect to
the following matters:
(i) The termination of the employment of the chief
executive officer of the Corporation; provided, however, that the provisions of
this clause (i) shall terminate if and when the BT Loan has been Discharged; and
(ii) Any Financing or any disposition of any
Subsidiary or of any property of the Corporation or any property of a Subsidiary
proposed by the Investor or any Investor Director, the proceeds of which will be
used, directly or indirectly, to repay the BT Loan, or any refinancing thereof
(other than a Qualified Refinancing Loan); provided, however, that the
provisions of this clause (ii) shall terminate on the ninetieth (90th) day after
the final maturity date (including all extensions) of the BT Loan if an
Investor's Bridge Transaction (as defined in Section 2(c) below) has not been
completed on or before such date.
(c) The Investor will give written notice (the "TRANSACTION
NOTICE") to the Corporation setting forth the terms of any transaction proposed
by the Investor or an Investor Director pursuant to SECTION 2(B)(II) (an
"INVESTOR'S BRIDGE TRANSACTION"). The MBCP Group shall not be bound by SECTION
2(B)(II) if, and only if, the Corporation arranges, on a timely basis, for an
alternate financing transaction (the "ALTERNATE BRIDGE TRANSACTION") on terms
that are substantially equivalent to, or more favorable to the Corporation than,
the Investor's Bridge Transaction. In order for the MBCP Group to avoid
compliance with Section 2(b)(ii), within five (5) business days after the
Transaction Notice, the Corporation must obtain a bona fide, written commitment
(a "COMMITMENT LETTER") for the Alternate Bridge Transaction, which provides for
funding within thirty-five (35) days after the date of the Transaction Notice.
The Commitment Letter must be subject to no conditions other than those to which
the Investor's Bridge Transaction is subject. If the Corporation or the MBCP
Group delivers such a Commitment Letter to the Investor, the Investor shall have
five (5) business days from the date of its receipt thereof to determine whether
the Alternate Bridge Transaction is on substantially equivalent or better terms
as the Investor's Bridge Transaction. If the Investor determines that the
Alternate Bridge Transaction is not on substantially equivalent or better terms
as the Investor's Bridge Transaction, then the Investor will send written notice
thereof (a "DETERMINATION NOTICE") to the Corporation within such five-day
period. If the Investor fails to send a Determination Notice within such
five-day period, the Investor shall be deemed to have agreed that the Alternate
Bridge Transaction is on substantially equivalent or better terms than the
Investor's Bridge Transaction. Following delivery of a timely Determination
Notice, the parties shall attempt to determine whether the Alternate Bridge
Transaction is on substantially equivalent or better terms as the Investor's
Bridge Transaction (the "DETERMINATION"). If the parties are unable to do so
within three (3) days after delivery of the Determination Notice, within the
next three (3) business days, the parties will select a mutually acceptable
investment banker who shall make the Determination or, if the parties are unable
to agree on an investment banker, the Corporation shall choose an investment
banker, the Investor shall choose an investment banker and the parties shall
direct the two investment bankers to promptly select a third investment banker,
who shall make the Determination. The Determination of the investment banker
selected in accordance with this paragraph shall be final and binding on the
parties. The fees and expenses of the investment banker shall be paid by the
Corporation. If the parties or an investment banker makes a Determination that
the Alternate Bridge Transaction was on substantially equivalent or better terms
as the Investor's Bridge Transaction, but the Alternate Bridge Transaction does
not close within thirty-five (35) days after the Transaction Notice, then the
Alternate Bridge Transaction shall be conclusively presumed NOT to be on
substantially equivalent or better terms as the Investor's Bridge Transaction
and the Corporation and the MBCP Group will be bound by SECTION 2(B)(II) with
respect to the proposed Investor's Bridge Transaction.
(d) Each of the MBCP Group shall execute and deliver to the Investor an
Irrevocable Proxy in the form attached hereto as EXHIBIT A. Each of the MBCP
Group agrees that the Irrevocable Proxy is coupled with an interest in the
voting agreements set forth herein.
(e) The Corporation agrees that, if and to the extent that the
Corporation is or becomes entitled to exercise the voting rights associated with
any Series B Preferred Shares owned by any of the MBCP Group (including but not
limited to any voting rights that the Corporation may exercise pursuant to the
pledge agreements between the Corporation and Moore and the Corporation and
Magiera), the Corporation will be bound by the voting agreements contained in
this Section 2.
3. BOARD OF DIRECTORS.
(a) The Corporation shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), and each of the Holders agrees to take all action
necessary in his capacity as a stockholder, including, without limitation, the
voting of his, her or its Series B Preferred Shares of the Corporation, the
execution of written consents, the calling of special meetings, attendance at
meetings in person or by proxy, the removal of directors, the filling of
vacancies on the Board of Directors, the waiving of notice and the attending of
meetings, so that:
(i) the authorized number of directors on the
Corporation's board of directors (the "BOARD") shall be established at
eight (8) directors, four (4) of whom shall be designated by the
Investor, who shall initially be Michael E. Heisley, Sr., Stanley
Meadows, Emily Heisley Stoeckel and Larry Gies;
(ii) the Investor shall have the right to designate
one-half of the board of directors of each of the Corporation's
Subsidiaries (a "SUB BOARD");
(iii) the removal from the Board or a Sub Board of
the Investor Directors shall be only upon the request of the Investor;
and
(iv) in the event that any Investor Director for any
reason ceases to serve as a member of the Board or a Sub Board during
his term of office, the resulting vacancy on the Board or the Sub Board
shall be filled by the Investor.
(b) The Corporation shall pay all out-of-pocket expenses
incurred by each director in connection with attending regular and special
meetings of the Board, any Sub Board and any committee thereof.
(c) At any election of members of the Board or any Sub Board,
the initial Investor Directors identified in SECTION 3(A) above or initially
designated to serve on a Sub Board shall continue to be the designated Investor
Directors unless and until the Investor designates a different representative.
(d) In order to ensure that the Corporation will implement the
acts that the Investor has the right to direct pursuant to SECTION 2(B)(II)
hereof, the resignations of Moore and Magiera (the "RESIGNING DIRECTORS") as
directors of the Corporation have been executed and delivered to the Investor.
If the BT Loan is not Discharged at or before its maturity date and the Board or
a Sub Board fails or refuses to adopt or approve an Investor's Bridge
Transaction that has been recommended or approved by all of the Investor
Directors, and such failure or refusal is other than as a result of a proposed
Alternate Bridge Transaction that is on substantially equivalent or better terms
as the Investor's Bridge Transaction (as determined in accordance with Section
2(c) hereof), then the Investor may at any time thereafter tender the
resignations to the Corporation, upon which the resignations shall become
effective. If directors are appointed to fill the resulting vacancies, the
Investor shall have the sole and exclusive right to designate and appoint the
new directors (the "REPLACEMENT DIRECTORS") to fill the vacancies, and such
directors will be considered Investor Directors. Following the Corporation's
approval and consummation of the Investor's Bridge Transaction or a Discharge of
the BT Loan, the Investor will take all appropriate actions reasonably requested
by the Corporation to obtain the resignation of the Replacement Directors and to
re-appoint the Resigning Directors to the Corporation's board of directors.
4. DISPOSITION OF PREFERRED SHARES.
(a) No Holder of Series B Preferred Shares will transfer,
sell, convey, exchange or otherwise dispose of (herein referred to as a
"disposition" or "to dispose") such Series B Preferred Shares, except (i) in a
registered public offering under the Securities Act or in a public sale pursuant
to Rule 144 promulgated by the Commission under the Securities Act, (ii) with
the prior written consent of the Investor, (iii) in connection with the
conversion of the Series B Preferred Shares to shares of Common Stock, or (iv)
in compliance with SECTION 5 of this Agreement.
(b) No Holder of Series C Preferred Shares will dispose of
such Series C Preferred Shares, except (i) in a registered public offering under
the Securities Act or in a public sale pursuant to Rule 144 promulgated by the
Commission under the Securities Act, (ii) with the prior written consent of the
Holders of a majority of the Series B Preferred Shares held by the MBCP Group,
(iii) in connection with the conversion of the Series C Preferred Shares to
shares of Common Stock, or (iv) in compliance with SECTION 5 of this Agreement.
5. PERMITTED TRANSFERS. Any Holder of Preferred Shares may transfer
such Preferred Shares, without complying with SECTION 4, to Permitted
Transferees; provided, however, that a Permitted Transferee of a Holder of
Series B Preferred Shares must consent in a writing delivered to the Corporation
to become a member of the MBCP Group and to be bound by the terms of this
Agreement as a member of the MBCP Group. With respect to any Holder of Preferred
Shares, "PERMITTED TRANSFEREES" means another member of the MBCP Group, the
spouse or lineal descendants of such Holder, any trust for the benefit of such
Holder or the benefit of the spouse or lineal descendants of such Holder, any
Affiliate of such Holder, and the personal representative of such Holder upon
such Holder's death for purposes of administration of such Holder's estate or
upon such Holder's incompetency for purposes of the protection and management of
the assets of such Holder.
6. LEGEND.
(a) The Corporation will stamp or imprint each certificate or
other instrument representing Preferred Shares now owned or hereafter acquired
by the Holders, throughout the term of this Agreement, with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS, INCLUDING, AMONG OTHERS, RESTRICTIONS ON
VOTING AND TRANSFERS SET FORTH IN A CERTAIN SHAREHOLDER
AGREEMENT DATED AS OF DECEMBER 31, 1998, A COPY OF WHICH IS
AVAILABLE AT THE OFFICE OF THIS COPORATION."
(b) The Corporation will stamp or imprint each certificate or
other instrument representing Series B Preferred Stock now owned or hereafter
acquired by any of the MBCP Group, throughout the term of this Agreement, with a
legend in substantially the following form:
"THE VOTING RIGHTS ASSOCIATED WITH THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO AN IRREVOCABLE PROXY DATED
AS OF DECEMBER 31, 1998, A COPY OF WHICH IS AVAILABLE AT THE
OFFICE OF THIS CORPORATION."
7. REMEDIES. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
8. NOTICES. Any notices desired, required or permitted to be given
hereunder shall be delivered personally or mailed, certified or registered mail,
return receipt requested, or delivered by overnight courier service, to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the overnight courier service, if delivered by
overnight courier service:
If to the Corporation, to:
WorldPort Communications, Inc.
1825 Barrett Lakes Blvd.
Atlanta, GA 30144
Attn.: Chairman
If to the MBCP Group, to the addresses set forth on the stock record
books of the Corporation.
If to the Investor, to:
The Heico Companies, LLC
70 West Madison Street
Suite 5600
Chicago, IL 60602
Attn.: Michael E. Heisley, Sr.
9. AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended only upon the written agreement of each of the parties to this
Agreement. Any waiver, permit, consent or approval of any kind or character on
the part of any Holders of any provision or condition of this Agreement must be
made in writing and shall be effective only to the extent specifically set forth
in writing.
10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors of the parties hereto, and each
transferee of all or any portion of the Preferred Shares held by the parties
hereto, whether so expressed or not, provided such transferee acquired the
Preferred Shares in compliance with Section 4 hereof. In addition, whether or
not any express assignment has been made, the provisions of this Agreement which
are for the benefit of the Investor or any other Holders of Series C Preferred
Shares are (except for the provisions contained in SECTION 8 above) also for the
benefit of, and enforceable by, subsequent Holders of Series C Preferred Shares,
provided such Holder is a successor of the Investor or such Holder acquired the
Series C Preferred Shares in compliance with Section 4 hereof.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
12. GOVERNING LAW. All questions concerning the construction, validity
and interpretation of, and the performance of the obligations imposed by, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and wholly to be performed in
that state.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and such counterparts together will constitute one instrument.
14. TERMINATION OF THIS AGREEMENT. This Agreement shall terminate upon
the date on which fewer than 30% of the Series C Preferred Shares remain
outstanding.
<PAGE>
IN WITNESS WHEREOF, this Shareholder Agreement was executed and
delivered on the date first set forth above.
The Heico Companies, LLC WorldPort Communications, Inc.
By: By:
Its: Its:
Theodore H. Swindells Paul A. Moore
Phillip S. Magiera
