<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission File Number: 0-27658
PREFERRED NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 58-1954892
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5300 Oakbrook Parkway, Suite 320, Norcross, GA 30093
(Address of principal executive offices)
(Zip Code)
(770) 806-6970
(Registrant's telephone number including area code)
(Former name, former address and former fiscal year,
if changed since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 14,426,576 shares of common
stock, par value $.0001, as of August 13, 1996.
<PAGE> 2
PREFERRED NETWORKS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, June 30, 1996 (Unaudited)
and December 31, 1995 3
Condensed Consolidated Statements of Operations for the
three months and six months ended June 30, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Deficit) for the six months ended June 30, 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
Page 2
<PAGE> 3
PREFERRED NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,941,156 $ 9,311,379
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879,195 923,890
Receivables from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,512 66,425
Pager inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,419,911 1,068,970
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . 305,091 386,648
----------- ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,585,865 11,757,312
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,205,189 6,885,022
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,873,720 1,403,385
----------- ------------
$46,664,774 $ 20,045,719
=========== ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK,
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,503,731 $ 292,073
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,062 341,604
Payables to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,650 500
Accrued salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,877 145,924
Current portion of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 6,358 2,605,627
----------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,224,678 3,385,728
Notes payable, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,561,339 2,807,398
Series A Redeemable Convertible Preferred Stock, $.01 par value,
$11 per share minimum redemption price; 159,377 shares
authorized in 1995; 159,377 shares issued and outstanding in 1995 . . . . . . . . . -- 2,437,890
Series B Redeemable Convertible Preferred Stock, $.01 par value,
$1,000 per share minimum redemption price; 21,000 shares
authorized in 1995; 16,565 shares issued and outstanding in 1995 . . . . . . . . . . -- 19,220,921
----------- ------------
Total liabilities and Redeemable Convertible Preferred Stock . . . . . . . . . 4,786,017 27,851,937
Stockholders' equity (deficit)
Preferred stock, $.01 par value, 5,000,000 and 319,623 shares
authorized in 1996 and 1995, respectively; none issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.0001 par value, 70,000,000 shares authorized,
14,422,576 and 4,138,496 shares issued and outstanding in
1996 and 1995, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . 1,443 414
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,387,612 1,013,981
Accretion on Series A and Series B Redeemable Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3,289,003)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,510,298) (5,531,610)
----------- ------------
41,878,757 (7,806,218)
----------- ------------
$46,664,774 $ 20,045,719
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
Page 3
<PAGE> 4
PREFERRED NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- --------------------------
1996 1995 1996 1995
------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues
Pager airtime . . . . . . . . . . . . . . . . . . . . . . $ 1,444,850 $ 744,483 $ 2,744,046 $ 1,392,715
Pager sales . . . . . . . . . . . . . . . . . . . . . . . 1,049,797 861,189 2,086,177 1,522,435
Maintenance and other . . . . . . . . . . . . . . . . . . -- 45,896 32,957 68,413
------------ ---------- ----------- -----------
2,494,647 1,651,568 4,863,180 2,983,563
Costs of revenues
Pager airtime . . . . . . . . . . . . . . . . . . . . . . 946,521 341,943 1,688,080 653,701
Pager sales . . . . . . . . . . . . . . . . . . . . . . . 1,307,720 1,052,000 2,668,719 1,884,366
------------ --------- ---------- -----------
240,406 257,625 506,381 445,496
Selling, general and administrative expenses . . . . . . . . . 1,680,135 556,116 3,139,846 1,027,972
Depreciation and amortization . . . . . . . . . . . . . . . . . 399,325 148,289 762,701 293,403
------------ --------- ---------- -----------
Operating loss . . . . . . . . . . . . . . . . . . . (1,839,054) (446,780) (3,396,166) (875,879)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 13,237 77,346 155,182 155,054
Interest income . . . . . . . . . . . . . . . . . . . . . . . . 374,363 2,419 572,660 2,436
------------ --------- ---------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . (1,477,928) (521,707) (2,978,688) (1,028,497)
Accretion of Series A and Series B Redeemable Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . . . . -- (7,342) (1,121,316) (7,342)
Series B Redeemable Convertible Preferred
Stock dividend requirements . . . . . . . . . . . . . . . -- (49,014) (353,651) (49,014)
----------- ---------- ----------- -----------
Net loss attributable to Common Stock . . . . . . . . $(1,477,928) $ (578,063) $(4,453,655) $(1,084,853)
=========== ========== =========== ===========
Pro forma net loss per share of Common Stock . . . . . . . . . $ (.05) $ (.23) $ (.10)
========== =========== ===========
Weighted average number of common shares
used in calculating pro forma net loss per
share of Common Stock . . . . . . . . . . . . . . . . . . 10,013,901 12,938,554 10,013,901
========== =========== ===========
Historical net loss per share of Common Stock . . . . . . . . . $ (.10) $ (.06) $ (.28) $ (.12)
=========== ========== =========== ===========
Weighted average number of common shares
used in calculating historical net loss per share of
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 14,417,732 9,237,071 12,679,831 9,197,740
=========== ========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
<PAGE> 5
PREFERRED NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
Accretion of
Redeemable
Additional Convertible
Common Paid-in Preferred Accumulated
Stock Capital Stock (Deficit) Total
-------- ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 . . . $ 414 $1,013,981 $(3,289,003) $(5,531,610) $(7,806,218)
Accretion of Series A and
Series B Redeemable
Convertible Preferred
Stock . . . . . . . . . . -- -- (1,121,316) -- (1,121,316)
Dividends on Series B
Redeemable Convertible
Preferred Stock . . . . . -- (353,651) -- -- (353,651)
Issuance of Common Stock
upon Initial Public
Offering . . . . . . . . 345 31,160,364 -- -- 31,160,709
Conversion of Series A and
Series B Redeemable
Convertible Preferred
Stock . . . . . . . . . . 683 18,546,627 4,410,319 -- 22,957,629
Issuance of 5,800 shares of
Common Stock upon
exercise of stock
options . . . . . . . . . 1 5,625 -- -- 5,626
Non-cash stock option
compensation . . . . . . . -- 14,666 -- -- 14,666
Net loss . . . . . . . . . . . -- -- -- (2,978,688) (2,978,688)
------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 . . . . . $1,443 $50,387,612 $ -- $(8,510,298) $41,878,757
======= =========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
<PAGE> 6
PREFERRED NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,978,688) $ (1,028,497)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 762,701 293,403
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . 101,087 46,762
Stock option compensation expense . . . . . . . . . . . . . . . . . 14,666 --
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . (56,392) (140,085)
Receivables from related parties . . . . . . . . . . . . . . . 25,913 --
Pager inventory . . . . . . . . . . . . . . . . . . . . . . . . (350,941) 102,328
Prepaid expenses and other assets . . . . . . . . . . . . . . . 81,557 (18,064)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 1,211,658 (139,365)
Payables to related parties . . . . . . . . . . . . . . . . . . 3,150 --
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . (192,542) (17,793)
Accrued salaries . . . . . . . . . . . . . . . . . . . . . . . 415,953 --
------------ ------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . (961,878) (901,311)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment . . . . . . . . . . . . . . . . . . . . . . . . . (3,076,367) (363,923)
Purchases of other assets . . . . . . . . . . . . . . . . . . . . . . . . (1,573,848) (136,728)
------------ ------------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (4,650,215) (500,651)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . -- 1,099,608
Payments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . (5,748,316) (1,016,295)
Issuance of Redeemable Convertible Preferred Stock . . . . . . . . . . . -- 16,055,972
Net proceeds from initial public offering of Common Stock . . . . . . . . 31,160,709 --
Payment of Redeemable Convertible Preferred Stock dividends . . . . . . . (176,149) --
Issuance of Common Stock warrants . . . . . . . . . . . . . . . . . . . . -- 3,774
Issuance of Common Stock upon exercise of stock options . . . . . . . . . 5,626 --
------------ ------------
Net cash provided by financing activities . . . . . . . . . . . . . . . . 25,241,870 16,143,059
------------ ------------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 19,629,777 14,741,097
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 9,311,379 221,255
------------ ------------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $28,941,156 $ 14,962,352
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
Page 6
<PAGE> 7
PREFERRED NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. THE COMPANY
Preferred Networks, Inc. (the "Company") commenced operations in July
1991 and is a carrier's carrier of exclusively wholesale one-way
paging network services. The Company's networks are currently
operational in the Southeast, Mid-Atlantic and Northeast regions, and
the Company plans to expand its operations on a nationwide basis to
provide local and regional paging services, primarily on a common
frequency, in the 50 largest U.S. metropolitan markets and adjacent
areas. The Company's customers are organizations that offer the
Company's network services to their subscribers, including existing
paging carriers and resellers of paging services. As a carrier's
carrier, the Company does not market paging services directly to end
users and therefore does not compete with its customers.
The Company has formed wholly-owned subsidiaries to execute certain
business transactions. All significant intercompany activity has been
eliminated.
2. BASIS FOR PRESENTATION
The interim condensed consolidated financial information contained
herein has been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission
("SEC") and include in the opinion of management, all adjustments,
which are of a normal recurring nature necessary for a fair
presentation of the financial position, results of operations and cash
flows for the periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
Company believes, however, that its disclosures are adequate to make
the information presented not misleading. These financial statements
and related notes should be read in conjunction with the financial
statements and notes as of December 31, 1995, included in the
Company's Registration Statement on Form S-1 (No. 33-80507) with
respect to the sale of the Company's Common Stock. Results of
operations for the periods presented herein are not necessarily
indicative of results to be expected for the full year or any other
interim period.
Effective January 24, 1996, the Company amended its certificate of
incorporation to increase the authorized Common Stock to 70,000,000
shares, to reduce Common Stock par value to $.0001, and to provide a
7.35-for-1 Common Stock split. The number of authorized shares of
Preferred Stock was increased to 5,000,000, with terms and rights to
be determined. All common share and per common share amounts have
been adjusted for all periods to reflect the stock split.
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents include investments in money market
instruments, which are carried at fair market value. Cash payments
made for interest during the six months ended June 30, 1996 and 1995,
were approximately $111,000 and $185,000, respectively. There were no
significant federal or state income taxes paid or refunded for the six
months ended June 30, 1996 and 1995.
4. INITIAL PUBLIC OFFERING (IPO)
On March 1, 1996, the Company issued 3,300,000 shares of Common Stock
in a public offering at a price to the public of $10.00 per share.
The Company received net proceeds before offering expenses of $30.7
million. In addition, on March 28, 1996, the underwriters exercised
their over-allotment option to purchase an additional 148,000 shares
of Common Stock and the Company received additional net proceeds of
$1.4 million.
Pursuant to their terms, upon consummation of the IPO all outstanding
shares of Series A Redeemable Convertible Preferred Stock (the "Series
A") and Series B Redeemable Convertible Preferred Stock (the "Series
B") automatically converted into Common Stock. The Company elected to
pay accrued dividends on the Series B through January 31, 1996, in
shares of Common Stock and the remainder of the accrued dividends from
February 1 to March 1, 1996, in the amount of $176,000 in cash. The
total number of shares of Common Stock issued upon such conversion and
such dividend payment was 6,830,280 shares. All accretion previously
accrued was eliminated upon conversion to shares of Common Stock.
Page 7
<PAGE> 8
PREFERRED NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
4. INITIAL PUBLIC OFFERING (IPO) - CONTINUED
A portion of the proceeds of the IPO were used to repay all debt then
outstanding.
5. LOAN AGREEMENTS
All existing loan agreements were terminated and outstanding balances
repaid in March 1996, with funds received from the IPO.
In January 1996, the Company entered into a $12 million line of credit
with an equipment manufacturer, effective upon consummation of the
IPO. Debt outstanding under this agreement bears interest at the
five-year U.S. Treasury rate plus 6.5%, is payable in various monthly
installments of principal and interest with maturity dates through
2001 and is secured by paging equipment. At June 30, 1996, borrowings
were $1.9 million at 12.10% under this facility.
In March 1996, the Company entered into a $5 million line of credit
with a finance company. Interest on debt outstanding under this
agreement is based upon the prime rate plus 1.75%. This facility is
payable in various monthly installments of principal and interest,
with maturity dates through 2001. Borrowings under this agreement are
secured by paging equipment. At June 30, 1996, borrowings were
$689,000 at 11% under this facility.
6. LOSS PER SHARE
Pro forma net loss per share for periods prior to the IPO was computed
by dividing net loss by the weighted average number of shares of Common
Stock outstanding after giving retroactive effect to the mandatory
conversion of the Series A and the Series B into Common Stock, and the
related accrued dividends on the Series B through January 31, 1996,
paid in shares of Common Stock, which occurred upon the consummation of
the IPO, plus cheap stock as defined below. Pro forma net loss per
share for periods ending after the IPO is calculated as the sum of pro
forma net loss per share for the period from January 1, 1996 until the
March 1, 1996 IPO closing date plus historical net loss per share from
the IPO until March 31, 1996.
Historical net loss per share was computed using the requirements of
Accounting Principles Board Opinion No. 15 and SEC Staff Accounting
Bulletin No. 83 and as such equals the net loss increased by the
portion of accretion of the Series A which relates to shares which are
not considered as cheap stock, as defined below, and the dividends on
Series B divided by the weighted average number of shares of Common
Stock outstanding, plus cheap stock as defined below, up until the
March 1, 1996 closing date of the IPO. The calculation excludes any
antidilutive shares during the period, other than cheap stock. After
the IPO, historical and pro forma net loss per share are identical and
hence pro forma disclosures are not included after the IPO. Loss per
share is computed independently for each of the quarters presented.
Therefore, the sum of the quarterly loss per share does not equal the
year-to-date loss per share due to the stock transactions in March
1996. See note 4.
Pursuant to SEC Staff Accounting Bulletin No. 83, common stock and
common stock equivalents (including preferred stock) issued at prices
equal to or below the IPO price per share ("cheap stock") during the
twelve month period immediately preceding the initial filing date of
the Company's registration statement for the IPO have been included as
if outstanding for all periods presented, up until the March 1, 1996
closing date of the IPO (using the treasury stock method at the IPO
price) even though the effect is to reduce the loss per share. A
portion of the Series A, all of the Series B and certain of the stock
options and warrants have been treated as cheap stock.
Supplemental loss per common share is calculated using the weighted
average number of common and common equivalent shares outstanding
during the respective periods assuming the same number of shares
outstanding as described above, and also considering the reduction
in interest expense from the repayment of long term debt of $5.6
million with proceeds of the IPO, as if such shares had been issued
and repayment had occurred at the beginning of the period or later if
the debt was not outstanding the entire period. The computations of
supplemental loss per share for the six months ended June 30, 1996
are ($.22) for historical and ($.27) for pro forma.
Retroactive restatement has been made to all share, weighted average
shares and all loss per share calculations for the stock splits
effected in January 1996.
The computation of fully diluted and historical net loss per share of
Common Stock was antidilutive in each of the periods presented;
therefore the amounts reported for primary and fully diluted are the
same.
Page 8
<PAGE> 9
PREFERRED NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
6. LOSS PER SHARE (Continued)
The unaudited pro forma net loss per share and the unaudited pro forma
supplemental net loss per share for 1995 as presented in the Company's
registration statement for the IPO should have been ($.29) and ($.25),
respectively, rather than ($.72) and ($.69), respectively, as reported
therein. The unaudited pro forma net loss per share, historical net
loss per share, pro forma supplemental net loss per share and
historical supplemental net loss per share for the three months ended
March 31, 1996 were ($.13), ($.19), ($.12) and ($.18), respectively.
7. ACQUISITION
In June 1996, the Company signed a definitive agreement to purchase
substantially all the assets of Big Apple Paging Corporation ("Big
Apple") for $2.6 million in stock and cash, subject to certain
adjustments and possible additional consideration. Big Apple, a
reseller, presently serves approximately 27,200 paging subscribers in
the New Jersey, New York and Southern Connecticut markets. The
acquisition is subject to Federal Communications Commission ("FCC")
approval and is expected to close in 1996. Prior to closing, the
Company will provide certain services to Big Apple under an agency
agreement.
8. SUBSEQUENT EVENTS
In July 1996, the Company acquired in a merger the stock of Paging
Services, Inc. for $500,000 in stock and $250,000 in cash. Paging
Services, Inc. operates as a repair, maintenance and installation
services and equipment sales company for paging carriers.
In August 1996, the Company entered into a $20 million revolving
credit facility with a financial institution, the majority of which
will be used to finance paging network acquisitions and capital
expenditures. The outstanding balance under this facility bears
interest at a rate of prime plus 1% or at a rate of LIBOR plus 3.75%,
at the Company's option. Interest only is payable monthly in arrears
with the entire principal due in full in August 1998. Borrowings
under this facility and the other two credit facilities will be
secured by substantially all the assets of the Company. This new
credit facility contains various conditions, financial covenants and
restrictions.
Page 9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Throughout this section, the Company makes reference to "EBITDA" which
represents earnings before interest expense, interest income, taxes,
depreciation and amortization. EBITDA is a financial measure commonly used in
the telecommunications industry and should not be construed as an alternative
to operating income (as determined in accordance with generally accepted
accounting principles ("GAAP")), as an alternative to cash flows from operating
activities (as determined in accordance with GAAP), or as a measure of
liquidity.
The following table presents certain items in the Consolidated Statements of
Operations as a percentage of total revenues for the three months and six
months ended June 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Pager airtime 57.9% 45.1% 56.4% 46.7%
Pager sales 42.1 52.1 42.9 51.0
Maintenance and other -- 2.8 .7 2.3
----- ----- ----- -----
100.0 100.0 100.0 100.0
Cost of revenues
Pager airtime 37.9 20.7 34.7 21.9
Pager sales 52.5 63.7 54.9 63.2
----- ----- ----- -----
9.6 15.6 10.4 14.9
Selling, general & administrative 67.3 33.7 64.5 34.5
Depreciation and amortization 16.0 9.0 15.7 9.8
----- ----- ----- -----
Operating loss (73.7) (27.1) (69.8) (29.4)
Interest expense .5 4.7 3.2 5.2
Interest income 15.0 0.2 11.8 0.1
----- ----- ----- -----
Net loss (59.2)% (31.6)% (61.2)% (34.5)%
===== ===== ===== =====
EBITDA (57.7)% (18.1)% (54.2)% (19.5)%
</TABLE>
The table below provides information about the Company's units in service by
customer type and average revenue per unit ("ARPU") for the six months ended
June 30. ARPU is calculated by dividing pager airtime revenues for the month
by the total units in service at month end. ARPU for periods greater than one
month equals the average of the monthly ARPUs during the period.
<TABLE>
<CAPTION>
Percentage
Increase (Decrease)
for the Twelve Month
June 30, period ended June 30,
-------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units in service
Reseller units 143,273 74,071 93.4% 58.3%
Co-location/interconnection units 45,228 11,632 288.8% --
------- ------
Total 188,501 85,703 120.0% 83.2%
Units under agency agreement 27,205 -- -- --
------- ------
Total Units 215,706 85,703 151.7% 83.2%
======= ======
ARPU $ 2.60 $ 3.09 (15.9)% (8.6%)
</TABLE>
Page 10
<PAGE> 11
RESULTS OF OPERATIONS
Total revenues increased $843,000 or 51.0%, to $2.5 million for the three-month
period ended June 30, 1996, from $1.7 million for the three-month period ended
June 30, 1995. Total revenues increased $1.9 million, or 63.0%, to $4.9
million for the six-month period ended June 30, 1996, from $3.0 million for the
six-month period ended June 30, 1995. Total units in service increased by
102,798 , or 120.0%, to 188,501 at June 30, 1996, from 85,703 at June 30, 1995.
Revenues from pager airtime increased by $700,000, or 94.1%, to $1.4 million
for the three-month period ended June 30, 1996, from $744,000 for the
three-month period ended June 30, 1995. Revenues from pager airtime increased
by $1.4 million, or 97.0%, to $2.7 million for the six-month period ended June
30, 1996, from $1.4 million for the six-month period ended June 30, 1995. The
increase in revenues was attributable to the growth in units in service and the
associated recurring revenue stream, which resulted from approximately 30,000
units from new reseller agreements negotiated after the purchase of certain
network assets from BellSouth Telecommunications, Inc., expansion into new
markets (Philadelphia, Pittsburgh, Orlando, Jacksonville, Miami, Columbia,
Savannah, and Knoxville) and the continued growth in existing markets. The
growth in units in service was offset in part by declining ARPU due to a change
in the mix of customer type and to a lesser extent, unit volume and airtime
usage discounts. Co-location and interconnection customers generate lower ARPU
to the Company because certain operating expenses customarily incurred by the
Company are borne by the customer. The ARPU was also lower on the units in
service on certain purchased network assets due to generally fewer paging
service features available on those networks.
Revenues from pager sales increased $189,000, or 21.9%, to $1.0 million for the
three-month period ended June 30, 1996, from $ 861,000 for the three-month
period ended June 30, 1995. Revenues from pager sales increased $564,000, or
37.0%, to $2.1 million for the six-month period ended June 30, 1996, from $1.5
million for the six-month period ended June 30, 1995. The increase in the
number of pagers sold was attributable to continued expansion in existing
markets and expansion into new markets. In addition, the average selling price
per pager declined as a result of competitive pricing in the industry and the
Company's marketing programs to attract resellers to its networks.
Cost of pager airtime increased by $604,000, or 177%, to $946,000 for the
three-month period ended June 30, 1996, from $342,000 for the three-month
period ended June 30, 1995. Cost of pager airtime increased by $1.0 million,
or 158%, to $1.7 million for the six-month period ended June 30, 1996, from
$654,000 for the six-month period ended June 30, 1995. The increase was
primarily attributable to the expansion into new markets and the increased
number of units in service. Cost of pager airtime as a percentage of pager
airtime revenue was 65.5% and 61.5 % for the three-month and six-month periods
ended June 30, 1996, respectively, compared to 45.9% and 46.9% for the
three-month and six-month periods ended June 30, 1995, reflecting the expansion
into new markets and the higher cost of airtime per unit during the start up
period (i.e., telephone costs and transmission site rental) due to fewer units
in service in those new markets.
Cost of pager sales increased by $256,000, or 24.3%, to $1.3 million for the
three-month period ended June 30, 1996, from $1.1 million for the three-month
period ended June 30, 1995. Cost of pager sales increased by $784,000, or
41.6%, to $2.7 million for the six-month period ended June 30, 1996, from $1.9
million for the six-month period ended June 30, 1995. The increase was due to
the increased number of pagers sold, offset in part by the decreasing cost to
the Company of purchasing pagers. Cost as a percentage of pager sales was
124.6% and 127.9% for the three-month and six-month periods ended June 30,
1996, compared to 122.2% and 123.8% for the three-month and six-month periods
ended June 30, 1995, reflecting the Company's marketing programs to attract
customers to its networks and the competitive nature of pricing in the
industry.
Selling, general and administrative expenses increased by $1.1 million, or
202.1%, to $1.7 million for the three-month period ended June 30, 1996, from
$556,000 for the three-month period ended June 30, 1995, and increased as a
percentage of total revenues to 67.3% for the three-month period ended June 30,
1996, from 33.7% for the three-month period ended June 30, 1995. Selling,
general and administrative expenses increased by $2.1 million, or 205.4%, to
$3.1 million for the six-month period ended June 30, 1996, from $1.0 million
for the six-month period ended June 30, 1995, and increased as a percentage of
total revenues to 64.5% for the six-month period ended June 30, 1996, from
34.5% for the six-month period ended June 30, 1995. The additional costs
primarily reflect additional sales and administrative personnel to attract and
support the increasing number of customers and expansion into new markets.
Depreciation and amortization increased by $251,000, or 169.3%, to $399,000 for
the three-month period ended June 30, 1996, from $148,000 for the three-month
period ended June 30, 1995. Depreciation and amortization increased by
$469,000, or 159.9%, to $763,000 for the six-month period ended June 30, 1996,
from $293,000 for the six-month period ended June 30, 1995. The increases were
primarily due to additional assets being put in service resulting from
expansion into new markets. Depreciation and amortization increased as a
percentage of total revenues to 16.0% and 15.7% for the three-month and
six-month periods ended June 30, 1996, from 9.0% and 9.8% for the three-month
and six- month periods ended June 30, 1995.
Page 11
<PAGE> 12
Interest expense decreased $64,000, or 82.9%, to $13,000 for the three-month
period ended June 30, 1996, from $77,000 for the three-month period ended June
30, 1995, due to the repayment of all outstanding loan balances in March 1996
with funds received from the IPO. Interest expense remained flat at $155,000
for the six-month periods ended June 30, 1996, and June 30, 1995, due to an
increase in the current year's first quarter expense as compared to 1995's
first quarter. This increase was primarily due to the ongoing financing of
assets purchased for expansion into new markets and those markets beginning
commercial operation. While markets are under construction, the interest
associated with the financing of the network assets in those markets is
capitalized. The amount of interest capitalized for the three-month and
six-month periods ended June 30, 1996, was $22,000 and $46,000 compared to
$15,000 and $29,000 capitalized during the same periods in 1995. The average
level of indebtedness outstanding during the three-month and six-month periods
ended June 30, 1996, was approximately $1.4 million and $2.7 million compared
to approximately $3.4 million and $3.2 million outstanding during the
three-month and six-month periods ended June 30, 1995. All outstanding debt
was repaid with a portion of the proceeds of the IPO in March 1996. Subsequent
to that date, the Company has borrowed $2.6 million to finance its equipment
purchases.
Interest income increased to $374,000 for the three-month period ended June 30,
1996, from $2,000 for the three-month period ended June 30, 1995. Interest
income increased to $573,000 for the six-month period ended June 30, 1996, from
$2,000 for the six-month period ended June 30, 1995. The increase represents
interest income from the investment of the remainder of funds received from the
sale of the Series B, which was consummated in June 1995, and the net proceeds
of the IPO, which was consummated in March 1996.
Net loss for the three-month period ended June 30, 1996, as compared with the
three-month period ended June 30, 1995, increased to $1.5 million from
$522,000. Net loss for the six-month period ended June 30, 1996, as compared
with the six-month period ended June 30, 1995, increased to $3.0 million from
$1.0 million. The increases were primarily due to losses incurred due to sales
of pagers below cost and substantial increases in selling, general and
administrative expenses, as described above. The Company expects to incur
start up losses when entering a new market until sufficient subscribers utilize
the Company's network in that market. Due to the Company's rapid expansion
strategy, consolidated net losses are expected for at least the next three
years.
The historical net loss per share of Common Stock for the three months ended
June 30, 1996 increased to ($.10) from ($.06) for the same three month
period ended in 1995. The increased losses per share result primarily from
the additional losses of the Company for the reasons described above. The
increase in net loss and pro forma net loss per share for the six months
period ended June 30, 1996 as compared to the six months period ended June 30,
1995 is due to the same reason, offset by an increase in the number of shares
used in both the pro forma and historical calculations for the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's expansion strategy will continue to require substantial funds to
finance the expansion of existing operations, the expansion into new markets as
part of the nationwide build-out of its networks, the purchase of network
assets and related FCC licenses, capital expenditures, debt service and general
corporate purposes.
The Company's net cash used in operations was $962,000 for the six-month period
ended June 30, 1996, as compared to $901,000 for the six-month period ended
June 30, 1995. The increase in net cash used in operations was due primarily
to the Company's increased net loss and increase in pager inventory, offset by
the timing of payments of accounts payable.
Capital expenditures were $6.0 million for the six months ended June 30, 1996,
compared to $364,000 for the comparable period in 1995 reflecting the rapid
expansion of the Company's networks. As of June 30, 1996, the Company was
constructing networks in 18 new markets, including Technical Control Centers
(TCCs) in Illinois and Michigan and network expansions into New York, Chicago,
Boston, Richmond, Raleigh/Durham, Charlotte, Orlando, Tampa, Jacksonville,
Gainesville, Albany, Mid-Hudson Valley, Rochester, Hartford, Miami, Detroit,
Cleveland, and Cincinnati. The Company anticipates making capital expenditures
of approximately $40.0 million during 1996 and 1997 (at least $10.0 million of
which will be paid from the net proceeds of the IPO) related to the nationwide
expansion of its networks, including purchases of network assets and related
equipment.
On March 1, 1996, the Company issued 3,300,000 shares of Common Stock in the
IPO at a price to the public of $10.00 per share. The Company received net
proceeds before offering expenses of $30.7 million. In addition, on March 28,
1996, the underwriters exercised their over-allotment option to purchase an
additional 148,000 shares of Common Stock and the Company received additional
net proceeds of $1.4 million.
Page 12
<PAGE> 13
A portion of the net proceeds of the IPO was used to repay all debt then
outstanding which was approximately $5.6 million. The Company intends to use
the remaining net proceeds to finance the expansion of its network facilities
through the purchase of paging system equipment and possible network asset
purchases and for working capital and general corporate purposes.
Pursuant to their terms, upon consummation of the IPO all outstanding shares of
the Series A and the Series B automatically converted into Common Stock. The
Company elected to pay accrued dividends on the Series B through January 31,
1996, in shares of Common Stock and the remainder of the accrued dividends from
February 1 to March 1, 1996, in the amount of $176,000 in cash. The total
number of shares of Common Stock issued upon such conversion and such dividend
payment was 6,830,280 shares. All accretion previously accrued was eliminated
upon conversion to shares of Common Stock.
Upon the consummation of the IPO, all existing vendor financing commitments
terminated.
The Company has a secured credit facility for $12.0 million of vendor financing
which bears interest at the five-year U.S. Treasury rate plus 6.5%. This new
credit facility contains various conditions, financial covenants and
restrictions and is secured by paging equipment.
The Company also has a $5.0 million secured line of credit from a finance
company for the purchase of Motorola paging system equipment which bears
interest at 1.75% over prime at the time of funding.
In August 1996, the Company entered into a $20 million revolving credit
facility with a financial institution, the majority of which is to be used to
finance paging network acquisitions and capital expenditures. The outstanding
balance under this facility bears interest at a rate of prime plus 1% or at a
rate of LIBOR plus 3.75%, at the Company's option. Interest only is payable
monthly in arrears with the entire principal due in full in August 1998.
Borrowings under this facility and the other two credit facilities will be
secured by substantially all the assets of the Company. This new credit
facility contains various conditions, financial covenants and restrictions.
Management believes that cash and cash equivalents on hand together with the
new secured credit facilities in place, will be sufficient to meet the
Company's working capital and capital expenditure needs for the next 12 months
without obtaining additional vendor or other financing. However, in order to
fully implement its nationwide expansion strategy on its anticipated schedule,
the Company believes it will need to raise additional funds prior to the end of
this period in the form of equity, bank debt, or other debt financing. No
assurance can be given that such additional funds will be available on terms
acceptable to the Company, if at all. If such additional funds are not
obtained within such period, the Company would be required to slow its planned
nationwide network expansion, and the failure to obtain such additional funds
within such period could have a material adverse effect on the Company. In
addition, future acquisitions of paging network assets and licenses may change
the Company's capital requirements.
The market price of the Common Stock is likely to be highly volatile. Factors
such as delays by the Company in achieving its expansion goals, fluctuations in
the Company's operating results, announcements of new services offered by the
Company or its competitors, changes in earnings estimates of securities
analysts, regulatory changes and general market conditions, among other things,
could cause the market price of the Common Stock to fluctuate substantially.
Such market fluctuations could adversely affect the market price for the Common
Stock.
ACQUISITIONS
In June 1996, the Company signed a definitive agreement to purchase
substantially all the assets of Big Apple Paging Corporation ("Big Apple") for
$2.6 million in stock and cash, subject to certain adjustments and possible
additional consideration. Big Apple, a reseller, presently serves approximately
27,200 paging subscribers in the New Jersey, New York and Southern Connecticut
markets. The acquisition is subject to Federal Communications Commission
("FCC") approval and is expected to close in 1996. Prior to closing, the
Company will provide certain services to Big Apple under an agency agreement.
In July 1996, the Company acquired in a merger the stock of Paging Services,
Inc. for $500,000 in stock and $250,000 in cash. Paging Services, Inc. operates
as a repair, maintenance and installation services and equipment sales company
for paging carriers.
Page 13
<PAGE> 14
OTHER MATTERS
On February 8, 1996, the FCC released a notice of proposed rulemaking (the
"NPRM") which, among other things, provided that the FCC would accept no new
applications for paging licenses until it adopted an interim licensing
procedure to be used during the pendency of the rulemaking procedure. On April
22, 1996, the FCC adopted an Order in which it eased the freeze on the
acceptance of applications for licenses for shared paging channels, including
the channel primarily utilized by the Company (157.740 MHz). Under the Order,
the FCC allowed applications to be filed for new sites on these channels if the
applicant certifies that the proposed site is within 40 miles of an operating
transmission site which was licensed to the same applicant on the same channel
prior to February 8, 1996. All paging applications received through July 31,
1996 will be processed under the interim rules where all such applications will
be placed on public notice for the applicable period and competing applications
will be accepted. Applications received after July 31, 1996 may be affected by
the timing of a final order and the transition to new licensing rules. The
Company filed for 83 additional licenses within 40 miles of its operating
transmission sites prior to July 31.
As a result of the NPRM and the subsequent actions of the FCC noted above, the
Company has been forced to modify its prior build-out schedule to install
transmitters on an expedited basis in areas where it has needed to protect its
license position. These unscheduled installations have delayed and may continue
to delay the Company's buildout of certain markets in the Company's planned
nationwide expansion.
Page 14
<PAGE> 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description of Exhibits
10.1 Agreement and Plan of
Merger, dated July 3, 1996,
by and among Paging Services,
Inc., Preferred Networks,
Inc., and the shareholders of
Paging Services, Inc.
10.2 Credit Agreement dated
August 8, 1996, by and among
Preferred Networks, Inc., PNI
Systems, LLC, and
NationsBank, N.A. (South)
11.1 Computation of Pro Forma Net
Loss Per Share
11.2 Computation of Historical
Net Loss Per Share
11.3 Computation of Supplemental
Pro Forma and Supplemental
Historical Net Loss
Per Share
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
The registrant did not file any reports on Form 8-K during the
three months ended June 30, 1996.
Page 15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREFERRED NETWORKS, INC.
Date: August 14, 1996 By: /s/ Mark H. Dunaway
--------------------------------
Mark H. Dunaway
Chief Executive Officer
Date: August 14, 1996 By: /s/ Michael J. Saner
--------------------------------
Michael J. Saner
President
Date: August 14, 1996 By: /s/ Kim Smith Hughes
--------------------------------
Kim Smith Hughes
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Page 16
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
10.1 Agreement and Plan of Merger, dated July 3, 1996, by and
among Paging Services, Inc., Preferred Networks, Inc., and
the shareholders of Paging Services, Inc.
10.2 Credit Agreement dated August 8, 1996, by and among
Preferred Networks, Inc., PNI Systems, LLC, and
NationsBank, N.A. (South)
11.1 Computation of Pro Forma Net Loss Per Share
11.2 Computation of Historical Net Loss Per Share
11.3 Computation of Supplemental Pro Forma and Supplemental
Historical Net Loss Per Share
27 Financial Data Schedule (for SEC use only)
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of July
3, 1996, among PAGING SERVICES, INC., a Georgia corporation ("Seller"),
PREFERRED NETWORKS, INC. ("Purchaser"), a Delaware corporation and PREFERRED
TECHNICAL SERVICES, INC., a Georgia corporation and a wholly-owned subsidiary
of Purchaser ("SubCorp") and the undersigned shareholders of Seller (referred
to herein individually as a "Shareholder" and collectively as the
"Shareholders").
BACKGROUND STATEMENT
Purchaser and Seller desire to effect a business combination of Seller
and SubCorp pursuant to which Seller will merge with and into SubCorp, and the
holders of shares of Seller common stock, $1 par value ("Seller Common Stock"),
will receive Purchaser common stock, par value $.0001 per share ("Purchaser
Common Stock"), in exchange for Seller Common Stock, as provided in this
Agreement (the "Merger"). The Merger is intended to be a reorganization under
Section 368(a)(1)(A) and 368 (a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code").
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE 1
THE BUSINESS COMBINATION
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3),
Seller shall be merged with and into SubCorp in accordance with the provisions
of this Agreement and the Georgia Business Corporation Code (the "GBCC"), and
the separate existence of Seller shall thereupon cease, and SubCorp as the
surviving corporation in the Merger (hereinafter sometimes referred to as the
"Surviving Corporation"), shall continue its corporate existence under the laws
of the State of Georgia as a wholly-owned subsidiary of Purchaser. The Merger
shall have the effect provided under the applicable laws of the State of
Georgia including, but not limited to, Section 14-2-1106 of the GBCC.
1.2 CLOSING. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Preferred
Networks, Inc., 5300 Oakbrook Parkway, Suite 320, Norcross, Georgia 30093 at
10:00 a.m. on the third business day after all conditions set forth in Article
7 have been satisfied or waived in writing or at such
other place and time as
1
<PAGE> 2
Purchaser and Seller may agree (the "Closing Date"). At the Closing,
the parties shall execute and deliver the agreements and other documents
referred to in Article 8.
1.3 EFFECTIVE TIME OF THE MERGER. If all the conditions set forth
in Article 7 shall have been fulfilled or waived in accordance with this
Agreement and provided that this Agreement has not been terminated pursuant to
Article 10, the parties shall cause the certificate of merger attached hereto
as Exhibit A (the "Certificate of Merger") to be executed, delivered and filed
with the Secretary of State of Georgia in accordance with the provisions of the
GBCC. The Merger shall become effective at the time of such filing unless a
different effective time is specified in the Certificate of Merger pursuant to
the GBCC (the "Effective Time").
1.4 ARTICLES OF INCORPORATION; BYLAWS. The Articles of
Incorporation and Bylaws of SubCorp as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, until duly amended in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the persons who are directors and officers of SubCorp at the
Effective Time will become the directors and officers of the Surviving
Corporation until such time as they may be replaced in accordance with the
Bylaws of the Surviving Corporation.
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION
2.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) SELLER COMMON STOCK. Each issued and outstanding share
of Seller Common Stock (an aggregate of 555 shares), excluding any
such shares held in the treasury of Seller and excluding any such
shares held by Purchaser or its Subsidiaries (as defined below) shall
automatically be cancelled and extinguished and shall thereafter be
converted into only the right to receive 105.98738 shares of Purchaser
Common Stock (the "Conversion Ratio"), and Four Hundred Fifty and
45/100 Dollars ($450.45) in cash or readily available funds.
(b) TREASURY SHARES. Each share of Seller Common Stock held
in the treasury of Seller or held by Purchaser or any of its
Subsidiaries shall be automatically cancelled and extinguished, and no
payment shall be made in respect thereof.
(c) SUBCORP COMMON STOCK. Each issued and outstanding share
of SubCorp common stock at the Effective Time shall be converted into
and shall thereafter represent one validly issued, fully paid and
nonassessable share of common stock of the Surviving
2
<PAGE> 3
Corporation, which shall then constitute all of the issued and
outstanding shares of the Surviving Corporation.
2.2 NO FRACTIONAL SHARES. No scrip or fractional shares of
Purchaser Common Stock shall be issued in the Merger upon conversion of Seller
Common Stock as provided in Section 2.1(a). Each registered holder of Seller
Common Stock who would otherwise have been entitled to receive a fraction of a
share of Purchaser Common Stock upon conversion of his Seller Common Stock
shall be entitled to receive a cash payment with respect to such fractional
share in an amount equal to the product of the Reported Market Price (as
defined below) of Purchaser Common Stock multiplied by such fractional share.
Purchaser will make available promptly after the Effective Time to the Exchange
Agent (as defined below) the funds necessary for the purpose of paying cash for
fractional shares.
2.3 REPORTED MARKET PRICE. The Reported Market Price for Purchaser
Common Stock shall be the closing price per share for Purchaser Common Stock on
the Nasdaq Stock Market ("Nasdaq") as of June 28, 1996.
2.4 STOCK TRANSFER BOOKS. From and after the Effective Time, no
transfer of Seller Common Stock outstanding prior to the Effective Time shall
be registered on the stock transfer books of the Surviving Corporation. If,
after the Effective Time, certificates for Seller Common Stock are presented to
the Surviving Corporation for transfer, such certificates shall be cancelled
and exchanged for the consideration described in Section 2.1(a) (the "Merger
Consideration").
2.5 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING SELLER
COMMON STOCK.
(a) EXCHANGE AGENT. Purchaser shall appoint First Union
National Bank of North Carolina, N.A., or such other financial
institution as may be selected by Purchaser, or Purchaser shall
appoint itself, to act as exchange agent for the Merger (the "Exchange
Agent"). At the Effective Time, Purchaser shall, pursuant to
irrevocable instructions, direct the Exchange Agent to deliver the
number of shares of Purchaser Common Stock provided for in Section
2.1.
(b) SURRENDER OF CERTIFICATES. Prior to, at or promptly
after the Effective Time, Purchaser shall cause the Exchange Agent to
mail or otherwise make available to each record holder as of the
Effective Time of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Seller Common
Stock (the "Certificates"), a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates for conversion thereof,
which letter of transmittal shall comply with all applicable rules of
Nasdaq. Upon surrender to the Exchange Agent of the Certificates,
together with such letter of transmittal duly executed, the holder of
such Certificates shall be entitled to receive promptly in exchange
therefor one or more certificates as requested
3
<PAGE> 4
by the holder (properly issued, executed and counter-signed, as
appropriate) representing that number of whole shares of Purchaser
Common Stock to which such holder of Seller Common Stock shall have
become entitled pursuant to the provisions of Section 2.1 and the
Certificates so surrendered shall forthwith be cancelled. From the
Effective Time until surrender in accordance with the provisions of
this Section 2.5, each Certificate (other than Certificates
representing treasury shares) shall represent for all purposes only
the right to receive the Merger Consideration. All payments in
respect of Seller Common Stock that are made in accordance with the
terms hereof shall be deemed to have been made in full satisfaction of
all rights pertaining to such securities.
(c) LOST CERTIFICATES. In the case of any lost, misplaced,
stolen or destroyed Certificate, the holder thereof may be required,
as a condition precedent to delivery to such holder of the Merger
Consideration, to deliver to Purchaser an indemnity agreement and a
bond in such reasonable sum as Purchaser may direct as indemnity
against any claim that may be made against the Exchange Agent,
Purchaser or the Surviving Corporation with respect to the Certificate
alleged to have been lost, misplaced, stolen or destroyed.
(d) NO INTEREST. No interest shall be paid or accrued on any
portion of the Merger Consideration regardless of the cause for delay
in payment of the Merger Consideration.
(e) DIVIDENDS ON PURCHASER COMMON STOCK. No holder of a
Certificate shall be entitled to delivery of any dividend or other
distribution from Purchaser having a record date after the Effective
Time until surrender of such holder's Certificate pursuant to this
Section 2.5. Upon such surrender, there shall be paid to the holder
the amount of any dividends or other distributions (without interest)
that theretofore became payable by Purchaser, but were not paid by
reason of the foregoing with respect to the number of whole shares of
Purchaser Common Stock represented by the certificate or certificates
issued upon such surrender. From and after the Effective Time,
Purchaser shall, however, be entitled to treat any such Certificate
that has not yet been surrendered for exchange as evidencing the
ownership of the aggregate Merger Consideration into which the Seller
Common Stock represented by such Certificate shall have been
converted, notwithstanding any failure to surrender such Certificate.
(f) NO LIABILITY. Neither Purchaser nor Seller shall be
liable to any holder of shares of Seller Common Stock for any
Purchaser Common Stock (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any abandoned
property, escheat or similar law.
(g) WITHHOLDING RIGHTS. Purchaser or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of shares
of Seller Common Stock such amounts, if any, as Purchaser or the
Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state,
local or foreign tax
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law. To the extent that amounts are so withheld by Purchaser
or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the
shares of Seller Common Stock in respect of which such deduction and
withholding was made by Purchaser or the Exchange Agent.
2.6 DISSENTING STOCKHOLDERS. Any holder of Seller Common Stock who
dissents from the Merger and exercises dissenters' rights in accordance with
the provisions of Article 13 of the GBCC and who perfects such rights pursuant
to such Article shall be entitled to receive, in lieu of the consideration
provided in Section 2.1, the value of such shares in cash as determined
pursuant to the applicable provisions of the GBCC. Notwithstanding the other
provisions of this Article 2, Seller Common Stock with respect to which a
proper demand has been made in accordance with Section 1321 of the GBCC shall
not be converted into the right to receive Merger Consideration applicable to
such shares as set forth in Section 2.1, unless the holder thereof shall have
lost his status as a dissenting shareholder pursuant to Section 1323 of the
GBCC. Within ten days after the date the Shareholders approve this Agreement
and the Merger, Seller shall send to those Shareholders entitled thereto a
notice relating to dissenters' rights complying with the provisions of Section
1322(b) of the GBCC, accompanied by a copy of Article 13 of the GBCC.
2.7 ADJUSTMENTS. In the event that at any time after the date
hereof and prior to the Effective Time, Purchaser shall effect (i) a dividend
or other distribution with respect to Purchaser Common Stock payable in
Purchaser Common Stock or other property (other than cash), including the
common stock, preferred stock or other securities of a Subsidiary, (ii) a
combination of outstanding Purchaser Common Stock into a smaller number of such
Purchaser Common Stock, or (iii) any reorganization or reclassification, or any
consolidation or merger of Purchaser, with another corporation, or the sale of
all or substantially all of its assets to another corporation, in such a way
that holders of outstanding Purchaser Common Stock shall be entitled to receive
(either directly or upon subsequent liquidation) stock, securities or other
property with respect to or in exchange for such Purchaser Common Stock (any
such event described in (i)-(iii) above referred to as a "Diluting Event"),
then, as a condition of such Diluting Event, lawful and adequate provision
shall be made whereby the Shareholders shall thereafter be entitled to receive
(under the same terms otherwise applicable their receipt of Purchaser Common
Stock), in lieu of the number of shares of Purchaser Common Stock to which such
Shareholders are entitled immediately prior to such Diluting Event, such shares
of stock, securities or other property as may be issued or payable with respect
to or in exchange for that number of shares of Purchaser Common Stock to which
the Shareholders were so entitled, and in any case appropriate provision shall
also be made with respect to such Shareholders' rights and interests to the end
that the provisions of this Section 2.7 shall thereafter be applicable in
relation to any shares of stock, securities or other property thereafter
deliverable to such Shareholders pursuant to the provisions hereof.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES BY SELLER AND SHAREHOLDERS
Seller and the Shareholders represent and warrant to Purchaser as
follows:
3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, has the corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in the jurisdictions shown on
Schedule 3.1, which include all jurisdictions in which the failure to be so
qualified would have a material adverse effect on Seller's [consolidated]
financial condition or results of operations. The copies of Seller's Articles
of Incorporation and Bylaws, as amended to date, which have been delivered to
Purchaser, are complete and correct, and such instruments, as so amended, are
in full force and effect at the date hereof.
3.2 CAPITALIZATION. The authorized capital stock of Seller
consists of 100,000 shares of Seller Common Stock. All of the issued and
outstanding shares of Seller Common Stock are duly authorized, validly issued,
fully paid and nonassessable, and were not issued in violation of any
preemptive rights. As of the date hereof: (i) 555 shares of Seller Common
Stock are issued and outstanding; and (ii) no shares of Seller Common Stock are
held by Seller as treasury shares. Except as set forth on Schedule 3.2 and in
this Section 3.2, there are no shares of capital stock of Seller outstanding,
and there are no subscriptions, options, convertible securities, calls, rights,
warrants or other agreements, claims or commitments of any nature whatsoever
obligating Seller to issue, transfer, register with any securities commission
or other authority, deliver or sell or cause to be issued, transferred, so
registered, delivered or sold, additional shares of the capital stock or other
securities of Seller or obligating Seller to grant, extend or enter into any
such agreement or commitment.
3.3 AUTHORITY. Seller has the corporate power and authority to
execute and deliver this Agreement and any other agreements, instruments and
documents executed and delivered by Seller pursuant to this Agreement (this
Agreement and such other agreements, instruments and documents are collectively
referred to as the "Seller Delivered Agreements") and to consummate the
transactions contemplated on the part of Seller hereby and thereby. The
execution and delivery by Seller of the Seller Delivered Agreements and the
consummation by Seller of the transactions contemplated on its part thereby
have been duly authorized by its Board of Directors. The Seller Delivered
Agreements have been duly executed and delivered by Seller and each is a valid
and binding obligation of Seller enforceable in accordance with its terms.
3.4 NON-CONTRAVENTION. The execution and delivery of the Seller
Delivered Agreements by Seller do not and the consummation by Seller of the
transactions contemplated thereby does not and will not (i) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Seller or any
of its Subsidiaries, or (ii) except as set forth on Schedule 3.4, violate or
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conflict with, or result (with the giving of notice or the lapse of time or
both) in a violation of or constitute a default under any provision of, or
result in the acceleration or termination of or entitle any party to accelerate
or terminate (whether after the giving of notice or lapse of time or both), any
obligation or benefit under, or result in the creation or imposition of any
lien, charge, pledge, security interest, adverse claim or other encumbrance
(collectively, a "Lien") upon any of the assets or properties of Seller or
require consent, authorization or approval of any person or entity pursuant to
any provision of any "Material Contract" (as defined below), "Intellectual
Property Agreement" (as defined below), law, ordinance, regulation, policy,
order or rule (collectively "Laws"), arbitration award, judgment or decree to
which Seller or any of its Subsidiaries is a party or by which it or its assets
or properties are bound and do not and will not violate or conflict with any
other material restriction of any kind or character to which Seller or any of
its Subsidiaries is subject or by which any of its assets or properties may be
bound, and the same does not and will not constitute an event permitting
termination of any Material Contract or Intellectual Property Agreement to
which Seller is a party. Except as set forth on Schedule 3.4, no such
violation, conflict, default, acceleration, termination, entitlement, creation
or imposition of a Lien, regardless of whether it is described on Schedule 3.4,
shall cause any damage, additional cost or expense (including any payments or
expenses incurred to obtain consents or waivers) to Seller, Purchaser or the
Surviving Corporation. Except as set forth on Schedule 3.4, Seller believes
that it will be able to obtain (without material additional payment or expense)
all consents and waivers necessary to avoid any such violation, acceleration,
entitlement to accelerate, creation or imposition of a lien, charge, pledge,
security interest or other encumbrance, conflict or event.
3.5 CONSENTS. Except as set forth on Schedule 3.5, and except for
the filing of the Certificate of Merger with the Secretary of State of Georgia,
no consent, authorization, clearance, order or approval of, or filing or
registration (collectively, "Authorizations") with, any executive, judicial or
other public authority, agency, department, bureau, division, unit or court or
other public person or entity (collectively, a "Governmental Entity") or any
other third party is required for or in connection with the execution and
delivery of the Seller Delivered Agreements by Seller and the consummation by
Seller of the transactions contemplated thereby.
3.6 SUBSIDIARIES. Schedule 3.6 sets forth each Subsidiary of
Seller. Seller owns, directly or indirectly, all the outstanding capital stock
of each of its Subsidiaries, free and clear of all liens, charges, pledges,
security interests or other encumbrances, and all such capital stock is duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
except as set forth on Schedule 3.6, neither Seller nor any Subsidiary has made
any material investment in, or material advance of cash or other extension of
credit to, any person, corporation or other entity other than its Subsidiaries.
None of such Subsidiaries has any commitment to issue or sell any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for, or giving any person (other than Seller) any right to acquire from such
Subsidiary, any shares of its capital stock, and no such securities or
obligations are outstanding. Each such Subsidiary is a corporation duly
organized and validly existing in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to own
all of its properties and assets
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and to carry on its business as it is now being conducted. Each Subsidiary is
duly qualified to do business and is in good standing in the jurisdictions
shown on Schedule 3.6, which are all jurisdictions in which each such
Subsidiary owns any real property, has any place of business, or where such
qualification is required. As used in this Agreement, the term "Subsidiary"
means, with respect to any person, corporation or other entity, any corporation
or other organization, whether incorporated or unincorporated, of which at
least a majority of the securities or interests having by the terms thereof
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is at
that time directly or indirectly owned or controlled by such person,
corporation or other entity.
3.7 FINANCIAL STATEMENTS. Seller has previously furnished
Purchaser with a true and complete copy of the balance sheets of Seller as of
December 31, 1994 and 1995 and the related statements of income, stockholders'
equity and cash flows for the years then ended, (the "Seller Financial
Statements"). The Seller Financial Statements and the Seller financial
statements for the five (5) month period ending May 31, 1996 (together with the
Seller Financial Statements and the financial statements to be provided
pursuant to Section 6.13, the "Seller Financial Statements") have been prepared
from, and are in accordance with, the books and records of Seller and present
fairly the financial position and results of operations of Seller and its
Subsidiaries taken as a whole as of the dates and for the periods indicated, in
each case in conformity with generally accepted accounting principles,
consistently applied, except as otherwise stated in the Seller Financial
Statements and include all adjustments (consisting only of normal recurring
accruals) that are necessary for the fair presentation of the financial
position of Seller and its Subsidiaries and the results of operations and cash
flows except as otherwise stated in the Seller Financial Statements. The
accounts receivable, net of allowance for doubtful accounts, of Seller
reflected in the latest Seller Financial Statements, are valid, existing and
fully collectible without resort to legal proceedings.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on
Schedule 3.8, since December 31, 1995, there has not been: (i) any material
adverse change in the assets, liabilities, business, financial condition,
results of operations or prospects of Seller; (ii) any damage, destruction,
loss or casualty to property or assets of Seller, whether or not covered by
insurance, which property or assets are material to the operations or business
of Seller; (iii) any strike, work stoppage or slowdown or other labor trouble
involving Seller; (iv) any declaration, setting aside or payment of any
dividend or distribution (whether in cash, capital stock or property) with
respect to the capital stock of Seller; (v) any redemption or other acquisition
by Seller of any of the capital stock of Seller; (vi) any split, combination,
reclassification or other similar change in the outstanding Seller Common
Stock; (vii) any transaction entered into by Seller other than in the ordinary
course of business; or (viii) any agreement to do any of the foregoing. Since
December 31, 1995, there has not been any issuance by Seller of any shares, or
options, calls or commitments relating to shares of its capital stock, or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to acquire from it, any shares of its capital stock.
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3.9 GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Except as
disclosed on Schedule 3.9, Seller and its Subsidiaries have been and are in
compliance with all Laws of all Governmental Entities applicable to Seller or
its business, properties or assets. Seller holds all licenses, permits,
certificates, franchises, registrations, consents, Authorizations or other
rights filed with, granted, issued by, or entered by any Governmental Entity,
including without limitation, any state or local regulatory authorities and any
state or local public service commission or public utility commission asserting
jurisdiction over the radio facilities of Seller (each, a "State Authority"),
that are required for the conduct of its business as now being conducted
(collectively, "Seller Licenses"). The Seller Licenses are set forth on
Schedule 3.9 and are valid, in full force and effect, and the terms of said
Seller Licenses are not subject to any restrictions or conditions that
materially limit or would materially limit the operations of the business of
Seller as presently conducted, other than restrictions or conditions generally
applicable to licenses of that type. There are no proceedings pending or, to
the best knowledge of Seller, complaints or petitions by others, or threatened
proceedings, before any Governmental Entity relating to the business or
operations of Seller or the Seller Licenses, and there are no facts or
conditions that reasonably could be expected to constitute grounds to revoke,
terminate, suspend, deny, annul, or impose conditions on any renewal of any
Seller Licenses, or materially impair the ability of Seller to consummate the
transactions contemplated hereby or to impose any fines, forfeitures or other
penalties on Seller. Schedule 3.9 also contains a true and complete list of
all licenses, permits, certificates, franchise registrations, consents,
approvals and Authorizations of Seller pending before or issued by any State
Authority (the "Seller State Certificates"). The Seller State Certificates are
the only such federal, state or local licenses, permits, certificates,
franchise registrations, consents and Authorizations that are required for the
conduct of the business and operations of Seller as currently conducted.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
balance sheet as of May 31, 1996, or on Schedule 3.10, Seller (i) did not have,
as of May 31, 1996, debts, liabilities or obligations, whether accrued,
absolute, contingent or otherwise and whether due or to become due (including
without limitation any uninsured liabilities resulting from failure to comply
with any Laws); (ii) has not incurred since May 31, 1996, any such debts,
liabilities or obligations (other than debts, liabilities or obligations
incurred in the ordinary and usual course of business after May 31, 1996), or
(iii) since May 31, 1996, has not conducted its business otherwise than in the
ordinary and usual course.
3.11 TAX MATTERS. All taxes arising under the Code, or any Law
promulgated thereunder, or arising under any federal, state, local or foreign
Law, including, without limitation, any income, profits, employment, sales,
use, occupation, excise, real property, personal property or ad valorem taxes
or any license or franchise fee or tax and all penalties and interest related
thereto (collectively, "Taxes"), due and payable by Seller have been paid or
provided for in the Seller Financial Statements and are not delinquent. All
Taxes not yet due have been fully accrued on the books of Seller and adequate
reserves have been established therefor. The charges, accruals and reserves
which have been provided in the Seller Financial Statements in respect of Taxes
for all fiscal periods prior to and ending at May 31, 1996, are sufficient for
the payment of all unpaid
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Taxes, whether or not disputed, that are accrued or applicable for the period
ended May 31, 1996, and for all years and periods ended prior thereto. There
are no pending claims asserted for Taxes against Seller or outstanding
agreements or waivers extending the statutory period of limitation applicable
to any tax return of Seller for any period. Seller has duly and timely filed
all federal, state, local and foreign tax returns and all other returns
heretofore required to be filed ("Tax Returns") with respect to all Taxes.
Seller has delivered to Purchaser true and correct copies of all Tax Returns
for its 1993, 1994 and 1995 taxable years. Seller has made all estimated
income tax deposits and all other required Tax payments or deposits and has
complied for all prior periods in all material respects with the Tax
withholding provisions of all applicable federal, state, local and other Laws.
3.12 TITLE TO PROPERTIES; ADEQUACY. Seller has good and marketable
title to all properties and assets reflected in the balance sheet dated May 31,
1996 (or acquired after that date), or valid leasehold interests in all
properties and assets not reflected on such balance sheet but used by Seller,
free and clear of any title defects or Liens, except (i) mortgages and Liens
securing debt reflected as liabilities on such balance sheet, (ii) Liens for
current Taxes and assessments not in default, (iii) mechanics', carriers',
workers', repair persons', statutory or common law Liens either not delinquent
or being contested in good faith and (iv) Liens, covenants, rights-of-way,
building or use restrictions, easements, exceptions, variances, reservations
and other matters or limitations of any kind, if any, which do not have an
adverse effect on Seller's use of the property affected. No person other than
Seller is currently entitled to possession of any of the properties of Seller,
whether owned or leased by Seller. The real property, buildings, structures
and improvements owned or leased by Seller conform to all applicable Laws,
including zoning regulations, none of which would upon consummation of the
Merger adversely interfere with the use of such properties, buildings,
structures or improvements for the purposes for which they are now utilized.
Seller has not received notice nor has knowledge of (A) any pending or
contemplated condemnation or eminent domain proceeding affecting the properties
owned or leased by Seller, (B) any proposal for increasing the assessed value
of any such properties for state, county, local or other ad valorem Taxes or
(C) any pending or contemplated proceedings or public improvements that would
result in the levy of any special Tax or assessment against any such
properties; and there are no outstanding requirements or recommendations by
Seller's insurance providers requiring or recommending any repairs or work to
be done with reference to any such properties or any basis for such. The
properties and assets owned or leased by Seller are adequate in all material
respects for the conduct of its business as presently conducted and are in good
repair and operating condition, normal wear and tear excepted. The properties
and assets owned by Seller constitute all of the property and assets which
Seller uses or may reasonably need in connection with the operation of its
business as presently conducted, and the consummation of the transactions
contemplated by this Agreement will not impair the ability of Purchaser and
SubCorp to use such properties and assets.
3.13 BANK ACCOUNTS. Schedule 3.13 lists all bank, money market,
savings and similar accounts and safe deposit boxes of Seller, specifying the
account numbers and the authorized signatories or persons having access to
them.
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3.14 LEASES AND SUBLEASES. Schedule 3.14 sets forth each lease or
sublease pursuant to which Seller leases or subleases any real or personal
property, either as lessor or lessee, except any lease or sublease of personal
property that (i) can be cancelled by the Seller upon 30 or fewer days' notice
without cost or penalty, acceleration of rentals or exercise of an option to
purchase the leased property or (ii) involves an annual rental of $5,000 or
less, and the leases and subleases disclosed on Schedule 3.14 together with the
leases and subleases not required to be disclosed on Schedule 3.14)) do not
involve payments by or to the Seller of more than $50,000 in the aggregate.
Seller has delivered to Purchaser true and correct copies of all leases and
subleases required to be set forth on Schedule 3.14, and: (A) Seller is not in
default in connection with any lease or sublease to which it is a party or by
which it is bound nor, so far as Seller knows, is there any basis for any claim
or default in any respect under any of the foregoing; and so far as Seller
knows, no other party is in default under any such lease or sublease; (B) no
act or event has occurred which with notice or lapse of time, or both, would
constitute a default under any such lease or sublease and, so far as Seller
knows, there is no basis for such; (C) there is no outstanding notice of
cancellation or termination in connection therewith; and (D) each such lease or
sublease is a valid and binding agreement of the parties thereto which is in
full force and effect in accordance with its terms.
3.15 MATERIAL CONTRACTS. Schedule 3.15 contains a correct and
complete list of the following (collectively, the "Material Contracts"):
(a) all bonds, debentures, loan agreements, notes, mortgages,
deeds to secure debt, deeds of trust, reinsurance and other risk
sharing agreements, indentures or guaranties to which Seller is a
party or by which Seller or its properties or assets are bound;
(b) all leases (whether capital or operating) under which
Seller is the lessee of real or personal property;
(c) all employment agreements of Seller; and
(d) all existing contracts and commitments (other than those
described in subparagraphs (a), (b) or (c) and any "Employee Plans"
(as defined below to which Seller is a party or by which Seller or its
properties or assets may be bound involving an annual commitment or
annual payment by any party thereto of more than $1,000 individually,
or which have a fixed term extending more than 12 months from the date
hereof and which involve an annual commitment or annual payment by any
party thereto of more than $1,000 individually.
True and complete copies of all Material Contracts, including all amendments
thereto, have been made available to Purchaser. Except as set forth on
Schedule 3.15: (A) all Material Contracts are in full force and effect and
constitute the valid and binding obligations of the respective parties thereto;
(B) there has not been and there currently is no default under any Material
Contract by
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Seller or, to the knowledge of Seller, any other party thereto; (C) no event
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder entitling any party to terminate a Material Contract; and (D) the
continuation, validity and effectiveness of all such Material Contracts under
the current terms thereof and the current rights and obligations of Seller
thereunder will in no way be affected, altered or impaired by the consummation
of the Merger. Except as disclosed on Schedule 3.15, there are no contracts or
options to sell or lease any properties or assets of Seller.
3.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 3.16, (i)
there is no claim, action, suit, proceeding or investigation pending or, to the
knowledge of Seller, contemplated or overtly threatened against Seller or any
of its properties or assets (or any of its officers or directors in connection
with the business of Seller) before any arbitrator or Governmental Entity,
domestic or foreign, which in the event of a final adverse determination,
considered individually or in the aggregate with all such other claims,
actions, suits or proceedings, would adversely affect the assets, liabilities,
financial condition, results of operations, business or prospects of Seller, or
which seeks treble damages, seeks damages in connection with any of the
transactions contemplated by this Agreement or seeks to prohibit, restrict or
delay consummation of the Merger or any of the conditions to consummation of
the Merger or to limit in any material manner the right of Purchaser to control
the Surviving Corporation or any aspect of the business of Seller after the
Effective Time, nor is there any judgment, decree, injunction, ruling or order
of any Governmental Entity, arbitrator or any other person outstanding against
Seller having any such effect; and (ii) Seller is a party to or bound by any
judgment, decree, injunction, ruling or order of any Governmental Entity,
arbitrator or any other person against Seller that, when considered
individually or in the aggregate with all such other judgments, decrees,
injunctions, rulings or orders, adversely affects the assets, liabilities,
financial condition, results of operations, business or prospects of Seller.
3.17 LABOR RELATIONS. Except as disclosed on Schedule 3.17, Seller
is in compliance with all federal and state Laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
is not engaged in any unfair labor or unlawful employment practice. There is
no unlawful employment practice or discrimination charge pending before the
Equal Employment Opportunity Commission ("EEOC") or any EEOC recognized state
"referral agency." There is no unfair labor practice charge or complaint
against Seller pending before the National Labor Relations Board ("NLRB").
There is no labor strike, dispute, slowdown or stoppage actually pending or, to
the best knowledge of Seller, threatened against or involving or affecting
Seller and no NLRB representation question exists respecting any of its
employees. No grievance or arbitration proceeding is pending and no written
claim therefor exists. There is no collective bargaining agreement that is
binding on Seller. Except for any Material Contract disclosed pursuant to
Section 3.15, Seller is not a party to or bound by any agreement, arrangement
or understanding with any employee or consultant that cannot be terminated on
notice of ninety (90) or fewer days without liability to Seller or that
entitles the employee or consultant to receive any salary continuation or
severance payment or retain any specified position with Seller.
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3.18 INSIDER INTERESTS. Except as disclosed on Schedule 3.18, no
affiliate, officer, director or Shareholder of Seller (i) has any agreement
with Seller or any interest in any property, real or personal, tangible or
intangible, including without limitation trade names or trademarks used in or
pertaining to the business of Seller, except for the normal rights as a
stockholder or (ii) has any claim or cause of action against Seller, except for
accrued compensation and benefits, expenses and similar obligations incurred in
the ordinary course of business (including reimbursement of medical expenses
pursuant to Employee Plans) with respect to employees of Seller.
3.19 INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.19,
Seller owns all patents, trademarks, service marks, trade names, copyrights or
applications for the foregoing, and all computer programs, firmware and
documentation relating thereto, and trade secrets and other intellectual
properties (collectively, the "Intellectual Property") that are or were used in
the conduct of the business of Seller. Except as disclosed on Schedule 3.19,
Seller has and has had the unrestricted right to produce, market, license and
sell all of the products and services produced, marketed and licensed by it and
the consummation of the transactions contemplated by this Agreement will not
alter or impair any such rights. Schedule 3.19 lists all of the Intellectual
Property other than trade secrets, which have been separately disclosed to
Purchaser, and lists all licenses or other agreements (other than licenses of
generally available software programs for personal computers) pursuant to which
Seller has any right to use or enjoy any Intellectual Property that is owned by
others or pursuant to which Seller is under a duty of confidentiality with
respect to any Intellectual Property owned by others (the "Intellectual
Property Agreements"). Except as disclosed on Schedule 3.19, all of the
Intellectual Property is owned free and clear of all assignments, licenses,
sublicenses, and Liens, including claims of employees, former employees or
independent contractors of Seller, and Seller has not received notice that the
use of any of the Intellectual Property in the business of Seller, any of the
products or services of Seller or any products held for future sale or license
by Seller violates or infringes upon the claimed rights of others and there is
no valid basis for such a claim. As to the Intellectual Property Agreements,
except as set forth on Schedule 3.19, (i) all are in full force and effect;
(ii) Seller is not, nor to the best of the knowledge of Seller or the
Shareholders, is any other party thereto, in default under any Intellectual
Property Agreement; (iii) Seller is not obligated to make any royalty, transfer
or similar payments under any Intellectual Property Agreement, (iv) the rights
of Seller under the Intellectual Property Agreements will not be affected by
the consummation of the transactions provided for herein, and (v) the exercise
by Seller of its respective rights under any Intellectual Property Agreement
will not infringe upon the claimed rights of others.
3.20 INSURANCE. Seller maintains the amount and scope of all
insurance policies or contracts providing coverage as summarized on Schedule
3.20. All such policies or contracts of insurance are of a scope and, in the
opinion of management, in an amount usual and customary for businesses engaged
in the businesses of Seller and are sufficient for compliance with all Laws and
of all agreements to which Seller is a party. All insurance policies pursuant
to which any such insurance is provided are in full force and effect and no
effective notice of cancellation or
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termination of any such insurance policies has been given to Seller by the
carrier of any such policy. All premiums required to be paid in connection
therewith have been paid in full.
3.21 EMPLOYEE AND FRINGE BENEFIT PLANS.
(a) SCHEDULE OF PLANS. Schedule 3.21 lists each of the
following that Seller or any of the Subsidiaries or any ERISA
Affiliate (as defined below) either maintains, is required to
contribute to or otherwise participates in (or at any time during the
preceding seven years maintained, contributed to or otherwise
participated in) or as to which Seller or any of the Subsidiaries or
any ERISA Affiliate has any unsatisfied liability or obligation,
whether accrued, contingent or otherwise:
(i) any employee pension benefit plan
("Pension/Profit-Sharing Plan") (as such term is defined in the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including any pension, profit-sharing, retirement,
thrift or stock bonus plan;
(ii) any "multi-employer plan" ("Multi-Employer
Plan") (as such term is defined in ERISA);
(iii) any employee welfare benefit plan ("Welfare
Plan") (as such term is defined in ERISA); or
(iv) any other compensation, stock option, restricted
stock, fringe benefit or retirement plan, program, policy,
understanding or arrangement of any kind whatsoever, whether
formal or informal, not included in the foregoing and providing
for benefits for, or the welfare of, any or all of the current
or former employees or agents of Seller or any of the
Subsidiaries or any ERISA Affiliate or their beneficiaries or
dependents, including any group health, life insurance, retiree
medical, bonus, incentive or severance arrangement, and all
outstanding stock options, restricted shares, phantom stock
awards, stock appreciation rights, performance share unit
awards or cash or other similar incentive awards thereunder;
(all of the foregoing in items (i), (ii), (iii) and (iv) being
referred to as "Employee Plans"). "ERISA Affiliate" means each
trade or business (whether or not incorporated) which together with
Seller or any of the Subsidiaries is treated as a single employer
pursuant to Code Section 414(b), (c), (m) or (o). Seller has
delivered to Purchaser (and Schedule 3.21 lists each item delivered)
copies of the following: (1) each written Employee Plan, as amended
(including either the original plan or the most recent restatement and
all subsequent amendments); (2) the most recent Internal Revenue
Service ("IRS") determination letter issued with respect to each
Pension/Profit-Sharing Plan; (3) the latest actuarial valuation (if
any) for each Pension/Profit-Sharing Plan; (4) the three most recent
annual reports on the Form 5500 series; (5) each trust agreement,
insurance contract or
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document setting forth any other funding arrangement, if any, with
respect to each Employee Plan; (6) the most recent ERISA summary plan
description or other summary of plan provisions distributed to
participants or beneficiaries for each Employee Plan; (7) each opinion
or ruling from the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC") concerning any Employee Plan; and (8)
each Registration Statement, amendment thereto and prospectus relating
thereto filed with the Securities and Exchange Commission (the "SEC")
or furnished to participants in connection with any Employee Plan.
(b) QUALIFICATION. Except as set forth on Schedule 3.21 each
Pension/Profit-Sharing Plan: (i) has received a favorable
determination letter from the IRS to the effect that it is qualified
under Code Sections 401(a) and 501, both as to the original plan and
all restatements or material amendments; (ii) has never been subject
to any assertion by any Governmental Entity that it is not so
qualified; and (iii) has been operated so that it has always been so
qualified.
(c) ACCRUALS; FUNDING.
(i) Pension/Profit-Sharing Plans. None of the
Employee Plans is a Pension/Profit-Sharing Plan subject to
ERISA Title IV (including those for retired, terminated or
other former employees and agents).
(ii) Other Plans. Schedule 3.21 fully and accurately
sets forth any funding liability under each Employee Plan not
subject to ERISA Title IV, whether insured or otherwise,
specifically setting forth any liabilities under any retiree
medical arrangement and specifically designating any insured
plan which provides for retroactive premium or other
adjustments. The levels of insurance reserves and accrued
liabilities with regard to each such Employee Plan are
reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
(iii) Contributions. Except as set forth on Schedule
3.21: (1) Each of Seller and the Subsidiaries and each ERISA
Affiliate have made full and timely payment of all amounts
required to be contributed under the terms of each Employee
Plan and applicable Law, or required to be paid as expenses
under such Employee Plan, including PBGC premiums and amounts
required to be contributed under Code Section 412; (2) all
contributions have been made in accordance with the actuarial
recommendations; and (3) no excise taxes are assessable as a
result of any nondeductible or other contributions made or not
made to an Employee Plan.
(d) REPORTING AND DISCLOSURE. Summary plan descriptions and
all other returns, reports, registration statements, prospectuses,
documents, statements and communications which are required to have
been filed, published or disseminated under ERISA or other
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Law and the rules and regulations promulgated by the Department of
Labor under ERISA and the Treasury Department or by the SEC with
respect to the Employee Plans have been so filed, published or
disseminated.
(e) PROHIBITED TRANSACTIONS; TERMINATIONS; OTHER REPORTABLE
EVENTS. Except as set forth on Schedule 3.21:
(i) neither Seller, any Subsidiary, any ERISA
Affiliate, any Employee Plan, any trust or arrangement created
under any of them, nor any trustee, fiduciary, custodian,
administrator or any person or entity holding or controlling
assets of any of the Employee Plans has engaged in any
"prohibited transaction" (as such term is defined in ERISA or
the Code) for which there is no exception which could subject
any of the foregoing persons or entities, or any person or
entity dealing with them, to any tax, penalty or other cost or
liability of any kind; and
(ii) no termination, whether partial or complete, has
occurred with respect to any Employee Plan.
(f) CLAIMS FOR BENEFITS. Other than claims for benefits
arising in the ordinary course of the administration and operation of
the Employee Plans, no claims, investigations or arbitrations are
pending or threatened against any Employee Plan or against Seller, any
Subsidiary any ERISA Affiliate, any trust or arrangement created under
or as part of any Employee Plan, any trustee, fiduciary, custodian,
administrator or other person or entity holding or controlling assets
of any Employee Plan, and no basis to anticipate any such claim or
claims exists.
(g) OTHER. Each of Seller, each Subsidiary and all ERISA
Affiliates have fully complied with all of their obligations under
each of the Employee Plans and with all provisions of ERISA and any
and all other Laws applicable to the Employee Plans. No written
notice has been received by Seller or any Subsidiary of any claim by
any participant in the Employee Plans of any violations of such Laws,
and to the best knowledge of Seller, no such claims are pending or
threatened.
(h) CREATION OF OBLIGATIONS BY REASON OF MERGER. Except as
set forth on Schedule 3.21, the execution and delivery of this
Agreement and the consummation of the transactions contemplated by
this Agreement will not constitute an event under any Employee Plan
that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee, including any obligation to make a payment
that would be nondeductible under Code Section 280G or any other Code
provision.
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(i) NO MULTI-EMPLOYER PLANS. Except as set forth on
Schedule 3.21, none of the Employee Plans is a Multi-Employer
Plan, and neither Seller, any Subsidiary nor any ERISA
Affiliate has any liability, joint or otherwise, for any
withdrawal liability (potential, contingent or otherwise) under
ERISA Title IV for a complete or partial withdrawal from any
Multi-Employer Plan.
3.22 MAJOR CUSTOMERS. Schedule 3.22 sets forth (i) the name of each
customer of Seller or any Subsidiary which during the year ended December 31,
1995 generated revenue of $10,000 or more, (ii) the name of each customer of
Seller or any Subsidiary which during the three months ended March 31, 1996,
generated annualized revenue of $10,000 or more and (iii) the name of each
customer of Seller or any Subsidiary which during the year ended December 31,
1995, or during the three months ended March 31, 1996, generated revenue or
annualized revenue, respectively, of $10,000 or more and as to which Seller has
received a termination notice or otherwise has a reasonable basis to believe
that such customer will terminate its relationship with Seller on or before
December 31, 1996. The revenues generated during the year ended December 31,
1995 or the annualized revenues generated during the three months ended March
31, 1996, under contracts providing for recurring revenues with Seller or any
Subsidiary with respect to which Seller has received a termination notice (or
has been informed that such notice is forthcoming) since December 31, 1995 or
March 31, 1996, as the case may be, did not exceed the estimated revenues to be
received during the year ending December 31, 1996 under new contracts providing
for recurring revenues with customers of Seller or any Subsidiary commencing in
1996.
3.23 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.23:
(a) Seller and its Subsidiaries each has obtained all
Authorizations, kept all records and made all filings required by
applicable Environmental Laws (as defined below) with respect to
emissions or discharges into the environment and the proper disposal
of any hazardous wastes, hazardous substances, or other hazardous or
toxic materials as defined in the Environmental Laws. None of the
properties occupied or used by Seller and its Subsidiaries has been
contaminated with any such hazardous wastes, hazardous substances, or
other hazardous or toxic materials. The Company has conducted its
operations and will consummate the transactions contemplated by this
Agreement in compliance with all Environmental Laws and all
Authorizations obtained pursuant thereto.
(b) Neither Seller nor its Subsidiaries has received any
notice from the United States Environmental Protection Agency that it
is a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act ("Superfund
Notice"), any citation from any Governmental Entity for noncompliance
with its requirements with respect to air, water or environmental
pollution, or the improper storage, use or discharge of any hazardous
waste, other waste or other substance or material pertaining to its
business ("Citations") or any written notice from any private party
alleging any such noncompliance or impropriety; and there are no
pending or
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unresolved Superfund Notices, Citations or written notices from
private parties alleging any such noncompliance or impropriety.
(c) The term "Environmental Laws" shall mean all Laws relating
to pollution or protection of the environment.
3.24 CORPORATE RECORDS. The corporate record books (including the
share records) of Seller are complete, accurate and up to date with all
necessary signatures and set forth all meetings and actions taken by the
shareholders and directors of Seller and all transactions involving the shares
of Seller (and contain all cancelled share certificates).
3.25 ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS. All
information concerning Seller and the Subsidiaries contained in this Agreement,
in any certificate furnished to Purchaser pursuant hereto and in each schedule
hereto is both complete (in that, except as otherwise stated therein, it
represents all the information called for and does not omit to state any
material fact necessary to make the statements contained therein not
misleading) and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement as being documents described in this
Agreement or in any schedule attached hereto are true and correct copies of the
documents which they purport to represent.
3.26 BROKERS, FINDERS AND INVESTMENT BANKERS. Neither Seller nor
any of its officers, directors or employees have employed any broker, finder or
investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees or finders' or similar fees in
connection with the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each of the Shareholders severally represents and warrants to
Purchaser and SubCorp with respect to himself and his ownership of Seller
Common Stock as follows:
4.1 OWNERSHIP OF SHARES. Such Shareholder owns of record and
beneficially the number of shares of Seller Common Stock set opposite the name
of such Shareholder on Schedule 4.1. Such Shareholder owns all right, title
and interest in and to such shares, free and clear of all Liens (including
those for federal or state estate or inheritance taxes), options, rights of
refusal or similar rights or other transfer restrictions of any nature
whatsoever (including any arising from any pending or threatened litigation)
other than restrictions on transfers arising out of applicable federal and
state securities Laws. Except as set forth on Schedule 4.1, such Shareholder
owns no other security of Seller.
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4.2 AUTHORIZATION. With respect to this Agreement and any other
agreements, instruments and documents executed and delivered by such
Shareholder pursuant to this Agreement (this Agreement and such other
agreements, instruments and documents, are collectively referred to as the
"Shareholder Delivered Agreements"): (i) such Shareholder has the right, power
and authority to enter into the Shareholder Delivered Agreements executed and
delivered by him and to consummate the transactions contemplated by, and
otherwise to comply with and perform his obligations under, them; and (ii) the
Shareholder Delivered Agreements will, when delivered, constitute valid and
binding obligations of such Shareholder enforceable against such Shareholder in
accordance with their terms.
4.3 ABSENCE OF VIOLATIONS OR CONFLICTS. The execution and delivery
of the Shareholder Delivered Agreements and the consummation by such
Shareholder of the transactions contemplated by, or other compliance with the
performance under, them do not and will not with the passing of time or giving
of notice or both: (i) constitute a violation of, be in conflict with,
constitute a default or require any payment under, permit a termination of, or
result in the creation or imposition of any Lien upon any assets of Seller
under (A) any contract, agreement, commitment, undertaking or understanding
(including rights of refusal or similar rights or other transfer restrictions)
to which such Shareholder is a party or to which he or his properties are
subject or bound, (B) any judgment, decree or order of any Governmental Entity
to which such Shareholder or his properties are subject or bound, or (C) any
applicable Laws; or (ii) create, or cause the acceleration of the maturity of,
any debt, obligation or liability of such Shareholder that would result in any
Lien or other claim upon the assets of Seller.
4.4 NO CONSENTS REQUIRED. Except as set forth on Schedule 4.4, no
Authorization of or with any Governmental Entity or any other Authorization of
or with any other third party, on the part of such Shareholder is required in
connection with his execution or delivery of the Shareholder Delivered
Agreements or the consummation of the transactions contemplated by, or other
compliance with the performance under, such Shareholder Delivered Agreements by
such Shareholder.
4.5 NO CLAIMS AGAINST SELLER. Except as set forth on Schedule 4.5,
such Shareholder has no claim against Seller, except for accrued compensation
and benefits and expenses or similar obligations incurred in the ordinary
course of business (including reimbursement of medical expenses pursuant to the
Employee Plans disclosed pursuant to this Agreement) with respect to
Shareholders who are employees of Seller, and except as otherwise specifically
provided in this Agreement.
4.6 LITIGATION RELATED TO THIS AGREEMENT. Such Shareholder is not
a party to, or subject to any judgment, decree or order entered in, any lawsuit
or proceeding brought by any Governmental Entity or other third party seeking
to prevent the execution of this Agreement or the consummation of the
transactions contemplated hereby.
4.7 CONTINUITY OF STOCK OWNERSHIP. Such Shareholder does not have,
and to the best of the knowledge of such Shareholder, none of the other
Shareholders has, any plan or intention
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to sell, exchange, or otherwise dispose of a number of shares of Purchaser
Common Stock received in the Merger that would reduce the ownership of
Purchaser Common Stock by the former holders of Seller Common Stock to a number
of Purchaser Common Stock having a value, as of the Effective Time, of less
than 50 percent of the value of all the formerly outstanding Seller Common
Stock as of the Effective Time or to effect any other transaction which would
adversely affect the status of the Merger as a tax-free reorganization under
the Code. For purposes of this Section 4.7, Seller Common Stock exchanged for
cash in lieu of fractional shares of Purchaser Common Stock will be treated as
outstanding as of the Effective Time.
4.8 INVESTMENT INTENT. Such Shareholder will acquire the Purchaser
Common Stock, for his own account, to hold for investment, and with no present
intention of dividing his participation with others or reselling or otherwise
participating, directly or indirectly, in a distribution of the Purchaser
Common Stock, and he will not make any sale, transfer, or other disposition of
the Purchaser Common Stock in violation of the Securities Act or any applicable
state securities laws (the "State Acts"). Such Shareholder agrees that there
will be placed on the certificate for his Purchaser Common Stock, or any
substitutions for it, a legend stating in substance:
THE SHARES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS IN
RELIANCE ON ONE OR MORE EXEMPTIONS THEREUNDER AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER.
4.9 ACCESS TO INFORMATION. Such Shareholder has been given access
to all material and relevant information concerning Purchaser, thereby enabling
such Shareholder to make an informed investment decision concerning the
Purchaser Common Stock. Such Shareholder has relied solely upon an independent
investigation made by him and his representatives, if any, and has, prior to
the date hereof, been given access to and the opportunity to examine data and
information relating to Purchaser. In making his investment decision to
acquire the Purchaser Common Stock pursuant to this Agreement, such Shareholder
is not relying on any oral or written representations or assurances from
Purchaser or any other person or any representative of Purchaser or any other
person other than as set forth in this Agreement. Without limiting the
foregoing, such Shareholder has reviewed Purchaser's Registration Statement on
Form S-1, effective February 26, 1996 (the "S-1"), and Purchaser's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996 (the "10-Q"). Such
Shareholder is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act.
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4.10 ECONOMIC RISK. Such Shareholder represents that he is able to
bear the economic risk of an investment in the Purchaser Common Stock, which
such Shareholder acknowledges is currently illiquid and may remain illiquid
indefinitely, including a possible total loss of his investment. In making
this statement, such Shareholder hereby represents and warrants to Purchaser
that he has adequate means of providing for his current needs and
contingencies; he is able to afford to hold the Purchaser Common Stock for an
indefinite period and he further represents that he has such knowledge and
experience in financial and business matters that the he is capable of
evaluating the merits and risks of the investment in the Purchaser Common
Stock. Further, such Shareholder represents that he has no present need for
liquidity in the Purchaser Common Stock and is willing to accept such
investment risks.
4.11 TAX ADVICE. Such Shareholder has reviewed with his tax advisor
the U.S. federal, state, local and foreign tax consequences of an investment in
the Purchaser Common Stock and the transactions contemplated by this Agreement.
Such Shareholder is relying solely on such advisors and not on any statements
or representations of Purchaser or any of its agents and understands that he
(and not Purchaser) shall be responsible for his own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUBCORP
Purchaser represents and warrants to, Seller as follows and, as to
matters regarding SubCorp, SubCorp represents and warrants to Seller as
follows:
5.1 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own all its
properties and assets and to carry on its business as it is now being
conducted. SubCorp is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the corporate
power and authority to own all of its properties and assets and to carry on its
business as it is now being conducted. The copies of Purchaser's Certificate
of Incorporation and Bylaws and SubCorp's Articles of Incorporation and Bylaws,
in each case, as amended to date, which have been delivered to Seller, are
complete and correct, and such instruments, as so amended, are in full force
and effect.
5.2 CAPITALIZATION. The authorized capital stock of Purchaser
consists of 70,000,000 shares of Purchaser Common Stock and 5,000,000 shares of
$.01 par value preferred stock (the "Purchaser Preferred Stock"). As of March
31, 1996, 14,416,776 shares of Purchaser Common Stock were validly issued and
outstanding, fully paid and non-assessable, and no shares of Purchaser Common
Stock were held in the treasury of Purchaser. No Purchaser Preferred Stock is
issued or outstanding or held in the treasury of Purchaser. The authorized
capital stock of SubCorp consists of 1,000 shares of common stock, no par
value, of which 100 shares are validly
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issued and outstanding, fully paid and non-assessable. Purchaser owns all of
the outstanding shares of SubCorp, and no shares of SubCorp are held in its
treasury.
5.3 AUTHORITY. Each of Purchaser and SubCorp has the corporate
power and authority to execute and deliver this Agreement and any other
agreements, instruments and documents executed and delivered by Purchaser and
SubCorp pursuant to this Agreement (this Agreement and such other agreements,
instruments and documents are collectively referred to as the "Purchaser
Delivered Agreements") and to consummate the transactions contemplated on the
part of Purchaser and SubCorp thereby. The execution and delivery by each of
Purchaser and SubCorp of the Purchaser Delivered Agreements and the
consummation by each of Purchaser and SubCorp of the transactions contemplated
on its part thereby have been duly authorized by its Board of Directors. No
other corporate action on the part of Purchaser or SubCorp is necessary to
authorize the execution and delivery of the Purchaser Delivered Agreements by
Purchaser or SubCorp or the consummation by Purchaser or SubCorp of the
transactions contemplated thereby. The Purchaser Delivered Agreements have
been duly executed and delivered by Purchaser and SubCorp and each is a valid
and binding obligation of Purchaser and SubCorp enforceable in accordance with
its terms.
5.4 NON-CONTRAVENTION. The execution and delivery of the Purchaser
Delivered Agreements by Purchaser and SubCorp do not and the consummation by
Purchaser and SubCorp of the transactions contemplated thereby does not and
will not (i) violate or conflict with any provision of the Certificate or
Articles of Incorporation or Bylaws of Purchaser or SubCorp or (ii) violate or
conflict with, or result (with the giving of notice or the lapse of time or
both) in a violation of or constitute a default under, any provision of, or
result in the acceleration or termination of or entitle any party to accelerate
or terminate (whether after the giving of notice or lapse of time or both) any
obligation or benefit under, or result in the creation or imposition of any
lien, charge, pledge, security interest or other encumbrance upon any of the
assets or property of Purchaser or SubCorp pursuant to any provision of, any
contract, agreement, commitment, undertaking, arrangement or understanding to
which Purchaser or any of its Subsidiaries is a party or bound or to which any
of their assets or properties are subject that is required to be disclosed in
response to Items 601(b)(4) and 601(b)(10) of Regulation S-K promulgated under
the Securities Act (a "Purchaser Material Contract"), Law, order, arbitration
award, judgment or decree to which Purchaser or SubCorp is a party or by which
either of them or their respective assets or properties is bound, and the same
does not and will not constitute an event permitting termination of any
Purchaser Material Contract.
5.5 CONSENTS. Except for any required filings with the SEC under
Regulation D or any state securities commissions, the filing of the Certificate
of Merger with the Secretary of State of Georgia and as reflected on Schedule
5.5), no Authorization of any Governmental Entity is required for or in
connection with the execution and delivery of the Purchaser Delivered
Agreements by Purchaser or SubCorp and the consummation by Purchaser and
SubCorp of the transactions contemplated thereby, if the failure to make such
filing or registration or to obtain such consent, authorization order or
approval would have a material and adverse affect on the
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ability of Purchaser and SubCorp to consummate the transactions contemplated
by the Purchaser Delivered Agreements.
5.6 PERIODIC REPORTS. The S-1 and the 10-Q did not, as of their
respective dates, 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.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1996,
there has not been any material adverse change in the business, financial
condition, results of operations or prospects of Purchaser and its
Subsidiaries, taken as a whole.
5.8 ACTIVITIES OF SUBCORP. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby, SubCorp has neither incurred any obligations or
liabilities nor engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME. During the
period from the date hereof to the Effective Time (except as required by Law,
as set forth on Schedule 6.1 and for the transactions contemplated by this
Agreement):
(a) OPERATION BY SELLER IN THE ORDINARY COURSE OF BUSINESS.
Seller shall conduct its operations according to its ordinary and
usual course of business in substantially the same manner as
heretofore conducted and use its reasonable best efforts to preserve
intact its business organization, to keep available the services of
its officers and employees, suppliers, distributors, customers and
others having business relationships with it. Seller shall prepare
and file all federal, state, local and foreign returns for Taxes and
other Tax reports, filings and amendments thereto required to be filed
by it, and allow Purchaser, at its request, to review all such
returns, reports, filings and amendments at Seller's offices prior to
the filing thereof, which review shall not interfere with the timely
filing of such returns.
(b) FORBEARANCES BY SELLER. Seller shall not without the
prior written consent of Purchaser, which consent shall not be
unreasonably withheld:
(i) except as otherwise permitted pursuant to clause
(vi) below, incur any debt, liability or obligation, direct or
indirect, whether accrued, absolute, contingent or otherwise,
other than current liabilities incurred in the ordinary and
usual course
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of business, or pay any debt, liability or obligation
of any kind other than such current liabilities and current
maturities of existing long-term debt (including interest when
due) in each case only in accordance with the terms of the
document creating and evidencing such debt, or fail to pay any
debt when due or take or fail to take any action, the taking of
which, or the failure to take of which, would permit any debt
to be accelerated;
(ii) assume, guarantee, endorse or otherwise
become responsible for the obligations of any other individual,
firm or corporation or make any loans or advances to any
individual, firm or corporation;
(iii) declare, set aside or pay any dividend
(whether in cash, capital stock or property) with respect to
its capital stock or declare or make any distribution on,
redeem, or purchase or otherwise acquire any Seller Common
Stock, or split, combine or otherwise similarly change the
outstanding Seller Common Stock, or authorize the creation or
issuance of or issue or sell any shares of its capital stock or
any securities or obligations convertible into or exchangeable
for, or giving any person any right to acquire from it, any
shares of its capital stock, or agree to take any such action.
(iv) mortgage, pledge or otherwise encumber any
property or asset, except in the ordinary and usual course of
business;
(v) sell, lease, transfer or dispose of any of
its properties or assets, waive or release any rights or
cancel, compromise, release or assign any indebtedness owed to
it or any claims held by it, except in the ordinary and usual
course of business but in no event shall any such sale, lease,
transfer, disposition, waiver, release, cancellation,
compromise or assignment exceed $5,000;
(vi) make any investment of a capital nature
either by purchase of stock or securities, contributions to
capital, property transfers or otherwise, or by the purchase of
any property or assets of any other individual, firm or
corporation, except in the ordinary and usual course of
business but in no event greater than $5,000;
(vii) fail to perform in all material respects
its obligations under Material Contracts (except those being
contested in good faith) or enter into, assume or amend any
contract or commitment that would be a Material Contract other
than contracts to provide services entered into in the ordinary
and usual course of business;
(viii) except for regularly scheduled increases in
accordance, both as to timing and amount, with normal prior
practice, increase in any manner the compensation or fringe
benefits of any of its officers or employees or pay or agree
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to pay any pension or retirement allowance not required by any
existing plan or agreement to any such officers or employees, or
commit itself to or enter into any employment agreement or any
incentive compensation, deferred compensation, profit sharing, stock
option, stock purchase, savings, consulting, retirement, pension or
other "fringe benefit" plan, award or arrangement with or for the
benefit of any officer, employee or other person;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated or
any of the coverage thereunder to lapse, unless Seller makes
reasonable efforts to obtain simultaneously with such termination or
cancellation replacement policies providing substantially the same
coverage on commercially reasonable terms and, if so available, such
policies are in full force and effect;
(x) amend its Articles of Incorporation or Bylaws;
(xi) enter into any union, collective bargaining or
similar agreement; or
(xii) enter into an agreement to take any of the actions
described in clauses (i) through (xi).
In connection with the continued operation of the business of Seller between
the date of this Agreement and the Effective Time, Seller shall confer in good
faith on a regular basis with one or more representatives of Purchaser
designated in writing to receive reports on operational matters of materiality
and the general status of ongoing operations. Seller acknowledges that
Purchaser does not thereby waive any rights it may have under this Agreement as
a result of this covenant to engage in consultations nor shall Purchaser be
responsible for any decisions made by Seller's officers and directors with
respect to matters which are the subject of such consultation.
6.2 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions in this Agreement, the parties hereto shall in good faith
perform their obligations under this Agreement and shall each use their
reasonable best efforts to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to obtain all Authorizations and
orders and satisfy all conditions to the obligations of the parties under this
Agreement and to cause the Merger and the other transactions contemplated by
this Agreement to be carried out promptly in accordance with the terms hereof
and shall cooperate fully with each other and their respective officers,
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as part of their respective
obligations under this Agreement. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and deliver such
documents as may be reasonably requested by the other parties hereto in order
to consummate more effectively the transactions contemplated by this Agreement.
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6.3 INVESTIGATION; CONFIDENTIALITY.
(a) Purchaser may, prior to the Effective Time, make or cause
to be made, such investigation of the business and properties of
Seller and its financial and legal condition as Purchaser deems
necessary or advisable to familiarize itself therewith, provided that
such investigations shall not unreasonably interfere with normal
operations of Seller. Seller agrees to permit Purchaser and its
authorized representatives to have or cause them to be permitted to
have, after the date hereof, full access to the premises, books and
records of Seller at reasonable hours, and the officers of Seller will
furnish Purchaser with such financial and operating data and other
information with respect to Seller's businesses and properties as
Purchaser shall from time to time reasonably request. Seller will
request its auditing firm to permit Purchaser and its representatives,
including its auditing firm, to review the work papers of the auditing
firm of Seller relating to their examination of the Seller Audited
Financial Statements. No investigation by Purchaser heretofore or
hereafter made shall affect the representations and warranties of
Seller, and each such representation and warranty shall survive any
such investigation, subject to Article 10.
(b) Except as contemplated by this Agreement or as necessary
to carry out the transactions contemplated hereby, all information or
documents furnished to Purchaser shall be kept confidential by
Purchaser (and Purchaser shall cause its agents and representatives to
maintain the confidentiality of such documents) and in the event such
transactions are not consummated, Purchaser shall return to Seller all
information furnished hereunder and shall not thereafter use the same
for any purpose until such time as such information becomes publicly
available from sources other than parties to this Agreement, except to
the extent (i) it was known by Purchaser prior to being received, (ii)
it is or thereafter becomes lawfully obtainable from other sources,
(iii) Purchaser is legally required to disclose the same to any
Governmental Entity having jurisdiction over Purchaser or as otherwise
may be required by applicable law, or (iv) such duty of
confidentiality is waived by Seller.
6.4 SHAREHOLDERS' MEETING. As soon as practicable after the date
of this Agreement, Seller shall duly and properly call a special meeting of its
Shareholders for the purpose of approving this Agreement, the Merger, and all
other matters necessary to consummate the transactions contemplated hereby, and
shall submit all of the foregoing to its Shareholders for such approval as soon
as reasonably practicable and shall use its best efforts to obtain such
approval. The Shareholders agree to vote all of their shares of Seller Common
Stock in favor of approving this Agreement, the Merger and all such other
matters. The Shareholders may effect such approval by unanimous written
consent in lieu of a shareholders' meeting at any time after they have had a
reasonable time within which to review the Offering Memorandum and Proxy
Statement prepared in connection therewith.
6.5 OFFERING MEMORANDUM AND PROXY STATEMENT. As soon as
practicable after the date of this Agreement, Seller shall deliver copies of an
Offering Memorandum and Proxy Statement to its Shareholders that shall be in
compliance with applicable Law and shall be subject to prior
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review and approval of Purchaser, which shall inform Seller of any
misstatements or omissions of which it has knowledge. The Shareholders shall
be responsible for the accuracy of the information supplied by Seller or the
Shareholders for inclusion therein, and Purchaser shall be responsible for the
accuracy of the information supplied by Purchaser for inclusion therein.
6.6 EXPENSES. Except as otherwise provided in this Agreement,
whether or not the Merger is consummated, all costs and expenses (including any
brokerage commissions or any finder's or investment banker's fees and including
attorney's and accountants' fees) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses.
6.7 NO SOLICITATION OF TRANSACTIONS. Prior to the termination and
abandonment of this Agreement, neither the Seller nor any Shareholder will, or
will direct their Affiliates, officers, directors, and representatives to: (i)
solicit, initiate or encourage submission of proposals or offers from any
person other than Purchaser relating to any acquisition or purchase of all or a
material part of the stock or assets of, or any merger, consolidation, share
exchange or business combination with, or any recapitalization, restructuring
or issuance or offering of debt or equity securities of, Seller (an
"Acquisition Proposal"); or (ii) participate in any discussions or negotiations
regarding, or furnish to any person other than Purchaser and its
representatives, any information with respect to, or otherwise cooperate in any
way or assist, facilitate or encourage, any Acquisition Proposal by any person
other than Purchaser. Seller and the Shareholders will immediately cease and
cause to be terminated any existing activity, discussions or negotiations with
any person other than Purchaser and its representatives conducted prior to the
execution and delivery of this Agreement with respect to any Acquisition
Proposal. If, notwithstanding the foregoing, Seller, the Shareholders or any
of their Affiliates or representatives should receive any Acquisition Proposal
or any inquiry regarding any such proposal from a third party, the person or
entity receiving such a proposal shall promptly inform Purchaser.
6.8 SHARE TRANSFER RESTRICTIONS. In addition to restrictions on
transfer imposed by the Securities Act and the State Acts, no Shareholder shall
transfer any Purchaser Common Stock received by him in the Merger for six
months after the Effective Time. From the period beginning six months after
the Effective Time and ending one year after the Effective Time, no Shareholder
shall transfer more than twenty-five percent of such Purchaser Common Stock;
provided, however, that at any time, the Shareholders may margin such Purchaser
Common Stock in their brokerage account.
6.9 NASDAQ LISTING. Prior to the Effective Time, Purchaser shall
cause the shares of Purchaser Common Stock to be issued in connection with the
Merger to be authorized for listing on Nasdaq, upon official notice of
issuance.
6.10 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements regarding any aspect of this Agreement or the Merger to the
financial community, Governmental Entities, employees or the general public
shall be mutually agreed upon in advance unless Purchaser or Seller is advised
by counsel that any such announcement or other disclosure not
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mutually agreed upon in advance is required to be made by Law or applicable
Nasdaq rules and then only after making a reasonable attempt to comply with
provisions of this Section 6.10.
6.11 EMPLOYEE MATTERS.
(a) EMPLOYEE BENEFITS AND AGREEMENTS. Subject to the
transition provisions of subsection (b) of this Section 6.11,
Purchaser shall take all action necessary or appropriate to permit the
employees of Seller at the Effective Time ("Continuing Employees") to
participate after the Effective Time in Purchaser's employee benefit
programs and to cause the Surviving Corporation to take all actions
necessary or appropriate to adopt Purchaser's employee benefit
programs effective as of the Effective Time. Purchaser will cause the
Surviving Corporation to give each Continuing Employee full credit for
service with Seller for purposes of eligibility to participate in,
vesting and payment of benefits under, and eligibility for any
subsidized benefit provided under (but not, except as provided in the
preceding sentence, for purposes of determining the amount of any
benefit under), any Purchaser employee benefit plan; provided,
however, that nothing in this Agreement shall be deemed to require
Purchaser to cause to be continued any employee's employment,
responsibilities or officer title for any definite period.
(b) TRANSITION. After the Effective Time, Purchaser shall
have a reasonable period not to exceed one year (the "Review Period")
in which to review all of the Employee Plans for compatibility and
consistency with Purchaser's employee benefit programs. During the
Review Period, Purchaser may determine to continue in effect any one
or more of the Employee Plans, amend or modify any one or more of the
Employee Plans, merge one or more of the Employee Plans into a
comparable Purchaser employee benefit plan adopted by the Surviving
Corporation or terminate any one or more of the Employee Plans in its
or their entirety. Any such amendment, modification or termination
shall not deprive any Continuing Employee of any benefit in which such
Continuing Employee has become entitled to prior to the Effective
Time. If the Surviving Corporation is continuing in effect any of the
Employee Plans during the Review Period, then (i) neither it nor
Purchaser shall be obligated to adopt a comparable Purchaser employee
benefit plan for Continuing Employees, it being intended by the
parties that there be no duplication of benefits, and (ii) the
obligation to have the Surviving Corporation adopt the comparable
Purchaser employee benefit plan or program, as set out in subsection
(a) above, shall arise, and such adoption shall be effective only as
of the date the comparable Employee Plan is discontinued and not as of
the Effective Time. If Purchaser does not maintain an employee
benefit plan comparable to one of the Employee Plans, there shall be
no obligation to adopt any plan or program upon the discontinuance or
termination of such Employee Plan.
6.12 SHAREHOLDER AND EMPLOYMENT AGREEMENTS. On or prior to the
Closing Date, all agreements between or among the Shareholders and Seller
relating to Seller or any stock or securities of Seller, and all agreements
between the Company and any of its employees or Affiliates shall have been
cancelled at no cost to the Company.
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6.13 ADDITIONAL FINANCIAL STATEMENTS. As soon as practicable after
the end of every month beginning with the month in which this Agreement is
signed but in no event later than the twentieth day of the following month
Seller will deliver to Purchaser an unaudited balance sheet as of the end of
such month, and a related statement of income for such month, each certified by
an officer of Seller as meeting the standardized financial statements set forth
in Section 3.7.
6.14 NO TRANSFERS. Except pursuant to this Agreement, none of the
Shareholders shall transfer any or all of their shares of Seller Common Stock
after the date of this Agreement.
6.15 SPECIAL PROVISIONS WITH RESPECT TO SELLER. Seller hereby
expressly adopts and makes, jointly and severally with the Shareholders, the
representations, warranties, covenants and agreements of the Shareholders
contained in this Agreement as its representations, warranties, covenants and
agreements, but if the Closing occurs as provided herein, then at that time all
such representations, warranties, covenants and agreements to the extent hereby
made and adopted by Seller pursuant to this Section 6.15 (and only to such
extent) shall expire and be of no further force and effect, and Seller's having
made representations, warranties, covenants and agreements shall in no way
limit the liability of the Shareholders pursuant to this Agreement.
ARTICLE 7
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions (any
or all of which may be waived by Purchaser and Seller):
(a) SELLER SHAREHOLDER APPROVAL. This Agreement and the
Merger shall have been approved by an affirmative vote of a majority
of the outstanding shares of Seller Common Stock in accordance with
Seller's Articles of Incorporation and Bylaws and the GBCC.
(b) PURCHASER BOARD OF DIRECTOR APPROVAL. This Agreement and
the Merger shall have been adopted by an affirmative vote of a
majority of the members of Purchaser's Board of Directors.
7.2 CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUBCORP.
Consummation of the Merger is subject to the fulfillment to the reasonable
satisfaction of Purchaser, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by Purchaser):
(a) CONSENTS, AUTHORIZATIONS, ETC. All Authorizations of or
with any Governmental Entity or any nongovernmental third party (other
than the filing of the Certificate of Merger with the Secretary of
State of Georgia) which are required for or in connection with the
execution and delivery by Seller and the Shareholders of this
Agreement and the consummation by Seller and the Shareholders of the
Merger or the other transactions contemplated hereby shall have been
obtained or made.
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(b) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree, Law
applicable or effective with respect to Purchaser, SubCorp or their
respective officers and directors. No suit or proceeding shall have
been instituted by any person, or, to the knowledge of Purchaser,
shall have been threatened by any Governmental Entity, which seeks to
(i) prohibit, restrict or delay consummation of the Merger or to limit
in any material respect the right of Purchaser to control any material
aspect of the business of Purchaser and its Subsidiaries or Seller and
its Subsidiaries after the Effective Time, or (ii) to subject
Purchaser or Seller or their respective directors or officers to
material liability on the ground that it or they have breached any law
or regulation or otherwise acted improperly in relation to the
transactions contemplated by this Agreement; provided, however, that
in the case of any action, suit or proceeding instituted by a person
other than a Governmental Entity, such action, suit or proceeding has
a substantial likelihood of success in the opinion of counsel for
Purchaser.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS.
The representations and warranties of Seller and the Shareholders
contained in this Agreement shall have been true and correct in all
respects at the date hereof and, except for changes contemplated in
this Agreement, shall also be true and correct in all respects at and
as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, except in either case as such
representations and warranties by their terms relate only to dates or
periods of time prior to the Effective Time, and Seller and the
Shareholders shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time.
(d) CERTIFICATE. Seller shall have delivered to Purchaser a
certificate, dated as of the Effective Time, executed on behalf of
Seller by the Chief Executive Officer and the Chief Financial Officer
of Seller and by the Shareholders to the effect that the conditions
specified in paragraph (c) of this Section 7.2 have been satisfied.
Such certificate shall also specify the number of issued and
outstanding shares of Seller Common Stock.
(e) SHAREHOLDER APPROVAL. At least One Hundred percent
(100%) of the Purchaser Common Stock shall have been voted to approve
this Agreement and the merger in accordance with the GBCC.
(f) ADDITIONAL CERTIFICATES, ETC. Seller and the
Shareholders shall have furnished to Purchaser such additional
certificates, opinions and other documents as Purchaser may have
reasonably requested as to any of the conditions set forth in Sections
7.1 and 7.2.
(g) RESIGNATIONS. Seller shall have delivered to Purchaser,
to the extent requested by Purchaser, the written resignations of the
directors and officers of Seller.
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7.3 CONDITIONS TO OBLIGATIONS OF SELLER. Consummation of the Merger
is subject to the fulfillment to the reasonable satisfaction of Seller, prior
to or at the Effective Time, of each of the following conditions (any or all of
which may be waived by Seller):
(a) CONSENTS, AUTHORIZATIONS, ETC. All Authorizations of or
with any Governmental Entity or any non-governmental third party
(other than the filing of the Certificate of Merger with the Secretary
of State of Georgia), which are required for, or in connection with,
the execution and delivery of this Agreement by Purchaser and SubCorp
and the consummation by Purchaser and SubCorp of the transactions
contemplated hereby shall have been obtained or made except where the
failure to obtain such consent, authorization, or approval would not
have a material adverse effect on the financial condition, results of
operations, business or prospects of Purchaser.
(b) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree or
Law applicable or effective with respect to Seller or its officers or
directors.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS.
The representations and warranties of Purchaser and SubCorp contained
in this Agreement shall have been true and correct in all respects at
the date hereof and except for changes contemplated in this Agreement,
shall also be true and correct in all respects at and as of the
Effective Time, with the same force and effect as if made at and as of
the Effective Time, except in either case as such representations and
warranties by their terms relate only to dates or periods of time
prior to the Effective Time; and Purchaser and SubCorp each shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it at or prior to the Effective Time.
(d) PURCHASER COMMON STOCK. The shares of Purchaser Common
Stock issued to the stockholders of Seller pursuant to the Merger
shall, upon consummation of the Merger, be validly authorized and
issued, fully paid and nonassessable.
(e) CERTIFICATE. Purchaser shall have delivered to Seller a
certificate, dated as of the Effective Time, executed on behalf of
Purchaser by the Chairman of the Board, President or other executive
officer of Purchaser to the effect that the conditions specified in
paragraph (c) of this Section 7.3 have been satisfied.
(f) REGISTRATION RIGHTS AGREEMENT. Seller shall have
received a Registration Rights Agreement executed by Purchaser in the
form of Exhibit D hereto.
(g) ADDITIONAL CERTIFICATES, ETC. Purchaser shall have
furnished to Seller such additional certificates, opinions and other
documents as Seller may have reasonably requested as to any of the
conditions set forth in Sections 7.1 and 7.3.
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ARTICLE 8
DOCUMENTS TO BE DELIVERED AT CLOSING
8.1 DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller
shall deliver, or cause to be delivered, to Purchaser the following:
(i) The certificate referred to in Section 7.2(d).
(ii) To the extent requested by Purchaser, the written
resignations of the directors and officers of Seller.
(iii) The books and records of Seller.
8.2 DOCUMENTS TO BE DELIVERED BY PURCHASER AND SUBCORP TO EXCHANGE
AGENT. At the Closing, Purchaser and SubCorp shall deliver to the Exchange
Agent the Merger Consideration.
8.3 DOCUMENTS TO BE DELIVERED BY PURCHASER AND SUBCORP TO SELLER.
At the Closing, Seller and SubCorp shall deliver to Seller the following:
(i) The certificate referred to in Section 7.3(e).
(ii) The Registration Rights Agreement referred to in Section
7.3(f).
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders shall
jointly and severally indemnify and hold harmless Purchaser and Seller in
respect of any and all claims, losses, damages, liabilities, demands,
assessments, judgments, costs and expenses (including, without limitation,
settlement costs and any legal or other expenses for investigating, bringing or
defending any actions or threatened actions) reasonably incurred by Purchaser
or Seller (collectively, the "Costs") resulting from any misrepresentation or
breach of any warranty, covenant, agreement or obligation made by the
Shareholders or Seller under the Seller Delivered Agreements.
9.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify
and hold harmless the Shareholders in respect of any and all Costs reasonably
incurred by the Shareholders in connection with any misrepresentation or breach
of any warranty, covenant or agreement made by Purchaser under the Purchaser
Delivered Agreements.
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9.3 CERTAIN LIMITATIONS AND RELATED MATTERS.
(a) CERTIFICATES. Any claim based, in whole or in part, upon
any untrue or incorrect statement set forth in the certificate
delivered pursuant to Section 7.2(d) or Section 7.3(e) shall be deemed
to be a claim for misrepresentation or breach of warranty, covenant or
agreement under this Agreement.
(b) DEDUCTIBLE. No claim shall be made against the
Shareholders for indemnification for any breach of a representation or
warranty contained in this Agreement (or in any Schedule, certificate
or other document delivered pursuant hereto) unless and until the
aggregate Cost exceeds $5,000 (the "Deductible") in which event
Purchaser may claim indemnification for the full amount of such Costs;
provided, however, that the Deductible shall not apply to the extent
that such indemnification relates to any misrepresentation or breach
of warranty contained in Sections 3.1, 3.2, 3.3, 3.9, 3.11, 3.18,
3.19, 3.23, 3.26 or Article 4.
9.4 CLAIMS FOR INDEMNIFICATION. The representations, warranties,
covenants and agreements in this Agreement shall survive the Closing subject to
the limitations set forth herein and shall not be affected by any investigation
made by the parties hereto prior to the date hereof or the Effective Time. The
party seeking indemnification (the "Indemnified Party") shall give the party
from whom indemnification is sought (the "Indemnifying Party") a written notice
("Notice of Claim") within sixty (60) days of the discovery of any loss,
liability, claim or expense in respect of which the right to indemnification
contained in this Article 9 may be claimed; provided, however, that the failure
to give such notice within such sixty (60) day period shall not result in the
waiver or loss of any right to bring such claim hereunder after such period
unless, and only to the extent that, the other party is actually prejudiced by
such failure. In the event a claim is pending or threatened or the Indemnified
Party has a reasonable belief as to the validity of the basis for such claim,
the Indemnified Party may give written notice (a "Notice of Possible Claim") of
such claim to the Indemnifying Party, regardless of whether a loss has arisen
from such claim. A party shall have no liability under this Article 9 for
breach of warranty or misrepresentation, unless a Notice of Claim or Notice of
Possible Claim therefore is delivered by the Indemnified Party prior to the
second anniversary of the Effective Time; provided, however, that as to any
liability arising pursuant to Sections 3.9, 3.11 or 3.23 or Article 4, any
Notice of Claim must be delivered by the Indemnified Party not later than
ninety (90) business days after the expiration of the applicable statute of
limitations or any extensions thereof. Any Notice of Claim or Notice of
Possible Claim shall set forth the representations, warranties, covenants and
agreements with respect to which the claim is made, the specific facts giving
rise to an alleged basis for the claim and the amount of liability asserted or
anticipated to be asserted by reason of the claim.
9.5 DEFENSE OF CLAIM BY THIRD PARTIES. If any claim is made by a
third party against a party to this Agreement that, if sustained, would give
rise to a liability of the another party under this Agreement, the party
against whom the claim is made shall promptly cause notice of the claim to be
delivered to the other party and shall afford the other party and its counsel,
at the other party's sole expense, the opportunity to defend or settle the
claim. The failure to provide
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such notice will not relieve the Indemnifying Party of liability under this
Agreement unless, and only to the extent that, the other party is actually
prejudiced by such failure. If any such claim is compromised or settled
without the consent of the Indemnifying Party, no liability shall be imposed
upon the Indemnifying Party by reason of the claim.
9.6 THIRD PARTY CLAIM ASSISTANCE. From time to time after the
Closing, Purchaser and the Shareholders shall provide or cause their
appropriate personnel to provide the other party with information or data in
connection with the handling and defense of any third party claim or litigation
(including counterclaims filed by the parties) in respect to which a party may
be required to indemnify the another party under this Agreement. The party
receiving such information or data shall reimburse the other party for all of
its costs and expenses in providing these services, including, without
limitation, (i) all out of pocket, travel and similar expenses incurred by its
personnel in rendering these services; and (ii) all fees and expenses for
services performed by third parties engaged by or at the request of such other
party.
9.7 SETTLEMENT OF INDEMNIFICATION CLAIMS. If a recipient of a
Notice of Claim desires to dispute such claim, it shall, within thirty (30) days
after receipt of the Notice of Claim, give counternotice, setting forth the
basis for disputing such claim, to Purchaser or the Shareholders, as the case
may be. If no such counternotice is given within such thirty (30) day period,
or if Purchaser, or the Shareholders, as the case may be, acknowledges
liability for indemnification, then the amount claimed shall be promptly
satisfied as provided in Section 9.8. If, within thirty (30) days after the
receipt of counternotice by Purchaser or the Shareholders, as the case may be,
the Shareholders and Purchaser shall have not reached agreement as to the claim
in question, then the claim of indemnification shall be submitted to and
settled by arbitration in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall be held in the Atlanta, Georgia area before a panel of three (3)
arbitrators, one selected by each of the parties and the third selected by
mutual agreement of the first two. The decision of the arbitrators shall be
final and binding as to any matter submitted under this Agreement. To the
extent the decision of the arbitrators is that a party shall be indemnified
hereunder, the amount shall be satisfied as provided in Section 9.8. Judgment
upon any award rendered by the arbitrators may be entered in any court of
competent jurisdiction. The date of the arbitrator's decision or the date a
claim otherwise becomes payable pursuant to this Section 9.7 is referred to as
the "Determination Date."
9.8 MANNER OF INDEMNIFICATION. All indemnification under this
Article 9 shall be made by payment of cash or delivery of a certified or
cashier's check in the amount of the indemnification liability no later than
five (5) days following the Determination Date.
9.9 INDEMNIFICATION EXCLUSIVE REMEDY. In the absence of fraud, if
the Closing occurs, indemnification pursuant to the provisions of this Article
9 shall be the sole and exclusive remedy of the parties for any breach of any
representation, warranty, covenant or agreement contained in this Agreement.
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ARTICLE 10
TERMINATION AND ABANDONMENT
10.1 TERMINATION AND ABANDONMENT. This Agreement and the Merger may
be terminated and abandoned at any time prior to the Effective Time:
(a) By mutual action of the Board of Directors of Purchaser
and Seller, whether before or after any action by Seller's
stockholders.
(b) By Purchaser:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 7.2 is no longer
capable of being satisfied;
(ii) if there has been a breach by Seller of any
representation or warranty contained in this Agreement that
would have or would be reasonably likely to have a material
adverse effect on the assets, liabilities, financial condition,
results of operations, business or prospects of Seller, or
there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Seller,
in each case which breach is not curable, or, if curable, is
not cured within five days after written notice of such breach
is given by Purchaser to Seller;
(c) By Seller:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 7.3 is no longer
capable of being satisfied; or
(ii) if there has been a breach by Purchaser or SubCorp
of any representation or warranty contained in this Agreement
that would have a material adverse effect on the ability of
Purchaser or SubCorp to consummate the Merger, or there has
been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of Purchaser or
SubCorp, in each case which breach is not curable or, if
curable, is not cured within five days after written notice of
such breach is given by Seller to Purchaser.
(d) By Purchaser or Seller:
(i) if any general suspension of, or limitation on,
trading in securities generally on Nasdaq continuing for a
period of 15 business days has occurred; or
(ii) a declaration of a banking moratorium or if any
suspension of payments in respect of banks in the United States
continuing for a period of 15 business days has occurred;
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(iii) if any event shall have occurred as a result of
which any condition set forth in Section 7.1 is no longer
capable of being satisfied; or
(iv) if the Merger shall not have been consummated by
July 31, 1996; provided, however, that, in any case, the
terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner
which proximately contributed to the failure of any such
condition to be satisfied or the failure to consummate the
Merger.
10.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights
of each party to consummate the transactions contemplated hereby are special,
unique, and of extraordinary character, and that, in the event that either
violates or fails and refuses to perform any covenant made by it herein, the
other party or parties will be without adequate remedy at law. Each party
agrees, therefore, that, in the event that it violates, fails or refuses to
perform any covenant made by it herein, the other party or parties so long as
it or they are not in breach hereof, may, in addition to any remedies at law,
institute and prosecute an action in a court of competent jurisdiction to
enforce specific performance of such covenant or seek any other equitable
relief.
10.3 RIGHTS AND OBLIGATIONS UPON TERMINATION. If this Agreement is
not consummated for any reason, each party will redeliver all documents, work
papers, and other materials of any party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same, except to the extent previously delivered to
third parties in connection with the transactions contemplated hereby, and all
information received by any party hereto with respect to the business of any
other party shall not at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
information; provided, however, that this Section 10.3 shall not apply to any
documents, work papers, material, or information which is a matter of public
knowledge or which heretofore has been or hereafter is published in any
publication for public distribution or filed as public information with any
governmental agency.
10.4 EFFECT OF TERMINATION. Except for the provisions of Sections
6.3, 6.6, 6.10, 10.3 and 10.4, which shall survive any termination of this
Agreement, in the event of the termination and abandonment of this Agreement
pursuant to Article 10, this Agreement shall forthwith become void and have no
further effect, without any liability on the part of any party hereto or its
respective officers, directors or stockholders; provided, however, that nothing
in this Section 10.4 shall relieve any party from liability for the knowing and
intentional breach of its representations, warranties, covenants or agreements
set forth in this Agreement.
36
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ARTICLE 11
GENERAL PROVISIONS
11.1 NOTICES. All notices and other communications under this
Agreement shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) facsimile transmission; (iii) registered or
certified mail, postage prepaid, return receipt requested; or (iv) overnight
delivery service requiring acknowledgment of receipt. Any such notice or
communication shall be sent to the appropriate party at its address or
facsimile number given below (or at such other address or facsimile number for
such party as shall be specified by notice given hereunder):
If to Purchaser and SubCorp, to:
5300 Oakbrook Parkway, Suite 320
Norcross, Georgia 30093
Fax No. (770) 935-1924
Attention: Mark H. Dunaway, Chairman
with a copy to:
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: Mark D. Kaufman
If to Seller, to:
Michael J. Saner
Preferred Services, Inc.
5300 Oakbrook Parkway, Suite 320
Norcross, Georgia 30093
Attention: Stephen F. Johnston, Sr.
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail a copy of the
notice or communication to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice or communication is deemed received.
37
<PAGE> 38
11.2 TABLE OF CONTENTS; HEADINGS. The Table of Contents, cross
reference pages and headings contained herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit or affect any of the provisions hereof.
11.3 VARIATION AND AMENDMENT. This Agreement may be varied or
amended at any time before or after the approval of this Agreement by the
holders of Seller Common Stock by action of the respective Boards of Directors
of Seller, Purchaser and SubCorp, without action by the stockholders thereof;
provided, however, that any variance or amendment made after approval of the
Merger by the stockholders of Seller that (i) reduces the Merger Consideration
or changes the form of the Merger Consideration or (ii) changes any of the
terms and conditions of this Agreement if such change would adversely affect
the stockholders of Seller shall be subject to the further approval of Seller's
stockholders. Any variation, modification or amendment to this Agreement must
be made in writing and executed by each of the parties hereto.
11.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party hereto. Upon any such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto will negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated by this Agreement are
consummated to the extent possible.
11.5 WAIVER. The failure of any party hereto at any time or times
to require performance of any provision hereof shall in no manner affect the
right to enforce the same. No waiver by any party of any condition, or the
breach of any term, provision, warranty, representation, agreement or covenant
contained in this Agreement or the other agreements contemplated hereby,
whether by conduct or otherwise, in any one or more instances shall be deemed
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, warranty, representation, agreement or covenant herein or therein
contained.
11.6 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement
shall inure to the benefit of the parties and their respective successors and
permitted assignees. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity. Except for
assignments to wholly-owned Subsidiaries of Purchaser, in which event Purchaser
shall remain liable for the performance of this Agreement, no transfer or
assignment (including by operation of law) of this Agreement or of any rights
or obligations under this Agreement may be made by any party without the prior
written consent of the other parties and any attempted transfer or assignment
without that required consent shall be void. No transfer or assignment by a
party of its rights under this Agreement shall relieve it of any of its
obligations to the other parties under this Agreement.
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<PAGE> 39
11.7 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence of each and every provision of this Agreement. Whenever the last day
for the exercise of any right or the discharge of any duty under this Agreement
shall fall upon Saturday, Sunday or a public or legal holiday, the party having
such right or duty shall have until 5:00 p.m. Atlanta, Georgia time on the
next succeeding regular business day to exercise such right or to discharge
such duty.
11.8 COUNTERPARTS. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement shall
consist of enough of such copies to reflect the signatures of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be an original, and each of which shall constitute one and the same
agreement. Any party may deliver an executed copy of this Agreement and of any
documents contemplated hereby by facsimile transmission to another party and
such delivery shall have the same force and effect as any other delivery of a
manually signed copy of this Agreement or of such other documents.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without giving
effect to the conflicts of law principles thereof.
11.10 ENTIRE AGREEMENT. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of all the terms
of the arrangements among the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters and cannot be changed or terminated orally.
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, and their corporate seals affixed, as of the date first above
written.
SELLER:
PAGING SERVICES, INC.
By: /s/James N. Weber
---------------------------------
James N. Weber, President
ATTEST:
/s/Eugene H. Kreeft
- ------------------------------
Eugene H. Kreeft, Secretary
[CORPORATE SEAL] PURCHASER:
PREFERRED NETWORKS, INC.
By: /s/Mark H. Dunaway
----------------------------------------
Mark H. Dunaway, Chief Executive Officer
ATTEST:
/s/Mark B. Jones
- ------------------------------
Mark B. Jones, Secretary
[CORPORATE SEAL] PREFERRED TECHNICAL SERVICES, INC.
By: /s/Mark H. Dunaway
---------------------------------------
Mark H. Dunaway,
Chief Executive Officer
ATTEST:
/s/Mark B. Jones
- ------------------------------
Mark B. Jones, Secretary
[CORPORATE SEAL]
40
<PAGE> 41
WITNESS: SHAREHOLDERS:
/s/Toi E. Hines By: /s/Michael J. Saner
- ---------------------------- --------------------------------
Michael J. Saner, Individually
/s/Yvonne J. Pettice By: /s/James N. Weber
- ---------------------------- --------------------------------
James N. Weber, Individually
/s/Catherine Hartley By: /s/Eugene H. Kreeft
- ---------------------------- --------------------------------
Eugene H. Kreeft, Individually
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
Dated as of August 8, 1996
by and among
PREFERRED NETWORKS, INC.,
PNI SYSTEMS, LLC,
and
NATIONSBANK, N.A. (SOUTH)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C> <C>
1. Definitions and Accounting Matters .................................................... 1
1.1. Certain Defined Terms ............................................. 1
1.2. Accounting Terms and Determinations; Attorney's Fees .............. 18
2. Loans ................................................................................. 18
2.1. Amount of Company Loans ........................................... 18
2.2. Amount of Parent Loans ............................................ 19
2.3. Borrowings ........................................................ 19
2.4. Repayment of Loans ................................................ 19
2.5. Interest .......................................................... 19
2.6. Continuation and Conversion of Loans .............................. 21
2.7. Minimum Amounts ................................................... 21
2.8. Fees .............................................................. 22
2.9. Notes ............................................................. 22
2.10. Optional Prepayments .............................................. 23
2.11. Mandatory Prepayments of Loans .................................... 23
2.12. Use of Proceeds ................................................... 23
2.13. Extension of Termination Date ..................................... 24
3. Payments; Computations; Taxes; Etc. ................................................... 24
3.1. Payments .......................................................... 24
3.2. Computations ...................................................... 25
3.3. Certain Notices ................................................... 25
3.4. Taxes ............................................................. 26
3.5. Additional Costs .................................................. 26
3.6. Limitation on Types of Loans ...................................... 28
3.7. Illegality ........................................................ 28
3.8. Treatment of Affected Loans ....................................... 28
3.9. Compensation ...................................................... 29
4. Conditions Precedent .................................................................. 29
4.1. Initial Loans ..................................................... 29
4.2. Initial and Subsequent Extensions of Credit ....................... 33
5. Representations and Warranties ........................................................ 33
5.1. Corporate Existence ............................................... 34
5.2. Authorization; No Conflict ........................................ 34
5.3. Enforceability .................................................... 34
5.4. Governmental Approvals for Documents .............................. 34
5.5. Financial Condition ............................................... 35
5.6. Litigation ........................................................ 35
5.7. Eligibility of Receivables and Inventory .......................... 35
5.8. Margin Stock ...................................................... 35
5.9. ERISA ............................................................. 36
</TABLE>
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<TABLE>
<S> <C> <C> <C>
5.10. Intellectual Property ............................................. 36
5.11. Taxes ............................................................. 37
5.12. Investment Company Act; Public Utility Holding Company Act; Etc. .. 37
5.13. Existing Indebtedness ............................................. 37
5.14. Material Contracts ................................................ 38
5.15. Environmental and Safety Matters .................................. 38
5.16. Compliance with Law; Licenses and Other Governmental Approvals .... 38
5.17. Subsidiaries and Capitalization ................................... 39
5.18. Title to Properties ............................................... 39
5.19. Solvency .......................................................... 39
5.20. Conduct of Business ............................................... 40
5.21. Disclosure ........................................................ 40
5.22. Representations and Warranties in Acquisition Documents ........... 40
5.23. Representations Regarding Acquisitions ............................ 40
5.24. Survival of Representations and Warranties, Etc. .................. 40
6. Affirmative Covenants ................................................................. 41
6.1. Financial Statements and Other Information ........................ 41
6.2. Litigation ........................................................ 44
6.3. Corporate Existence, Etc. ......................................... 45
6.4. Insurance ......................................................... 45
6.5. Obligations and Taxes ............................................. 45
6.6. Maintaining Records; Access to Properties and Inspections ......... 45
6.7. Environmental and Safety Matters .................................. 46
6.8. Additional Security ............................................... 46
6.9. Deposit Accounts/Cash Management Services ......................... 47
6.10. Enforcement of Remedies under Acquisition Documents ............... 47
6.11. Leases ............................................................ 47
6.12. Acquisitions ...................................................... 47
7. Negative Covenants .................................................................... 50
7.1. Prohibition of Fundamental Changes ................................ 50
7.2. Limitation on Liens ............................................... 51
7.3. Indebtedness ...................................................... 51
7.4. Investments ....................................................... 51
7.5. Restricted Payments ............................................... 51
7.6. Transactions with Affiliates ...................................... 51
7.7. Amendment of Certain Documents .................................... 52
8. Financial Covenants ................................................................... 52
8.1. Cash Coverage of Debt Service ..................................... 52
8.2. Total Liabilities to Net Worth .................................... 52
8.3. Minimum Net Worth ................................................. 52
8.4. Debt Service Coverage Ratios ...................................... 52
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
9. Events of Default ..................................................................... 52
9.1. Payments under Loan Documents ..................................... 53
9.2. Other Indebtedness ................................................ 53
9.3. Representations and Warranties .................................... 53
9.4. Other Obligations ................................................. 53
9.5. Ability to Pay Debts .............................................. 53
9.6. Voluntary Proceedings ............................................. 54
9.7. Involuntary Proceedings ........................................... 54
9.8. Judgments ......................................................... 54
9.9. ERISA Event ....................................................... 54
9.10. Failure of Security ............................................... 55
9.11. Change in Control ................................................. 55
9.12. Additional Capital ................................................ 55
9.13. Remedies Upon Event of Default .................................... 55
9.14. Performance by Lender ............................................. 56
10. Miscellaneous ......................................................................... 56
10.1. Waiver ............................................................ 56
10.2. Notices ........................................................... 56
10.3. Expenses .......................................................... 57
10.4. Stamp, Intangible and Recording Taxes ............................. 58
10.5. Setoff ............................................................ 59
10.6. Indemnification ................................................... 59
10.7. Amendments, Etc. .................................................. 59
10.8. Successors and Assigns ............................................ 59
10.9. Assignments and Participations .................................... 59
10.10. Survival .......................................................... 60
10.11. Table of Contents: Descriptive Headings ........................... 60
10.12. Counterparts ...................................................... 60
10.13. Governing Law ..................................................... 60
10.14. Arbitration ....................................................... 60
10.15. Acknowledgments ................................................... 61
10.16. Confidentiality ................................................... 61
10.17. Obligations with Respect to Loan Parties .......................... 62
10.18. Entire Agreement. ................................................. 62
EXHIBITS:
Exhibit A Form of Assignment of Acquisition Documents
Exhibit B Form of Guaranty
Exhibit C Form of Pledge Agreement
Exhibit D Form of Security Agreement
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Continuation
Exhibit G Form of Notice of Conversion
</TABLE>
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<TABLE>
<S> <C>
Exhibit H Form of Company Note
Exhibit I Form of Parent Note
Exhibit J Form of Intercompany Note
Exhibit K Form of Collateral Assignment of Leases
Exhibit L Form of Intercreditor Agreement
SCHEDULES:
Schedule 5.1 Corporate Existence
Schedule 5.4 Governmental Approvals
Schedule 5.9 ERISA
Schedule 5.10 Intellectual Property
Schedule 5.11 Taxes
Schedule 5.13 Existing Indebtedness
Schedule 5.14 Material Contracts
Schedule 5.16 Compliance With Laws; License and Other Governmental
Approvals
Schedule 5.17 Subsidiaries and Capitalization
Schedule 5.18 Title to Properties
</TABLE>
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<PAGE> 6
THIS CREDIT AGREEMENT (this "Agreement") dated as of August 8, 1996 by
and among PNI SYSTEMS, LLC, a Georgia limited liability company (the
"Company"), PREFERRED NETWORKS, INC., a Delaware corporation (the "Parent") and
NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, the Company has requested that the Lender make available to
the Company a $18,000,000 revolving credit facility, and the Parent has
requested that the Lender make available to the Parent a $2,000,000 revolving
credit facility;
WHEREAS, the Lender is willing to make such credit facilities
available to the Company and the Parent upon the terms hereof and subject to
the conditions contained herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
1. DEFINITIONS AND ACCOUNTING MATTERS
1.1. Certain Defined Terms
As used herein, the following terms shall have the following meanings
(all terms defined in this Section or in other provisions of this Agreement in
the singular to have the same meanings when used in the plural and vice versa):
"Account Debtor" shall mean a Person who is obligated on a Receivable.
"Acquisition" shall mean any transaction, or any series of related
transactions, by which the Company or the Parent and/or any of their respective
Subsidiaries directly or indirectly (a) acquires any ongoing business or all or
substantially all of the assets of any Person or division or Asset Group
thereof, whether through purchase of assets, merger or otherwise, (b) acquires
(in one transaction or as the most recent transaction in a series of
transactions) control of a majority of the securities of a Person which have
ordinary voting power for the election of directors or (c) otherwise acquires
control of 51% ownership interest in any such Person.
"Acquisition Documents" shall mean, collectively, the asset purchase
agreement, stock purchase agreement, merger agreement or other primary
agreement to which the Parent, the Company and/or one or more of their
respective Subsidiaries is a party relating to an Acquisition, together with
all related agreements and conveyance instruments executed in connection
therewith or pursuant thereto.
"Adjusted EBITDA" shall mean for any number of consecutive fiscal
quarters (a) EBITDA for such fiscal quarters minus (b)(i) the number of TCC's
then owned by the Company times (ii) $50,000 times (iii) such number of fiscal
quarters.
"Adjusted LIBO Rate" shall mean, with respect to each Interest Period
for any LIBOR Loan, the rate obtained by dividing (a) LIBOR for such Interest
Period by (b) a percentage equal to 1 minus the stated maximum rate (stated as
a decimal) of all reserves, if any, required to be
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<PAGE> 7
maintained against "Eurocurrency liabilities" as specified in Regulation D of
the Board of Governors of the Federal Reserve System (or against any other
category of liabilities which includes deposits by reference to which the
interest rate on LIBOR Loans is determined or any category of extensions of
credit or other assets which includes loans by an office of the Lender outside
of the United States of America to residents of the United States of America).
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, spouse and children) of such
individual, any trust whose principal beneficiary is such individual or one or
more members of such individual's immediate family and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of the subject
Person (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); provided that, in any event,
any Person which owns directly or indirectly 5% or more of the securities
having ordinary voting power for the election of directors or other governing
body of a corporation or 5% or more of the partnership or other ownership
interests of any other Person (other than as a limited partner of such other
Person) will be deemed an Affiliate of such corporation or other Person.
"Applicable Law" shall mean all applicable provisions of
constitutions, statutes, rules, regulations and orders of all governmental
bodies and all orders, rulings and decrees of all courts and arbitrators.
"Asset Group" shall mean any asset or group of assets with
identifiable net earnings (or loss).
"Assignment of Acquisition Documents" shall mean each assignment of
rights under Acquisition Documents executed by any Loan Party in favor of the
Lender after the Effective Date pursuant to Section 6.12., each such assignment
to be in substantially the form of Exhibit A hereto.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of
1978, as amended from time to time, or any successor federal statute.
"Base Rate" shall mean, for any day, the higher of (a) the Federal
Funds Rate for such day plus 1/2 of 1% per annum and (b) the Prime Rate for
such day. Each change in any interest rate provided for herein resulting from a
change in the Base Rate shall take effect at the time of such change in the
Base Rate. If for any reason the Lender shall have determined that it is unable
to ascertain the Federal Funds Rate for such day, including, without
limitation, the inability or failure of the Lender to obtain sufficient bids or
publications as contemplated by the definition of the Federal Funds Rate, the
Base Rate for such day shall be the Prime Rate.
"Base Rate Loan" shall mean a Loan which bears interest at a rate
based on the Base Rate.
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<PAGE> 8
"Borrower" shall mean each of the Company and the Parent.
"Borrowing Base" shall mean at any time an amount equal to the sum of:
(i) 75% of the face value of Eligible Receivables of the Parent
due and owing at such time, plus
(ii) 75% of the face value of Eligible Receivables of the Company
due and owing at such time, plus
(iii) the lesser of
(A) the sum of
(1) 40% of the lesser of cost (computed on a
first-in-first-out basis) and fair market value of Eligible
Inventory of the Parent at such time, plus
(2) 40% of the lesser of cost (computed on a
first-in-first-out basis) and fair market value of Eligible
Inventory of the Company at such time, and
(B) $750,000.
"Borrowing Base Certificate" shall mean a certificate of the chief
financial officer of the Parent setting forth the calculation of the Borrowing
Base, such certificate to be in form reasonably acceptable to the Lender.
"Business Day" shall mean (a) any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required to close in
Atlanta, Georgia and (b) with reference to a LIBOR Loan, any such day that is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"Capitalized Lease Obligation" shall mean Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with such principles.
"Cash Equivalents" means: (a) securities issued, guaranteed or insured
by the United States of America or any of its agencies with maturities of not
more than one year from the date acquired; (b) certificates of deposit with
maturities of not more than one year from the date acquired issued by a United
States federal or state chartered commercial bank of recognized standing, which
has capital and unimpaired surplus in excess of $500,000,000 and which bank or
its holding company has a short-term commercial paper rating of at least A-2 or
the equivalent by Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc. ("S&P") or at least P-2 or the equivalent by Moody's Investors Services,
Inc. ("Moody's"); (c) reverse repurchase agreements with terms of not more than
seven days from the date acquired, for securities of the type described in
clause (a) above and entered into only with commercial banks having the
qualifications described in clause (b) above; (d) commercial paper issued by
any Person
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<PAGE> 9
incorporated under the laws of the United States of America or any state
thereof and rated at least A-2 or the equivalent thereof by S&P or at least P-2
or the equivalent thereof by Moody's, in each case with maturities of not more
than one year from the date acquired; and (e) investments in money market funds
registered under the Investment Company Act of 1940, which have net assets of
at least $500,000,000 and whose assets consist of securities and other
obligations of the types described in clauses (a) through (d) above.
"Change in Control" shall mean any of the following: (i) if any Person
or two or more Persons (other than Mark Dunaway) acting in concert, shall
acquire "beneficial ownership" within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), directly or
indirectly, of capital stock or securities of the Parent representing the
lesser of (A) 20% or more of the aggregate voting power of all classes of
capital stock and securities of the Parent or (B) more of the aggregate voting
power of all classes of capital stock and securities of the Parent then owned
directly or indirectly by Mark Dunaway, in each case on a fully diluted basis;
or (ii) if, (x) in any twelve-month period, any member of the Management Group
shall terminate his employment with the Parent or otherwise cease to be
employed by the Parent in a senior management position and (y) within 120 days
after such member shall terminate his employment or shall otherwise cease to be
so employed, the Parent shall fail to replace such member with an individual
having comparable industry experience.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
"Collateral" shall mean any collateral security hereafter pledged by
any Loan Party to secure the Obligations or any portion thereof.
"Commitment" shall mean collectively, the Company Commitment and the
Parent Commitment.
"Communications Laws" shall mean the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, and all rules, regulations,
precedents and policies of the FCC promulgated thereunder or in connection
therewith.
"Company Commitment" shall mean the obligation of the Lender to make
Company Loans to the Company in an aggregate principal amount at any one time
outstanding up to but not exceeding $18,000,000.
"Company Loans" shall mean any loan made by the Lender to the Company
pursuant to Section 2.1.
"Continue", "Continuation" and "Continued" each refers to the
continuation of a LIBOR Loan from one Interest Period to the next Interest
Period pursuant to Section 2.6.(a).
"Convert", "Conversion" and "Converted" each refers to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.6.(b).
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"Debt Service" shall mean, with respect to any Person and for any
period, the sum of (a) the total consolidated interest expense (including,
without limitation, capitalized interest expense) of such Person for such
period plus (b) regularly scheduled principal payments on Indebtedness of such
Person during such period, other than any balloon, bullet or similar principal
payment payable on any Indebtedness of such Person which repays such
Indebtedness in full.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any fiscal period, net earnings (loss) of the
Company for such period plus the sum of the following amounts (but only to the
extent included in determining net income (loss) for such period): (a) income
tax expense of the Company in respect of such period minus (b) cash payments
actually made during such period in respect of taxes on income of the Company
plus (c) interest expense of the Company for such period plus (d) depreciation
and amortization expense and other non-cash charges of the Company for such
period plus (e) extraordinary non-cash losses of the Company for such period
minus (f) extraordinary non-cash gains of the Company for such period minus (g)
capital expenditures of the Company for maintenance for such period. For
purposes of determining EBITDA, the earnings (or loss) of any Person accrued
prior to the date it became a Subsidiary of the Company or was merged into or
consolidated with the Company, or of any Asset Group accrued prior to the date
such Asset Group was acquired by the Company, shall be excluded from EBITDA if
and to the extent otherwise included in net earnings (loss) of the Company for
such period except that (i) such earnings (or loss) of any Asset Group acquired
by the Company from the Parent in connection with the initial formation of the
Company may be included in EBITDA and (ii) such earnings (or loss) of any Asset
Group or Person may be included in EBITDA if the Company provides the Lender
with evidence of the calculation of the EBITDA of such Person or Asset Group
which is acceptable to the Lender in its discretion exercised reasonably.
"Effective Date" shall mean the date upon which the conditions
precedent to the initial extension of credit hereunder set forth in Article 4.
have been satisfied and the initial extension of credit hereunder made, which
date must occur on or before November 29, 1996.
"Eligible Inventory" shall mean Inventory which the Lender in its sole
discretion determines to meet all of the following requirements: (a) such
Inventory consists only of new pager inventory, is owned by a Borrower, is
subject to a security interest in favor of the Lender pursuant to a Security
Agreement and such security interest is of first priority and perfected as to
such Inventory and is subject to no other Lien whatsoever other than Permitted
Liens; (b) such Inventory is in good condition and meets all standards imposed
by any Governmental Authority having regulatory authority over such goods,
their use or sale; (c) such Inventory is currently either usable or salable in
the normal course of the business of such Borrower, is not obsolete, and does
not constitute work-in-process; (d) such Inventory is located within the
continental United States of America at one of the locations set forth in a
Security Agreement executed by a Borrower; (e) such Inventory does not
constitute repossessed goods and is not on consignment
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with such Borrower; and (f) such Inventory is not determined by the Lender in
good faith to be ineligible for any other reason.
"Eligible Receivable" shall mean, as of any date of determination
thereof, the aggregate of all Receivables of the Borrowers at such date other
than the following (determined without duplication): (a) any Receivable which
does not represent a complete bona fide transaction requiring no further action
on the part of a Borrower to make such Receivable payable by the Account
Debtor; (b) any Receivable not payable in Dollars; (b) any Receivable which, at
the date of issuance of the invoice therefor, was by its terms payable more
than 60 days after provision of the related goods or services; (c) any
Receivable due from (i) any Subsidiary or Affiliate of any Loan Party or (ii)
any employee, agent or representative of any Loan Party or any Subsidiary or
Affiliate of any Loan Party; (d) any Receivable with respect to all or part of
which a check, promissory note, draft, trade acceptance or other instrument for
the payment of money has been presented for payment and returned uncollected
for any reason; (e) any Receivable as to which any one or more of the following
events has occurred with respect to the applicable Account Debtor: death or
judicial declaration of incompetency; the filing by or against such Account
Debtor of a request or petition for liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, or other relief under the
bankruptcy, insolvency, or similar laws of the United States, any state or
territory thereof, or any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by such Account Debtor for the benefit of
creditors; the appointment of a receiver or trustee for such Account Debtor or
for any of the assets of such Account Debtor, including, without limitation,
the appointment of or taking possession by a "custodian," as defined in the
Bankruptcy Code; the institution by or against such Account Debtor of any other
type of insolvency proceeding (under the bankruptcy laws of the United States
or elsewhere) or of any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against, or winding up of affairs of, such
Account Debtor; the sale, assignment, or transfer of all or substantially all
of the assets of such Account Debtor; the inability to pay or the nonpayment by
such Account Debtor of its debts generally as they become due; the cessation of
the business of such Account Debtor as a going concern; or, in the Lender's
good faith judgment, unsatisfactory general financial performance or credit
standing; (f) any Receivable due from an Account Debtor incorporated under the
laws of any jurisdiction other than the United States of America or any state
thereof or whose principal place of business or substantially portion of whose
assets is located outside of the United States of America; (g) any Receivable
which remains unpaid for more than 90 days after the original invoice date; (h)
all Receivables from any Account Debtor if more than 25% of the aggregate
amount of the Receivables of such Account Debtor are ineligible pursuant to
clause (g) above; (i) any Receivable with respect to which there is any
unresolved dispute, defense, offset or counterclaim with or by the respective
Account Debtor, but only to the extent of the amount shown to be due on the
invoice(s) with respect to which there is any dispute; (j) any Receivable as to
which either (i) the perfection, enforceability or validity of the Lender's
security interest in such Receivable, or (ii) the Lender's right or ability to
obtain direct payment of the proceeds of such Receivable, is governed by any
federal or state statutory requirements other than those of the UCC (including,
without limitation, the Federal Assignment of Claims Act); (k) any Receivable
(i) as to which the Lender does not have a valid and enforceable first priority
security interest, subject to no other Liens other than Permitted Liens or (ii)
as to which the Lender does not have a right of direct payment upon an Event of
Default;
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(l) any Receivable that has not been created in the ordinary course of
business; (m) the portion of the Receivables of a Borrower owing by any Account
Debtor or group of affiliated Account Debtors representing in excess of 25% of
the aggregate amount of all Eligible Receivables of a Borrower; (n) any
Receivable arising from a sale on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval or consignment basis or made pursuant to any
other written agreement providing for repurchase or return; and (o) any
Receivable determined by the Lender in good faith to be ineligible for any
other reason.
"Employee Benefit Plan" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA maintained or contributed to by any Loan
Party or any of its ERISA Affiliates, other than a Multiemployer Plan.
"Environmental Claim" shall mean, with respect to any Person, any
notice, claim, demand or other communication (whether written or oral) alleging
or asserting such Person's liability for investigatory costs, cleanup costs,
governmental response costs, damages to natural resources or other property,
personal injuries, fines or penalties arising out of, based on or resulting
from (a) the presence, handling, generation, treatment, storage, disposal,
Release or threatened Release into the environment of any Hazardous Material at
any location, whether or not owned by such Person, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances and similar provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and common law concerning public
health or safety, worker health or safety or pollution or protection of the
environment, including without limitation those relating to any emissions,
discharges or Releases of Hazardous Materials to ambient air, surface water,
ground water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, control, clean-up
or handling of Hazardous Materials.
"Equity Issuance" means any issuance or sale by the Parent of its
capital stock or any warrants, options or similar rights to acquire, or
securities convertible into or exchangeable for, such capital stock.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
"ERISA Affiliate" of any Person shall mean any corporation or trade or
business which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as such Person or which is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"ERISA Event" with respect to any Person shall mean (a) the occurrence
of a reportable event, within the meaning of Section 4043 of ERISA, with
respect to any Plan of such Person or any of its ERISA Affiliates, unless the
30-day notice requirement with respect to such event has been waived by the
PBGC; (b) the provision by the administrator of any Plan of such Person or
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<PAGE> 13
any of its ERISA Affiliates of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect
to a plan amendment referred to in Section 4041(a)(2) of ERISA); (c) the
cessation of operations at a facility of such Person or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of ERISA with
respect to a Plan; (d) the withdrawal by such Person or any of its ERISA
Affiliates from a Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (e) the failure by such
Person or any of its ERISA Affiliates to make a payment to a Plan required
under Section 302(f)(1) of ERISA; (f) the adoption of an amendment to a Plan of
such Person or any of its ERISA Affiliates requiring the provision of security
to such Plan pursuant to Section 307 of ERISA; or (g) the institution by the
PBGC of proceedings to terminate a Plan of such Person or any of its ERISA
Affiliates pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that could constitute grounds for
the termination of, or the appointment of a trustee to administer, such Plan.
"FCC" shall mean the Federal Communications Commission or any entity
succeeding to any or all of its functions under the Communications Laws or
other Applicable Law.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be the Federal Funds Rate for the immediately preceding Business Day, and
(b) if such rate is not so published for any Business Day, the Federal Funds
Rate for such day shall be the average rate charged by three federal funds
brokers of recognized standing selected by the Lender on such day for such
transactions as determined by the Lender.
"GAAP" shall mean generally accepted accounting principles applied in
the United States of America and practices which are recognized as such by the
American Institute of Certified Public Accountants, applied on a basis
consistent with those which, in accordance with Section 1.2.(a), are to be used
in making the calculations for purposes of determining compliance with the
terms of this Agreement.
"Governmental Approvals" shall mean all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" shall mean any federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, any
Indebtedness or other obligations, net worth, working capital or earnings of
any Person, or a guarantee of the payment of dividends or other distributions
upon the stock or equity interests of any Person, or an agreement to purchase,
sell or lease (as lessee or lessor) property, products, materials, supplies or
services primarily for the purpose of enabling a
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<PAGE> 14
debtor to make payment of its obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank to issue a
letter of credit for the benefit of another Person, but excluding endorsements
for collection or deposit in the ordinary course of business. Usage of the term
"Guarantee" as a verb shall have a corresponding meaning.
"Guarantor" shall mean each of the Parent, the License Subsidiary and
any other Loan Party executing a Guaranty after the Effective Date pursuant to
Section 6.12.
"Guaranty" shall mean (a) each Guaranty executed by a Guarantor in
favor of the Lender on or prior to the Effective Date and (b) each Guaranty
executed by a Loan Party in favor of the Lender after the Effective Date
pursuant to Section 6.12., in each case, substantially in the form of Exhibit
B.
"Hazardous Materials" shall mean all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Environmental Laws as "hazardous substances" "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity or "TLCP" toxicity, "EP toxicity"; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or (e) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
"Indebtedness" shall mean, with respect to a Person, at the time of
computation thereof, all of the following (without duplication and determined
on a consolidated basis): (a) obligations of such Person in respect of money
borrowed; (b) obligations of such Person (other than trade debt incurred in the
ordinary course of business), whether or not for money borrowed (i) represented
by notes payable, or drafts accepted, in each case representing extensions of
credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or
(iii) constituting purchase money indebtedness, conditional sales contracts,
title retention debt instruments or other similar instruments, upon which
interest charges are customarily paid or that are issued or assumed as full or
partial payment for property; (c) Capitalized Lease Obligations of such Person;
(d) all reimbursement obligations of such Person under any letters of credit or
acceptances, whether or not the same have been presented for payment (but
excluding any letter of credit the reimbursement obligations in respect of
which have been fully cash collateralized with the issuer of such letter of
credit); and (e) all Indebtedness of other Persons which (i) such Person has
Guaranteed or (ii) are secured by a Lien on any property of such Person.
"Insufficiency" shall mean, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Period" shall mean with respect to any LIBOR Loan, the
period commencing on the date of the borrowing, Conversion or Continuation of
such Loan and ending on the last day of the period selected by the Company
pursuant to the provisions below. The duration of each
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<PAGE> 15
Interest Period shall be one, two, three, six or twelve months, in each case as
the Company may, in an appropriate Notice of Borrowing, Notice of Continuation
or Notice of Conversion, select. In no event shall an Interest Period of a Loan
extend beyond the Termination Date. Whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next succeeding
Business Day; provided, however, that if such extension would cause the last
day of such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding Business
Day.
"Inventory" shall mean, with respect to a Borrower, (a) all inventory
of such Borrower and all goods intended for sale or lease by such Borrower, (b)
all work-in-process, (c) all raw materials and other materials and supplies of
every nature and description used or which might be used in connection with the
manufacture, packing, shipping, selling or furnishing of such goods or
otherwise used or consumed in the business of such Borrower, and (d) all
documents relating to any of the foregoing.
"Investment" in any Person shall mean (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of, or any contribution to the capital of, such Person; (b) any deposit with,
or advance, loan or other extension of credit to, such Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person (other than any such deposit, advance, loan, extension of credit or
commitment representing (i) the purchase price of inventory or supplies sold in
the ordinary course of business or (ii) a deposit for, or prepayment of, rents
or utilities made in the ordinary course of business); or (c) any Guarantee of,
or other contingent obligation with respect to, Indebtedness or other liability
of such Person.
"Lending Office" shall mean 600 Peachtree Street, 18th Floor, Atlanta,
Georgia 30308 or such other office of the Lender (or of an affiliate of the
Lender) in the United States of America as the Lender may from time to time
specify in writing to the Borrowers as the office by which the Loans are to be
made and maintained.
"LIBOR" shall mean, with respect to any Interest Period and a LIBOR
Loan, the offered rate per annum in the London interbank market for deposits in
Dollars of amounts equal or comparable to the principal amount of such LIBOR
Loan offered for a term comparable to such Interest Period, as currently shown
on the Reuters Screen LIBOR page as of 11:00 a.m., Greenwich Mean Time, two
Business Days prior to the first day of such Interest Period; provided,
however, that (a) if more than one offered rate as described above appears on
the Reuters Screen LIBOR page, the rate used to determine LIBOR will be the
arithmetic average (rounded upward, if necessary, to the next higher 1/16 of
1%) of such offered rates, or (b) if no such offered rates appear, the rate
used for such Interest Period will be the arithmetic average (rounded upward,
if necessary, to the next higher 1/16 of 1%) of rates quoted by the Lender at
approximately 10:00 a.m., New York time, two Business Days prior to the first
day of such Interest Period for deposits in Dollars offered to leading European
banks for a period comparable to such Interest Period in an amount comparable
to the principal amount of such LIBOR Loan. If the Lender ceases to use the
Reuters Screen LIBOR page for determining interest rates based on eurodollar
deposit rates, a
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<PAGE> 16
comparable internationally recognized interest rate reporting service shall be
used to determine such offered rates.
"LIBOR Loan" shall mean a Loan bearing interest at a rate based on
LIBOR. Only Company Loans may be LIBOR Loans.
"License Subsidiary" shall mean PNI Spectrum, LLC, a Georgia limited
liability company who, by the Effective Date, will be the registered owner of
all FCC licenses used by the Parent, the Company and their respective
Subsidiaries in their businesses.
"Licenses" shall mean and include with respect to any Loan Party's
business, all licenses, permits, franchises, and authorizations issued by the
FCC and/or any PUC, and/or other relevant Governmental Authority, including
pending applications for any of the foregoing, for the construction or
operation of such Loan Party's business, including all renewals and extensions
thereof.
"Lien" shall mean, as applied to the property of any Person: (a) any
security interest, encumbrance, mortgage, deed to secure debt, deed of trust,
pledge, lien, charge or lease constituting a Capitalized Lease Obligation,
conditional sale or other title retention agreement, or other security title or
encumbrance of any kind in respect of any property of such Person, or upon the
income or profits therefrom; (b) any arrangement, express or implied, under
which any property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to the payment
of the general, unsecured creditors of such Person; and (c) the filing of, or
any agreement to give, any financing statement under the Uniform Commercial
Code or its equivalent in any jurisdiction.
"Loan Availability Certificate" shall mean a certificate of the chief
financial officer of the Company setting forth the calculation of the amounts
referred to in clause (a) of Section 2.1., such certificate to be in form
reasonably acceptable to the Lender.
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Guaranties, the Security Documents, and any other documents and instruments
executed and delivered by any Loan Party in connection with this Agreement or
any of the foregoing documents.
"Loan Party" shall mean each of the Parent, the Company, the License
Subsidiary, their respective Subsidiaries, each other Guarantor and each Person
who grants a Lien in any of the Collateral to secure all or a portion of the
Obligations.
"Loans" shall mean, collectively, the Company Loans and the Parent
Loans.
"Management Group" shall mean Mark Dunaway, Michael Saner and Eugene
Kreeft.
"Material Adverse Effect" shall mean any event, circumstance or
condition that, individually or when aggregated with all other similar events,
circumstances or conditions, could reasonably be expected to have a material
adverse effect on (a)(i) with respect to the Parent, the Company or any other
Subsidiary of the Parent, the business, property, assets, liabilities,
condition
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(financial or otherwise), operations, results of operations or prospects of the
Parent and its Subsidiaries or the Company and its Subsidiaries, in each case,
taken as a whole and (ii) with respect to a Loan Party that is not the Parent
nor a Subsidiary of the Parent, the business, property, assets, liabilities,
condition (financial or otherwise), operations, results of operations or
prospects of such Loan Party; (b) the ability of any Loan Party to perform its
obligations under any of the Loan Documents to which it is a party; (c) the
validity or enforceability of any of the Loan Documents; or (d) the rights and
remedies of the Lender under any of the Loan Documents.
"Material Contract" means (a) each Material Lease of a Loan Party and
(b) any other contract or other arrangement (other than Loan Documents),
whether written or oral, to which any Loan Party is a party as to which the
breach, nonperformance, cancellation or failure to renew by any party thereto
could have a Material Adverse Effect.
"Material Lease" means, with respect to a Person, any lease, license
or other agreement material to the continued operation of such Person.
"Multiemployer Plan" of any Person shall mean a multiemployer plan
defined as such in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate of such Person and which is covered by
Title IV of ERISA.
"Net Proceeds" shall mean, with respect to an Equity Issuance, the
aggregate amount of all cash received by the Parent in respect of such Equity
Issuance net of investment banking fees, legal fees, accountants fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred by the Parent in connection with such Equity Issuance.
"Net Worth" shall mean, with respect to any Person and at any given
time, the sum of such Person's total shareholder's equity (including capital
stock, additional paid-in capital and retained earnings, after deducting
treasury stock) which would appear as such on a balance sheet of such Person
prepared in accordance with GAAP.
"New Subsidiary" shall mean, with respect to an Acquisition, any
Subsidiary of the Company or the Parent formed in connection with, and for the
purpose of effecting, such Acquisition. If any outstanding capital stock of or
other equity interest in a Person is being acquired by the Parent, the Company
or any of their Subsidiaries in connection with an Acquisition and after giving
effect thereto such Person would be a Subsidiary of the Parent, the Company or
any of their Subsidiaries, then such Person shall also constitute a New
Subsidiary.
"Notes" shall mean the Company Note and the Parent Note.
"Other Lease" means, with respect to a Person, any lease, license or
other agreement of such Person which is not a Material Lease.
"Operating Account" shall mean the account maintained by the Parent
with the Lender which the Parent and the Lender designate in writing as the
"Operating Account."
"Obligations" shall mean, individually and collectively: (a) the
Company Loans and the Parent Loans; (b) all other obligations and indebtedness
of either the Company or the Parent
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<PAGE> 18
owing to the Lender of every kind, nature and description, under or with
respect to this Agreement, any Note or any of the other Loan Documents, whether
direct or indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note;
(c) all other obligations and indebtedness owing by either the Company or the
Parent to the Lender and all future advances made to the Company or the Parent
by the Lender, however and whenever created, arising or evidenced, whether
direct or indirect, through assignment from third parties, whether absolute or
contingent, or otherwise, now or hereafter existing, or due or to become due,
including, without limitation, obligations under all guaranties, letters of
credit and overdrafts; and (d) any and all renewals, modifications, extensions
and supplements to any of the foregoing.
"Parent Commitment" shall mean the obligation of the Lender to make
Parent Loans to the Parent in an aggregate principal amount at any one time
outstanding up to but not exceeding $2,000,000.
"Parent Distributions" shall mean any Restricted Payment by the
Company to the Parent, and shall include all loans and advances made by the
Company to the Parent (other than any Intercompany Loan).
"Parent Loans" shall mean any loan made by the Lender to the Parent
pursuant to Section 2.2.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean: (a) Liens created pursuant to the
Security Documents; (b) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due or which are being contested in accordance
with Section 6.5.; (c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business not
yet delinquent or which are being contested in accordance with Section 6.5.;
(d) pledges or deposits under worker's compensation, unemployment insurance and
other social security legislation; (e) deposits to secure the performance of
bids, trade contracts (other than a trade contract which constitutes
Indebtedness), leases (other than Capitalized Lease Obligations), statutory
obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of business; (f) easements,
rights-of-way, zoning restrictions and other similar encumbrances of record on
real property incurred in the ordinary course of business which, in the
aggregate, are not material in dollar amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of any of the Loan Parties; (g) Liens
in favor of any Person with whom the Lender has entered into an Intercreditor
Agreement and (h) Liens disclosed on Schedule 5.18. hereto and which are
acceptable to the Lender.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
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<PAGE> 19
"Plan" of any Loan Party shall mean an employee benefit or other plan
established or maintained by such Loan Party or any ERISA Affiliate of such
Loan Party and which is covered by Title IV of ERISA, other than a
Multiemployer Plan of such Loan Party.
"Pledge Agreement" shall mean (a) each Pledge Agreement executed and
delivered by the Company or the Parent in favor of the Lender on or prior to
the Effective Date and (b) each pledge agreement executed and delivered by a
Loan Party in favor of the Lender after the Effective Date pursuant to Section
6.12., in each case, substantially in the form of Exhibit C.
"Post-Distribution Debt Service Coverage Ratio" shall mean the ratio
of (a)(i) Adjusted EBITDA for the four fiscal-quarter period most recently
ended minus (ii) all Parent Distributions during such period to (b) Debt
Service of the Company for such period.
"Pre-Distribution Debt Service Coverage Ratio" shall mean the ratio of
(a) Adjusted EBITDA for the four fiscal-quarter period most recently ended to
(b) Debt Service of the Company for such period.
"Prime Rate" shall mean the rate of interest from time to time
announced by the Lender in Atlanta, Georgia as its prime commercial lending
rate. The Prime Rate is not necessarily intended to be the lowest rate of
interest determined by the Lender in connection with extensions of credit.
"PUC" shall mean any state or local Public Utility Commission or
similar state or local Governmental Authority which exercises (or maintains
that it exercises) jurisdiction over any of the Loan Parties or any of their
respective businesses.
"Purchase Money Lien" shall mean a Lien on any property being acquired
by a Borrower which Lien attaches only to the property being acquired, the
Indebtedness incurred in connection with such acquisition shall not exceed the
purchase price of such property and such Lien shall secure only such
Indebtedness.
"Receivable" shall mean (a) all rights to the payment of money or
other forms of consideration of any kind (whether classified under the UCC as
accounts, contract rights, chattel paper, general intangibles or otherwise)
including, but not limited to, accounts receivable, letters of credit and the
right to receive payment thereunder, chattel paper, tax refunds, insurance
proceeds, any rights under contracts not yet earned by performance and not
evidenced by an instrument or chattel paper, notes, drafts, instruments,
documents, acceptances and all other debts, obligations and liabilities in
whatever form from any Person, (b) all guaranties, security and Liens securing
payment thereof, (c) all goods, whether now owned or hereafter acquired, and
whether sold, delivered, undelivered, in transit or returned, which may be
represented by, or the sale or lease of which may have given rise to, any such
right to payment or other debt, obligation or liability, and (d) all proceeds
of any of the foregoing.
"Regulations D, G, T, U and X" shall mean, respectively, Regulations
D, G, T, U and X of the Board of Governors of the Federal Reserve System (or
any successor), as the same may be amended or supplemented from time to time.
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"Regulatory Change" shall mean, with respect to the Lender, any change
enacted or adopted after the date of this Agreement in United States Federal,
state or foreign law or regulations (including, without limitation, Regulation
D) or the adoption or publication after the date of this Agreement of any
interpretations, directives or requests (whether or not having the force of
law) applying to a class of banks including the Lender of or under any United
States Federal, state or foreign law or regulations by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" shall mean any "release" as such term is defined in 42
U.S.C. ss.9601(22), or any successor federal statute or analogous state law.
"Restricted Payment" shall mean: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock, membership interest or other equity interest of the Parent or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock, membership interest or other equity interest of the Parent or any of its
Subsidiaries now or hereafter outstanding; (c) any payment or prepayment of
principal of, premium, if any, or interest on, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Debt; and (d) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights
to acquire shares of any class of stock, membership interest or other equity
interest of the Parent or any of its Subsidiaries now or hereafter outstanding.
"Security Agreement" shall mean (a) each Security Agreement executed
and delivered by a Loan Party in favor of the Lender on or prior to the
Effective Date and (b) each security agreement executed and delivered by a Loan
Party in favor of the Lender after the Effective Date pursuant to Section
6.12., in each case, substantially in the form of Exhibit D.
"Security Documents" shall mean, collectively, the Security
Agreements, the Pledge Agreements, the Assignments of Acquisition Documents,
each of the UCC financing statements naming a Loan Party as debtor and the
Lender as secured party and covering any of the Collateral, and any other
security documents executed and delivered to the Lender by a Loan Party.
"Significant Acquisition" shall mean any Acquisition in which the
aggregate amount of consideration payable by the Parent, the Company and their
Subsidiaries in connection therewith equals or exceeds $3,000,000. For purposes
of this definition, such consideration shall include (without duplication), but
shall not be limited to, the following: (a) the amount of cash paid, together
with the fair market value of all other assets (excluding assets of the type
described in the following clause (b)) conveyed, by the Parent, the Company and
their Subsidiaries in consideration for such Acquisition; (b) the fair market
value of all capital stock, warrants and options to acquire capital stock, of
the Parent conveyed by the Parent in consideration for such Acquisition; (c)
the aggregate amount of Indebtedness acquired, incurred or assumed by the
Parent, the Company and their Subsidiaries in connection with such Acquisition;
(d) all amounts
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<PAGE> 21
paid or to be paid by the Parent, the Company and their Subsidiaries in respect
of any covenant not to compete granted in connection with such Acquisition and
accruing to the benefit of any New Subsidiary or other Loan Party; (e) the
aggregate capitalized amount of consulting or other similar fees or payments to
be paid by such New Subsidiary or other Loan Party in connection with, or as a
result of, such Acquisition; (f) the aggregate amount of earn-out payments,
similar payments or other contingent obligations required to be made by the
Parent, the Company and their Subsidiaries in connection with such Acquisition
and which payments or other obligations are to be capitalized by the Parent,
the Company and their Subsidiaries and (g) the amount of all transaction fees
and expenses (including, without limitation, legal, accounting and brokers'
fees and expenses) incurred by the Parent, the Company and their Subsidiaries
in connection with such Acquisition. For purposes of this definition,
consideration shall not include any fees or other amounts paid to the Parent,
the Company or any of their Subsidiaries which represent compensation paid to
such Person for acting as agent for a Target of an Acquisition during the
period from the initial execution of the applicable Acquisition Documents until
the consummation of such Acquisition.
"Solvent" shall mean, when used with respect to any Person, that (a)
the fair value and the fair salable value of its assets (excluding any
Indebtedness due from any Affiliate of such Person) are each in excess of the
fair valuation of its total liabilities (including all contingent liabilities);
and (b) such Person is able to pay its debts or other obligations in the
ordinary course as they mature and (c) the Person has capital not unreasonably
small to carry on its business and all business in which it proposes to be
engaged.
"Subordinated Debt" means Indebtedness of the type described in clause
(a) or (b) of the definition thereof of the Borrower or any of its Subsidiaries
that is subordinated in right of payment and otherwise to the Loans and the
other Obligations on terms satisfactory to the Lender in its sole and absolute
discretion.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which more than 50% of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or any
combination thereof.
"Target" shall mean, in the case of the Acquisition of (i) all or
substantially all of the assets of a Person, such Person; (ii) a division or
Asset Group of a Person, such division or Asset Group and (iii) securities of a
Person, such Person.
"TCC" shall mean a Technical Control Center of the Company.
"Termination Date" shall mean August 8, 1998.
"Total Liabilities" shall mean, as to any Person as of a given date,
all liabilities which would, in conformity with GAAP, be properly classified as
a liability on the consolidated balance
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<PAGE> 22
sheet of such Person as at such date, and in any event shall include (without
duplication): (a) all Indebtedness of such Person and (b) all accounts payable
of such Person.
"Transactions" shall mean (a) the execution and delivery of each of
the Loan Documents and the Acquisition Documents, (b) the making of the Loans
hereunder, (c) any Acquisition and (d) the consummation of all of the other
transactions contemplated by the Loan Documents and the Acquisition Documents.
"Type" with respect to a Loan, refers to whether such Loan is a LIBOR
Loan or a Base Rate Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of Georgia.
"Wholly-Owned Subsidiary" of a Person shall mean any corporation,
association or other business entity of which 100% of the outstanding shares of
all classes of capital stock or other ownership interests is at the time owned
directly or indirectly by, such Person or one or more of the other Wholly-Owned
Subsidiaries of such Person or a combination thereof.
In addition to the above definitions, the following terms are defined
in this Agreement on the indicated pages:
<TABLE>
<S> <C>
Acquisition Historical Financial Statements ................ 48
Additional Costs ........................................... 27
Combined Financial Statements .............................. 48
Company Note ............................................... 22
Default Rate ............................................... 20
Event of Default ........................................... 53
FAA ........................................................ 38
Historical Financial Statements ............................ 32
Intellectual Property ...................................... 37
Intercompany Loans ......................................... 24
Intercompany Note .......................................... 24
Margin Stock ............................................... 36
Notice of Borrowing ........................................ 19
Notice of Continuation ..................................... 21
Notice of Conversion ....................................... 21
Other Taxes ................................................ 26
Overadvance ................................................ 19
Parent Note ................................................ 22
Pro Forma Balance Sheet .................................... 32
Taxes ...................................................... 26
</TABLE>
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<PAGE> 23
1.2. ACCOUNTING TERMS AND DETERMINATIONS; ATTORNEY'S FEES
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, all calculations for purposes of
determining compliance with the terms of this Agreement shall be made, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared in
accordance with GAAP applied for all periods to the extent practicable on a
basis consistent with that used in the preparation of the Historical Financial
Statements, so as to present fairly the financial condition and the results of
operations of the applicable Person. In the event of a change in GAAP that is
applicable to a Borrower, compliance with the financial covenants contained
herein shall continue to be determined in accordance with GAAP as in effect
prior to such change; provided, however, that the Borrowers and the Lender will
thereafter negotiate in good faith to revise such covenants to the extent
necessary to conform such covenants to GAAP as then in effect.
(b) To enable the ready and consistent determination of
compliance with the covenants set forth in Article 7. and Article 8., neither
Borrower will, without the prior written consent of the Lender, change the last
day of its fiscal year from December 31 of each year or the last days of the
first three fiscal quarters in each of its fiscal years from the last day in
March, June and September of each year, respectively.
(c) All terms defined in the UCC and not otherwise defined herein
are used herein as defined in the UCC. References in this Agreement to
"Sections", "Articles", "Exhibits" and "Schedules" are to sections, articles,
exhibits and schedules herein and hereto unless otherwise indicated. References
in this Agreement to any document, instrument or agreement (i) shall include
all exhibits, schedules and other attachments thereto, (ii) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (iii) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified or supplemented from time to time and
in effect at any given time.
(d) The amount of attorney's fees and disbursements payable
pursuant to any provision of this Agreement or of any of the other Loan
Documents relating to the collection and payment of such fees and
disbursements, shall be limited to reasonable attorney's fees and disbursements
actually incurred and shall not be determined by reference to any statutory
formulation.
2. LOANS
2.1. AMOUNT OF COMPANY LOANS
The Lender agrees, on the terms and subject to the conditions
contained herein, to make loans to the Company during the period from and
including the Effective Date to but excluding the Termination Date in an
aggregate principal amount at any one time outstanding of up to but not
exceeding the lesser of (a)(i)(A) the Company's Adjusted EBITDA for the two
fiscal-quarter periods most recently ended multiplied by (B) 8 minus (ii) the
aggregate amount of all of the Company's Indebtedness outstanding at the time
of determination (other than the Company Loans) and (b) the amount of the
Company Commitment. Notwithstanding the foregoing, the Lender may, in its sole
and absolute discretion, make Company Loans in excess of the limitation
-18-
<PAGE> 24
contained in the immediately preceding sentence or in the first sentence of
this Section, so long as the amount of such excess (the "Overadvance") is fully
secured by a pledge of cash collateral pursuant to documentation acceptable to
the Lender. During the period from and including the Effective Date to but
excluding the Termination Date and subject to the terms contained herein, the
Company may borrow, repay and reborrow the Company Loans.
2.2. AMOUNT OF PARENT LOANS
The Lender agrees, on the terms and subject to the conditions
contained herein, to make loans to the Parent during the period from and
including the Effective Date to but excluding the Termination Date in an
aggregate principal amount at any one time outstanding of up to but not
exceeding the lesser of (a) the Borrowing Base and (b) the amount of the Parent
Commitment. During the period from and including the Effective Date to but
excluding the Termination Date and subject to the terms contained herein, the
Parent may borrow, repay and reborrow the Parent Loans.
2.3. BORROWINGS
(a) A Borrower shall give the Lender notice of each borrowing of
a Loan hereunder as provided in Section 3.3., which notice when given shall be
irrevocable. Each notice of borrowing (which shall be in the form of Exhibit E,
each a "Notice of Borrowing") shall specify: (i) the requested amount of such
Loan; (ii) the proposed use of the proceeds of such Loan; (iii) the date such
Loan is to be made; and (iv) in the case of a Loan which is initially to be a
LIBOR Loan, the initial Interest Period therefor. Not later than 2:00 p.m.
(Atlanta, Georgia time) on the date specified for each borrowing hereunder, the
Lender shall make the amount of the Loan available to the Borrower requesting
such Loan by depositing the same, in immediately available funds, in an account
of such Borrower maintained with the Lender.
(b) At 5:00 p.m. on each Business Day the Parent shall be deemed
to have requested that the Lender make to the Parent a Parent Loan in an amount
equal to the amount by which drafts against the Operating Account exceed the
available balance contained therein at such time. The Lender shall make the
proceeds of each such Loan available to the Parent by depositing such proceeds
into the Operating Account. The provisions of this subsection shall not become
effective until the Parent has executed and delivered the Lender's customary
documentation relating to its "Auto Borrow" and "Auto Sweep" programs.
2.4. REPAYMENT OF LOANS
On the Termination Date, the aggregate principal amount of all Loans
then outstanding shall be due and payable in full.
2.5. INTEREST
(a) Each Borrower agrees to pay to the Lender interest on the
unpaid principal amount of each Loan made to such Borrower for the period from
and including the date of such Loan to but excluding the date such Loan shall
be paid in full, at the following per annum rates:
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<PAGE> 25
(i) during the periods that such Loan is a Base Rate Loan, at
the Base Rate (as in effect from time to time) plus one percent
(1.0%); and
(ii) in the case of the Company only, during the periods that
such Loan is a LIBOR Loan, for each Interest Period relating thereto,
at the Adjusted LIBO Rate for such Loan for such Interest Period plus
(a) to the extent such Loan is an Overadvance, eighty-five
one-hundredths of one percent (0.85%) or (b) otherwise for a LIBOR
Loan, three and three-quarters of one percent (3.75%).
Accrued interest on each Loan shall be payable (i) monthly in arrears on the
last Business Day of each calendar month; (ii) in the case of a LIBOR Loan, on
the last day of each Interest Period thereof; (iii) in the case of each Loan,
upon the payment or prepayment thereof or the Conversion of such Loan to a Loan
of another Type (but only on the principal amount so paid, prepaid or
Converted) and (iv) in the case of each Loan, on the Termination Date.
(b) If an Event of Default shall have occurred and be continuing,
interest shall accrue for the period such Event of Default is continuing, on
the unpaid principal amount of each Loan (and, to the extent permitted by law,
on the unpaid amount of all interest, fees and other amounts payable hereunder
or under the Loan Documents that is not paid when due) at a rate per annum (the
"Default Rate") equal at all times to 3% per annum above the rate per annum
required to be paid on such Loans pursuant to Section 2.5.(a). The Lender
agrees to give the Borrowers prompt notice of the commencement of accrual of
interest at the Default Rate; provided, however, the Lender's failure to give
such notice shall not in any way limit or discharge the obligation of either
Borrower to pay interest at the Default Rate as and when payable hereunder.
(c) In no event shall the amount of interest due or payable on
the Loans exceed the maximum rate of interest allowed by Applicable Law and, in
the event any such payment is paid by a Borrower or received by the Lender,
then such excess sum shall be credited as a payment of principal, unless the
applicable Borrower shall notify the Lender in writing that such Borrower
elects to have such excess sum returned to it forthwith. It is the express
intent of the parties hereto that no Borrower pay and the Lender not receive,
directly or indirectly, in any manner whatsoever, interest in excess of that
which may be lawfully paid under Applicable Law.
(d) THE PARTIES HERETO HEREBY AGREE AND STIPULATE THAT THE ONLY
CHARGE IMPOSED UPON THE BORROWERS FOR THE USE OF MONEY IN CONNECTION WITH THIS
AGREEMENT IS AND SHALL BE THE INTEREST DESCRIBED IN SECTION 2.5.(a). THE
PARTIES HERETO FURTHER AGREE AND STIPULATE THAT ALL OTHER CHARGES IMPOSED BY
THE LENDER ON THE BORROWERS IN CONNECTION WITH THIS AGREEMENT, INCLUDING ALL
COMMITMENT FEES, FACILITY FEES, UNDERWRITING FEES, DEFAULT CHARGES, LATE
CHARGES, ATTORNEYS' FEES AND REIMBURSEMENT FOR COSTS AND EXPENSES PAID BY THE
LENDER TO THIRD PARTIES OR FOR DAMAGES INCURRED BY THE LENDER, ARE CHARGES MADE
TO COMPENSATE THE LENDER FOR UNDERWRITING OR ADMINISTRATIVE SERVICES AND COSTS
OR LOSSES PERFORMED OR INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE LENDER
IN CONNECTION WITH THIS AGREEMENT AND SHALL UNDER NO
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<PAGE> 26
CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO OFFICIAL
CODE OF GEORGIA ANNOTATED SECTION 7-4-2 AND 7-4-18. ALL CHARGES OTHER THAN
CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED AND NONREFUNDABLE WHEN DUE.
2.6. CONTINUATION AND CONVERSION OF LOANS
(a) So long as no Default or Event of Default shall have occurred
and be continuing, the Company may on any Business Day, with respect to any
LIBOR Loan, elect to maintain such LIBOR Loan or any portion thereof as a LIBOR
Loan by selecting a new Interest Period for such LIBOR Loan or portion. Each
new Interest Period selected under this Section shall commence on the last day
of the immediately preceding Interest Period. Each selection of a new Interest
Period shall be made by the Company's giving of a notice in the form of Exhibit
F (a "Notice of Continuation") within the time prescribed by Section 3.3. Such
notice by the Company of a Continuation shall specify (a) the effective date of
such Continuation, (b) the LIBOR Loan and portion thereof subject to such
Continuation and (c) the duration of the selected Interest Period, all of which
shall be specified in such manner as is necessary to comply with all
limitations on Loans outstanding hereunder. If the Company shall fail to select
in a timely manner a new Interest Period for any LIBOR Loan in accordance with
this Section, such Loan will automatically, on the last day of the current
Interest Period therefor, Convert into a Base Rate Loan notwithstanding failure
of the Company to comply with the immediately following subsection (b).
(b) So long as no Default or Event of Default shall have occurred
and be continuing, the Company may on any Business Day, upon the Company's
giving of a notice in the form of Exhibit G (a "Notice of Conversion"), Convert
all or a portion of a Loan of one Type into a Loan of another Type. In
connection with any Conversion of a LIBOR Loan into a Base Rate Loan on a day
other than the last day of an Interest Period for such LIBOR Loan the Company
as a condition to such Conversion shall pay all amounts contemplated by Section
3.9. Each such Notice of Conversion shall be given within the time prescribed
by Section 3.3. Subject to the restrictions specified above, each Notice of
Conversion shall specify (a) the requested date of such Conversion, (b) the
Type of Loan to be Converted, (c) the portion of such Type of Loan to be
Converted, (d) the Type of Loan such Loan is to be Converted into and (e) if
such Conversion is into a LIBOR Loan, the requested duration of the initial
Interest Period of such Loan.
(c) No more than four separate Interest Periods in respect of
LIBOR Loans may be outstanding at any one time.
2.7. MINIMUM AMOUNTS
Except for Conversions or prepayments made pursuant to Section 3.8.,
(a) each borrowing of LIBOR Loans (including a Continuation of, or Conversion
into, LIBOR Loans) shall be in an amount at least equal to $1,000,000 and
integral multiples of $500,000 in excess thereof, (b) each borrowing of Base
Rate Loans (including a Continuation of, or Conversion into, Base Rate Loans)
shall be in an amount at least equal to $250,000 and integral multiples of
$5,000 in excess thereof, and (c) each voluntary prepayment of Loans shall be
in an amount at
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<PAGE> 27
least equal to $100,000 and integral multiples thereof (borrowings, prepayments
or Conversions of Loans into Loans of different Types or, in the case of LIBOR
Loans, having different Interest Periods, shall be deemed to be separate
borrowings, prepayments or Conversions for purposes of the foregoing, one for
each Type or Interest Period). The provisions of this Section shall not apply
to borrowings under Section 2.3.(b).
2.8. FEES
(a) The Company agrees to pay to the Lender a fee on the Company
Commitment in the amount of $270,000, representing one and one-half of one
percent (1.5%) of the amount of the Company Commitment. Such fee shall be due
and payable on the date of execution and delivery of this Agreement.
(b) During the period from the date of this Agreement through the
Termination Date, the Company shall pay to the Lender a fee on the daily
average unused amount of the Company Commitment at a per annum rate equal to
one-half of one percent (0.5%), such fee to be payable monthly in arrears on
the first Business Day of each month.
(c) The Parent agrees to pay to the Lender a fee on the Parent
Commitment in the amount of $25,000, representing one and one-quarter of one
percent (1.25%) of the amount of the Parent Commitment. The Lender acknowledges
that the Parent has already paid such fee in full.
(d) During the period from the date of this Agreement through the
Termination Date, the Parent shall pay to the Lender a fee on the daily average
unused amount of the Parent Commitment at a per annum rate equal to one-half of
one percent (0.5%), such fee to be payable monthly in arrears on the first
Business Day of each month.
(e) All fees shall be fully earned and non-refundable upon
receipt.
2.9. NOTES
(a) The Company Loans shall be evidenced by a single promissory
note (the "Company Note"") to be executed by the Company in substantially the
form of Exhibit H, dated the date hereof, payable to the order of the Lender in
a principal amount equal to the amount of the Company Commitment as originally
in effect and otherwise duly completed.
(b) The Parent Loans shall be evidenced by a single promissory
note (the "Parent Note") to be executed by the Parent in substantially the form
of Exhibit I, dated the date hereof, payable to the order of the Lender in a
principal amount equal to the amount of the Parent Commitment as originally in
effect and otherwise duly completed.
(c) The date and amount of each Loan made by the Lender to a
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books; provided that the failure of the Lender to
make any such recordation shall not affect the obligations of a Borrower to
make a payment when due of any amount owing under such Note.
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<PAGE> 28
Any such recordations made by the Lender on its books shall be prima facie
evidence of the amounts recorded therein.
2.10. Optional Prepayments
Each Borrower shall have the right to prepay Loans to such Borrower in
whole or in part at any time or from time to time, without premium or penalty,
except that in connection with any prepayment by the Company of LIBOR Loans on
a day other than the last day of the Interest Period applicable thereto, the
Company as a condition to such prepayment shall pay all amounts contemplated by
Section 3.9. in connection with such prepayment.
2.11. Mandatory Prepayments of Loans
(a) The Parent shall, within one Business Day after delivery of
each Borrowing Base Certificate pursuant to Section 6.1.(f), prepay the Parent
Loans in such amounts, if any, as shall be necessary so that the aggregate
principal amount of outstanding Parent Loans shall be less than or equal to the
Borrowing Base reflected in such Borrowing Base Certificate.
(b) The Company shall, within one Business Day after delivery of
each Loan Availability Certificate pursuant to Section 6.1.(g), prepay the
Company Loans in such amounts, if any, as shall be necessary so that the
aggregate principal amount of outstanding Company Loans shall be less than or
equal to the amount described in clause (a) of Section 2.1. as reflected in
such Loan Availability Certificate.
(c) If at any time the aggregate amount of Company Loans
outstanding shall exceed the amount of the Company Commitment in effect at such
time, the Company shall, within one Business Day, prepay the Company Loans in
such amounts as shall be necessary so that the aggregate principal amount of
the Company Loans outstanding shall not exceed the Company Commitment. If at
any time the aggregate amount of Parent Loans outstanding shall exceed the
amount of the Parent Commitment in effect at such time, the Parent shall,
within one Business Day, prepay the Parent Loans in such amounts as shall be
necessary so that the aggregate principal amount of the Parent Loans
outstanding shall not exceed the Parent Commitment.
(d) At 5:00 p.m. on each Business Day, the Parent shall repay a
principal amount of Parent Loans by an amount equal to the lesser of (i) the
outstanding principal balance of Parent Loans then outstanding and (ii) the
positive balance, if any, of available funds then on deposit in the Operating
Account as determined by the Lender at such time. The Parent hereby authorizes
the Lender to deduct such amount from the Operating Account without notice to
the Parent, and to apply such amount in repayment of the then outstanding
principal balance of Parent Loans. The provisions of this subsection shall not
become effective until the Parent has executed and delivered the Lender's
customary documentation relating to its "Auto Borrow" and "Auto Sweep"
programs.
2.12. Use of Proceeds
(a) The Company may only use the proceeds of Company Loans to
finance (i) the cash portion of the consideration paid by the Company to
finance paging related Acquisitions,
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<PAGE> 29
including without limitation, paging network Acquisitions, tower and site
Acquisitions and pager repair Acquisitions; (ii) capital expenditures of the
Company and (iii) intercompany loans to the Parent which the Parent will use to
finance the cash portion of the consideration paid by the Parent to finance
paging network Acquisitions ("Intercompany Loans"). All Intercompany Loans must
be evidenced by a promissory note executed by the Parent in favor of the
Company and substantially in the form of Exhibit J hereto (the "Intercompany
Note"). The Intercompany Note shall be pledged by the Company to the Lender as
further security for the Obligations of the Company.
(b) The Parent may only use the proceeds of Parent Loans for
working capital purposes.
2.13. EXTENSION OF TERMINATION DATE
The Borrowers may request that the Lender extend the current
Termination Date by executing and delivering to the Lender at least 60 days but
no more than 90 days prior to the current Termination Date, a written request
to that effect. If the Lender shall notify the Borrowers in writing on or
before the date which is 30 days prior to the current Termination Date that it
accepts such request, the Termination Date shall be extended to the date set
forth in the Lender's written notification of such acceptance. If the Lender
shall not have so notified the Borrowers on or prior to such date, the
Termination Date shall not be extended. The Borrowers understand that this
Section has been included in this Agreement for the Borrowers' convenience in
requesting an extension of the Termination Date and the Borrowers acknowledge
that the Lender has not promised (either expressly or impliedly), nor has any
obligation or commitment whatsoever, to extend the Termination Date at any
time.
3. PAYMENTS; COMPUTATIONS; TAXES; ETC.
3.1. PAYMENTS
(a) Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by a Borrower under this
Agreement and its Note and, except to the extent otherwise provided therein,
all payments to be made by a Borrower under any other Loan Document, shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Lender at its Lending Office, not later than 12:00 noon
(Atlanta, Georgia time) on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). If (i) a Borrower has
irrevocably authorized the Lender in writing to debit any general deposit
account maintained by such Borrower with the Lender for the purpose of
effecting payment of any amount due under this Agreement, (ii) the available
balance of such account shall equal or exceed the amount due on the due date
thereof and (iii) the Lender shall have failed to debit such account to effect
such payment, then no Event of Default shall be deemed to have occurred as a
result of such failure by the Lender (but such failure shall not relieve such
Borrower from any of its obligations hereunder or under any other Loan
Document).
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<PAGE> 30
(b) A Borrower shall, at the time of making each payment under
this Agreement or its Note, specify to the Lender the Loans or other
Obligations to which such payment is to be applied (and in the event that it
fails to so specify, or if an Event of Default has occurred and is continuing,
the Lender may apply such payment to the Obligations in such manner as it may
determine to be appropriate).
(c) If the due date of any payment under this Agreement or any
other Loan Document would otherwise fall on a day which is not a Business Day,
such date shall be extended to the next succeeding Business Day and interest
shall be payable for any principal so extended for the period of such
extension.
3.2. COMPUTATIONS
Interest on Loans and all fees shall be computed on the basis of a
year of 360 days comprised of twelve thirty-day months for the actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which such amounts are payable.
3.3. CERTAIN NOTICES
Notwithstanding anything contained in Section 10.2. to the contrary,
Notices of Borrowings, optional prepayments of Loans, Notices of Conversion and
Notices of Continuations shall be irrevocable and shall be effective only if
received by the Lender in writing not later than 12:00 noon (Atlanta, Georgia
time) on the number of Business Days prior to the date of the relevant notice
of borrowing, Continuation, Conversion or prepayment specified below:
<TABLE>
<CAPTION>
NUMBER OF
BUSINESS DAYS
NOTICE PRIOR
------ ------------
<S> <C>
Initial Borrowing on Effective Date 1
Subsequent Borrowing of Base Rate Loans Same Day
Subsequent Borrowing of LIBOR Loans 3
Notice of Conversion to a LIBOR Loan 3
Notice of Conversion to a Base Rate Loan 1
Notice of Continuation 3
Prepayment of Loans 1
</TABLE>
Each Notice of Borrowing, Conversion or optional prepayment shall specify the
Type of Loans to be borrowed, Converted or prepaid and the amount of each Loan
to be borrowed, Converted or prepaid and the date thereof (which shall be a
Business Day). The provisions of this Section shall not apply to borrowings
under Section 2.3.(b) or repayments pursuant to Section 2.11.(d).
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3.4. TAXES
(a) Any and all payments by a Borrower hereunder shall be paid
(except to the extent required by Applicable Law) free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
franchise taxes and taxes based on net income of the Lender (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If a Borrower shall be
required by Applicable Law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lender (i) the sum payable by such Borrower shall be
increased by the amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Lender shall receive an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions,
and (iii) such Borrower shall pay the full amount deducted to the relevant
taxing authority or other Governmental Authority in accordance with Applicable
Law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) Each Borrower will indemnify the Lender for the full amount
of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lender and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Such indemnification shall be made within five Business
Days after the date of receipt of a written demand therefor from the Lender.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by a Borrower in respect of any payment to the Lender, a
Borrower will furnish to the Lender, at its address referred to in Section
10.2., the original or a certified copy of a receipt evidencing payment
thereof.
(e) If the Lender claims any additional amounts payable pursuant
to this Section, the Lender shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document reasonably
requested by a Borrower if the making of such a filing would avoid the need for
or reduce the amount of any such additional amounts which may thereafter accrue
and would not, in the sole determination of the Lender, be otherwise
disadvantageous to the Lender.
3.5. ADDITIONAL COSTS
(a) Each Borrower shall pay directly to the Lender from time to
time such amounts as the Lender may determine in good faith to be necessary to
compensate it for any costs which it determines are attributable to its making
or maintaining any Loans or its obligation to make any
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Loans hereunder, or any reduction in any amount receivable by the Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs") resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
the Lender under this Agreement or the Note in respect of any of such
Loans (other than taxes imposed on or measured by the overall net
income of the Lender or of its Lending Office for any of such Loans by
the jurisdiction in which the Lender has its Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, the Lender
(including any of such Loans or any deposits referred to in the
definition of "LIBOR" in Section 1.1.), or any commitment of the
Lender (including the Commitments) hereunder.
(b) Without limiting the effect of the foregoing provisions of
this Section 3.5. (but without duplication), each Borrower shall pay directly
to the Lender from time to time on request such amounts as the Lender may
reasonably determine to be necessary to compensate the Lender (or, without
duplication, the bank holding company of which the Lender is a subsidiary) for
any increased costs which it determines in good faith are attributable to the
maintenance by the Lender (or its Lending Office or such bank holding company)
of capital in respect of the Commitments or Loans pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law) of any court or Governmental Authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) hereafter issued by any
Governmental Authority implementing at the national level the Basle Accord
(including, without limitation, the Final Risk-Based Capital Guidelines of the
Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix A;
12 CFR Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of the
Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A)), such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of the Lender (or its Lending Office
or such bank holding company) to a level below that which the Lender (or its
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request. For purposes of this
Section 3.5.(b), "Basle Accord" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended,
modified and supplemented and in effect from time to time or any replacement
thereof.
(c) The Lender shall notify the Borrowers of any event occurring
after the date of this Agreement that will entitle the Lender to compensation
under Section 3.5.(a) or (b) as promptly as practicable and shall furnish to
the Borrowers a certificate setting forth the basis and amount of each request
by the Lender for compensation, together with calculations in reasonable detail
of such amount. Determinations and allocations by the Lender for purposes of
this Section 3.5. of the effect of any Regulatory Change pursuant to Section
3.5.(a), of the effect of capital maintained pursuant to Section 3.5.(b) on its
costs or rate of return of maintaining Loans or its
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obligation to make Loans or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate the Lender under this Section, shall
be made in a manner consistent with that applied by the Lender in similar
contexts and shall be conclusive in the absence of manifest error.
3.6. LIMITATION ON TYPES OF LOANS
Anything herein to the contrary notwithstanding, if on or prior to the
determination of LIBOR for any Interest Period the Lender determines (which
determination shall be conclusive) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR" are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for LIBOR Loans as provided herein; or
(b) the relevant rates of interest referred to in the
definition of LIBOR in this Agreement upon the basis of which the rate
of interest for LIBOR Loans for such Interest Period is to be
determined are not likely to adequately cover the cost to the Lender
of making or maintaining LIBOR Loans for such Interest Period;
then the Lender shall give the Company notice thereof, and so long as such
condition remains in effect, the Lender shall be under no obligation to make
additional LIBOR Loans, to Continue LIBOR Loans or to Convert Base Rate Loans
into LIBOR Loans, and the Company shall, on the last day(s) of the then-current
Interest Period(s) for the outstanding LIBOR Loans, either prepay such Loans or
Convert such Loans into Base Rate Loans in accordance with Section 2.6.
3.7. ILLEGALITY
Notwithstanding any other provision of this Agreement, if it becomes
unlawful for the Lender to honor its obligation to make or maintain LIBOR Loans
hereunder, then the Lender shall promptly notify the Company thereof and the
Lender's obligation to make or Continue, or to Convert Base Rate Loans into,
LIBOR Loans shall be suspended until such time as the Lender may again make and
maintain LIBOR Loans.
3.8. TREATMENT OF AFFECTED LOANS
If the obligation of the Lender to make, Continue or Convert Base Rate
Loans into LIBOR Loans shall be suspended pursuant to either of the immediately
preceding Sections, all outstanding LIBOR Loans shall be automatically
Converted into Base Rate Loans on the last day(s) of the current Interest
Period(s) for such LIBOR Loans (or, in the case of a Conversion required by
Sections 3.6. or 3.7., on such earlier date as the Lender may specify to the
Company) and, unless and until the Lender gives notice as provided below that
the circumstances specified in Sections 3.6. or 3.7. which gave rise to such
Conversion no longer exist:
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(a) to the extent that any LIBOR Loans have been so
Converted, all payments and prepayments of principal which would
otherwise be applied to such LIBOR Loans shall be applied instead to
the Base Rate Loans; and
(b) all Loans which would otherwise be made or Continued as
LIBOR Loans shall be made or Continued instead as Base Rate Loans and
all Base Rate Loans which would otherwise be Converted into LIBOR
Loans shall remain as Base Rate Loans.
If the Lender gives notice to the Company that the circumstances specified in
Sections 3.6. or 3.7. which gave rise to the Conversion of LIBOR Loans pursuant
to this Section no longer exist at a time when LIBOR Loans are outstanding, the
Lender's Base Rate Loans shall be automatically Converted, at the option of the
Company.
3.9. COMPENSATION
The Company shall pay the Lender such amount or amounts as shall be
sufficient to compensate the Lender for any loss, cost, or expense which the
Lender determines in good faith is attributable to: (a) any payment, prepayment
or Conversion of a LIBOR Loan for any reason (including, without limitation,
the acceleration of the Loans pursuant to Article 9.) on a date other than the
last day of the Interest Period for such Loan; or (b) any failure by the
Company for any reason to borrow a LIBOR Loan on the date for such borrowing
specified in the relevant Notice of Borrowing given pursuant to Section
2.3.(a). Without limiting the effect of the preceding sentence, such
compensation shall include with respect to a LIBOR Loan an amount equal to the
excess, if any, of (i) the amount of interest which otherwise would have
accrued on the principal amount so paid, prepaid or Converted or not borrowed
for the period from the date of such payment, prepayment, Conversion or failure
to borrow to the last day of the then-current Interest Period for such Loan
(or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
amount of interest which would otherwise have accrued on such principal amount
at a rate per annum equal to the sum of (x) the Adjusted LIBO Rate which would
apply to a LIBOR Loan having a principal amount equal to or comparable to such
principal amount and with maturities comparable to such period (as determined
in good faith by the Lender) plus (y) three and three-quarters of one percent
(3.75%). If the Lender shall request compensation under this Section, the
Lender shall, upon the Borrowers' request, provide the Borrowers with a
statement setting forth the basis for requesting such compensation and the
method for determining the amount thereof. Any such statement shall be
conclusive absent manifest error.
4. CONDITIONS PRECEDENT
4.1. INITIAL LOANS
The obligation of the Lender to make the initial Loans hereunder on
the Effective Date is subject to the following conditions:
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(a) Corporate Documents. The Lender shall have received the following
documents, each certified as indicated below:
(i) a copy of the certificate of incorporation, articles of
organization or other comparable organizational instrument of each
Loan Party, certified as of a recent date by the Secretary of State of
the respective jurisdiction of its formation, and a certificate as of
a recent date from such Secretary of State as to the good standing of
such Loan Party;
(ii) a certificate as of a recent date from the Secretary of
State of each state in which each Loan Party is required to qualify to
do business as a foreign corporation or limited liability company, as
the case may be, to the effect that such Loan Party is so qualified;
(iii) a certificate of the respective secretary (or member in
the case of a limited liability company) of each Loan Party, dated the
Effective Date and certifying (A) that attached thereto is a true and
complete copy of such Loan Party's by-laws (or operating agreement in
the case of a limited liability company) as in effect on the date of
such certificate, (B) that attached thereto is a true and complete
copy of resolutions duly adopted by such Loan Party's board of
directors (or members in the case of a limited liability company)
authorizing the execution, delivery and performance of each of the
Loan Documents to which such Loan Party is a party, and that such
resolutions have not been modified, rescinded or amended and are in
full force and effect, (C) that such Loan Party's certificate of
incorporation, articles of organization or other comparable
organizational instrument has not been amended since the date of the
certification thereto furnished pursuant to subsection (i) above, and
(D) as to the incumbency and specimen signature of each of such Loan
Party's officers (or members in the case of a limited liability
company) executing each of the Loan Documents to which such Loan Party
is a party and in the case of a Borrower, the names and titles of each
officer (or member in the case of a limited liability company)
authorized to deliver Notices of Borrowing, Continuations and
Conversions (and the Lender may conclusively rely on such certificate
until the Lender receives notice in writing from such Loan Party, to
the contrary); and
(iv) a certificate of another officer (or member in the case
of a limited liability company) of such Loan Party as to the
incumbency and specimen signature of the secretary of such Loan Party.
(b) Notes. The Lender shall have received the Company Note duly
completed and executed by the Company, and the Parent Note duly completed and
executed by the Parent.
(c) Guaranties. The Lender shall have received the Guaranties,
duly executed and delivered by each of the Guarantors.
(d) Security Agreements. The Lender shall have received each of
the Security Agreements, duly executed and delivered by each of the Loan
Parties.
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(e) UCC Filings. The Lender shall have received Uniform
Commercial Code financing statements naming each Loan Party as debtor, the
Lender as secured party, and to be filed in each jurisdiction where the filing
of such financing statements may be necessary or appropriate as determined by
the Lender.
(f) Lien Searches. The Lender shall have received favorable UCC,
tax, judgment and lien search reports (including without limitation, searches
of the records of the United States Patent and Trademark Office) with respect
to the Parent, the Company, the License Subsidiary and each other Loan Party in
all necessary or appropriate jurisdictions and under all legal and appropriate
trade names indicating that there are no prior liens on any of the Collateral
other than Permitted Liens or Liens to be terminated prior to the Effective
Date.
(g) Assignment of Leases. The Lender shall have received (i)
true, correct and complete copies of each Material Lease and each Other Lease
of the Parent and the Company, (ii) a Collateral Assignment of Leases from each
of the Parent and the Company, substantially in the form of Exhibit K hereto,
(iii) the consent of each lessor or licensor under each Material Lease of the
Company to such collateral assignment in form acceptable to the Lender and (iv)
evidence satisfactory to the Lender that each Material Lease and Other Lease
initially of the Parent but transferred by the Parent to the Company in
connection with the formation of the Company, has been so transferred and each
lessor or licensor under each such Material Lease or Other Lease consented to
such transfer.
(h) Pledge Agreements. The Lender shall have received each of the
Pledge Agreements duly executed by the Parent and the Company. In addition, the
Lender shall have received each of the following: (i) all certificates, if any,
representing all of the issued and outstanding capital stock, membership
interest and other equity interest of each of the Company, the License
Subsidiary and any other Subsidiary of the Parent, (ii) stock powers duly
endorsed in blank relating to all such certificates, (iii) if such Pledge
Agreement covers membership interest in a limited liability company, the
consent of such Person and each of its members substantially in the form
attached to the Pledge Agreement and (iv) all the Intercompany Note pledged
pursuant to the Pledge Agreement executed by the Parent and endorsed by the
Company to the Lender.
(i) Blocked Account Agreements and Lockbox Agreements. The Lender
shall have either (i) entered into blocked account agreements in form
satisfactory to the Lender with each financial institution with which either
Borrower currently maintains lockbox arrangements with respect to its
respective Receivables or (ii) entered into a lockbox agreement in form
satisfactory to the Lender with each Borrower with respect to its respective
Receivables and also received evidence that all existing lockbox arrangements
of the Borrowers have been terminated.
(j) Opinions of Counsel. The Lender shall have received the
opinion of (i) Sutherland, Asbill and Brennan, counsel to the Loan Parties,
regarding (A) the due organization of each Loan Party; (B) the corporate
authority of each Loan Party delivering a Loan Document; (C) the execution,
delivery and enforceability of such Loan Documents; (D) noncontravention of
material contracts and Applicable Law by the Loan Parties' execution, delivery
and performance of Loan Documents; (E) validity and perfection of the Liens
granted under the Security Documents and (F) such other matters as the Lender
or its counsel may reasonably request; and (ii) Lucas,
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McGowan, Nace & Gutierrez, Chtd., special FCC counsel to the Loan Parties,
regarding (A) the validity of the Liens granted under the Security Documents
under the Communications Laws; (B) noncontravention of Communications Law by
the Loan Parties' execution, delivery and performance of Loan Documents and (C)
such other matters as the Lender or its counsel may reasonably request.
(k) Insurance. The Lender shall have received certificates of
insurance evidencing the existence of all insurance required to be maintained
by each Loan Party pursuant to the Loan Documents to which it is a party and
Section 6.4. hereof, together with loss payable clauses as required by such
Loan Documents.
(l) Historical Financial Statements. The Lender shall have
received the following in form and substance satisfactory to the Lender: (i)
the respective audited consolidated balance sheets and statements of operations
and cash flows of the Parent for the fiscal years ended December 31, 1994 and
December 31, 1995 and (ii) the respective unaudited consolidated balance sheets
and statements of operations and cash flows of the Parent for the six (6) month
period ending June 30, 1996 (collectively, the "Historical Financial
Statements").
(m) Pro Forma Balance Sheet. The Lender shall have received a pro
forma balance sheet of the Company as of the date of this Agreement in form and
substance satisfactory to the Lender (the "Pro Forma Balance Sheet").
(n) Fees, Expenses and Other Consideration. The Lender shall have
received all amounts payable by the Borrowers in respect of fees and expenses,
including the fee payable under Section 2.8.(a), and attorney's fees, to the
extent due and payable on or prior to the making of the initial Loans
hereunder.
(o) Borrowing Base Certificate. The Lender shall have received a
Borrowing Base Certificate as of the last day of the month most recently ending
prior to the Effective Date.
(p) Loan Availability Certificate. The Lender shall have received
a Loan Availability Certificate as of the last day of the fiscal quarter most
recently ending prior to the Effective Date.
(q) Business Services Audit. The Business Services department of
the Lender shall have completed its field examination of the Parent, the
Company and the other Loan Parties, and the Lender shall be satisfied with the
results of such examination.
(r) Licenses. The Lender shall have received correct and complete
copies of each License described in Schedule 5.16.
(s) License Subsidiary. The Lender shall have received evidence
satisfactory to the Lender that all FCC licenses previously owned by the Parent
have been transferred to the License Subsidiary, that the License Subsidiary
has entered into licensing agreements with the Parent and the Company with
respect to such FCC licenses used by such Loan Parties in their respective
businesses, and that all Governmental Approvals required in connection
therewith, including the approval of the FCC to such transfers, have been
obtained.
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(t) Existing Financing Agreements. The Lender shall have received
copies of each of the documents, instruments and agreement evidencing the
Indebtedness described on Schedule 5.13., certified as true and complete by the
President of the Parent.
(u) Intercreditor Agreements. The Lender shall have entered into
Intercreditor Agreements, substantially in the form of Exhibit L hereto, with
the holders of the Indebtedness described on Schedule 5.13., including without
limitation, Glenayre Electronics, Inc. and Associates Capital Services
Corporation.
(v) Amendment to Schedules. The parties hereto shall have entered
into an amendment to this Agreement, in form satisfactory to the Lender,
amending the information set forth on the Schedules hereto to make such
information accurate as of the Effective Date.
(w) Other Documents. The Lender shall have received such other
documents, instruments and agreements as the Lender or its counsel may
reasonably request.
4.2. INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT
The obligation of the Lender to make any Loan hereunder (including the
initial Loans) is subject to the further condition precedent that, both
immediately prior to the making of such Loan, and also after giving effect
thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made or deemed made in
Article 5. and by the Loan Parties in each of the other Loan Documents shall be
true, complete and correct in all material respects on and as of the date of
the making of such extension of credit with the same force and effect as if
made on and as of such date (or, in the case of any such representation and
warranty made only as of a particular date, as of such particular date);
(c) no change that is material and adverse shall have occurred in
the business, property, assets, liabilities, condition (financial or
otherwise), operations, results of operations or prospects of the Parent, the
Company or any of the other Loan Parties since December 31, 1995; and
(d) the Lender shall have timely received a duly executed Notice
of Borrowing.
Each Notice of Borrowing hereunder shall constitute a certification by the
Borrowers to the effect set forth in subsections (a) through (d) above (both as
of the date of such notice and as of the date of such extension of credit).
5. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers represents and warrants to the Lender that the
following statements are, and after giving effect to the Transactions will be,
true and correct:
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5.1. CORPORATE EXISTENCE
Each of the Loan Parties (a) is a corporation or limited liability
company, as the case may be, duly organized and validly existing and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite corporate power, and has all Governmental Approvals, necessary to own
its assets and carry on its business as now being or as proposed to be
conducted and to consummate the Transactions; and (c) is qualified to do
business in all jurisdictions in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect. As of the date
hereof, and as of the Effective Date (upon the occurrence thereof), the
jurisdictions in which each of the Loan Parties is qualified to do business are
set forth on Schedule 5.1.
5.2. AUTHORIZATION; NO CONFLICT
The execution, delivery and performance by each Loan Party of each of
the Loan Documents and the Acquisition Documents to which any is a party and
the consummation of the Transactions (a) have been duly authorized by all
requisite corporate and, to the extent required, stockholder action (or
membership action in the case of a limited liability company) on the part of
each such Loan Party and (b) will not (i) violate any provision of Applicable
Law, or any order of any Governmental Authority or any provision of the
certificate in incorporation, articles of organization or other comparable
organizational instrument or by-laws or operating agreement of any Loan Party,
(ii) violate, conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default or an event of default under any
Material Contract to which any Loan Party is a party or by which any Loan Party
or any of its property is or may be bound, or (iii) result in the creation or
imposition of any Lien upon any property or assets of any Loan Party (except
pursuant to the Security Documents).
5.3. ENFORCEABILITY
Each of this Agreement and the other Loan Documents has been duly
executed and delivered by each Loan Party a party thereto and constitutes the
legal, valid and binding obligation of such Loan Party enforceable against such
Loan Party in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting generally the enforcement of creditors'
rights and by general principles of equity (regardless of whether considered in
a proceeding in equity or at law). The License Subsidiary and each other Loan
Party each has the right to assign or transfer control of all of its rights and
interests in all of its respective Licenses to the Lender, subject to the prior
review and approval of the FCC and any other applicable Governmental Authority.
5.4. GOVERNMENTAL APPROVALS FOR DOCUMENTS
No Governmental Approvals are necessary for the execution, delivery or
performance by any Loan Party of the Loan Documents and the Acquisition
Documents to which it is a party, or for the validity or enforceability
thereof, except for (a) filings and recordings in respect of the Liens created
pursuant to the Security Documents and (b) Governmental Approvals which have
already been obtained and which are described on Schedule 5.4.
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5.5. FINANCIAL CONDITION
(a) The Historical Financial Statements fairly present, in all
material respects, the financial condition and results of operations of the
Parent and its Subsidiaries as of and for the periods covered thereby. Since
December 31, 1995, there has been no material adverse change in the business,
property, assets, liabilities, condition (financial or otherwise), operations
or results of operations of the Parent, the Company, any of their Subsidiaries
or any other Loan Party. The Pro Forma Balance Sheet fairly presents, in all
material respects, the pro forma financial condition of the Company as of the
Effective Date. All projected financial statements of the Parent, the Company
or any other Loan Party provided to the Lender in connection with this
Agreement or any of the other Loan Documents were, or will be when so provided,
based on the assumptions set forth therein, in the good faith judgment of the
Borrowers, reasonable estimations of the projected financial performance and
condition of the Person the subject of such projected financial statements.
(b) With respect to a given Acquisition, to the knowledge of the
Borrowers (i) the Acquisition Historical Financial Statements fairly present,
in all material respects, the financial condition and results of operations of
the Target as of and for the periods covered thereby; and (ii) the Combined
Financial Statements, if any, delivered under Section 6.12. in connection with
such Acquisition, fairly present, in all material respects, the financial
condition and results of operations of the Target and the Company, on a
combined basis for the periods covered thereby.
5.6. LITIGATION
There are no actions, suits or proceedings at law or in equity by or
before any Governmental Authority now pending or, to either Borrower's
knowledge, threatened against any Loan Party or its business, property or
rights (i) which involve any Loan Document, any Acquisition Document or any
Transaction or (ii) which, if adversely determined could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. There
exists no judgment, order, injunction or other restraint issued or filed which
is material to any Loan Party, or its business, properties or rights, or which
prohibits or adversely affects any of the Transactions.
5.7. ELIGIBILITY OF RECEIVABLES AND INVENTORY
Each Receivable reflected in the computations included in any
Borrowing Base Certificate meets the criteria enumerated in the definition of
Eligible Receivables. All items of Inventory reflected in the computations
included in any Borrowing Base Certificate meet the criteria enumerated in the
definition of Eligible Inventory.
5.8. MARGIN STOCK
No Loan Party is engaged in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying
Margin Stock. No part of the proceeds of any extension of credit hereunder,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, will be used (i) to purchase or carry Margin Stock or to extend
credit to
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others for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose, or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board of Governors of the Federal Reserve System,
including Regulations G, T, U or X. As used herein, the term "Margin Stock"
shall mean margin stock within the meaning of Regulations G, T, U and X.
5.9. ERISA
(a) No Loan Party maintains or contributes to any Employee
Benefit Plan or Multiemployer Plan other than those identified on Schedule 5.9.
(b) Each Loan Party is in compliance in all material respects
with all applicable provisions of ERISA and the Code with respect to all
Employee Benefit Plans. Each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to such Plan has
been determined to be exempt from federal income tax under Section 501(a) of
the Code. The actuarial present value of all accumulated benefit obligations
under each Plan, as disclosed in the most recent actuarial report with respect
to such Plan, does not exceed the fair market value of the assets of such Plan.
No material liability has been incurred by any Loan Party or any of its ERISA
Affiliates which remains unsatisfied for any taxes, penalties or other amount
(other than contributions in the ordinary course) with respect to any Employee
Benefit Plan or any Multiemployer Plan, and to either Borrower's knowledge no
such material liability is expected to be incurred.
(c) No Loan Party has: (i) engaged in a nonexempt prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code; (ii)
incurred any liability to the PBGC which remains outstanding other than the
payment of premiums and there are no premium payments which are due and unpaid;
(iii) failed to make a required contribution or payment to a Multiemployer
Plan; or (iv) failed to make a required installment or other required payment
under Section 412 of the Code.
(d) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan or Multiemployer Plan maintained or contributed
to by any Loan Party which could have a Material Adverse Effect.
(e) No proceeding, claim (other than routine claims for
benefits), lawsuit and/or investigation is existing or, to either Borrower's
knowledge, threatened concerning or involving any Employee Benefit Plan or
Multiemployer Plan maintained or contributed to by any Loan Party.
5.10. Intellectual Property
Each Loan Party owns, is licensed to use or otherwise has the legal
right to use, all patents, trademarks, trade names, copyrights, technology,
know-how and processes used in or necessary for the conduct of its business as
currently conducted that are material to the condition (financial or other),
business or operations of such Person (collectively called "Intellectual
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Property"). All such Intellectual Property with respect to which any public
filing with the United States Patent and Trademark Office, the United States
Copyright Office or any other Governmental Authority has been made, is
identified on Schedule 5.10. and fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions for
such registrations, filing or issuances. All Intellectual Property that is
registered or for which application for registration is pending is identified
on such Schedule. Except as disclosed in such Schedule, no material claim has
been asserted by any Person with respect to the use of any Intellectual
Property, or challenging or questioning the validity or effectiveness of any
Intellectual Property. Except as disclosed in such Schedule, the use of such
Intellectual Property by the Loan Parties, does not infringe on the rights of
any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liabilities on the part of any Loan Party that
could reasonably be expected to have a Material Adverse Effect.
5.11. Taxes
Each of the Loan Parties has filed all federal income tax returns and
all other tax returns and reports, domestic and foreign, required to be filed
by it and has paid all taxes, assessments, fees and other governmental charges
shown to be due and payable by it on such returns or reports, except where the
failure to so file or pay could not reasonably be expected to have a Material
Adverse Effect. All such returns are true and correct in all material respects.
Except as set forth on such Schedule, each of the Loan Parties has paid or, in
the case of taxes which are not yet due and payable or are being contested in
good faith, has provided adequate reserves for the payment of, all federal,
state and foreign taxes applicable for all prior fiscal years and for the
current fiscal year to the date hereof. To either Borrower's knowledge, there
is no proposed tax assessment against any Loan Party.
5.12. Investment Company Act; Public Utility Holding Company Act;
Etc.
No Loan Party is (a) an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended; (b) a "holding company" or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended or (c) subject to
any other Applicable Law which purports to regulate or restrict its ability to
borrow money or to consummate the transactions contemplated by this Agreement
or to perform its obligations under any Loan Document to which it is a party.
5.13. Existing Indebtedness
Schedule 5.13. is, as of the date hereof, and as of the Effective Date
(upon the occurrence thereof), a complete and correct listing of all
Indebtedness of the Parent, the Company and the other Loan Parties, including
without limitation, all Guarantees of each Loan Party. No default or event of
default, or event or condition which with the giving of notice, the lapse of
time, a determination of materiality, the satisfaction of any other condition
or any combination of the foregoing, would constitute such a default or event
of default, exists with respect to any such Indebtedness having a principal
amount outstanding, individually or in the aggregate, equal to or exceeding
$500,000.
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5.14. Material Contracts
Schedule 5.14. is a true, correct and complete listing of all Material
Contracts. Each of the Loan Parties that are parties to any Material Contract
has performed and is in compliance with all of the terms of such Material
Contract, and no default or event of default, or event or condition which with
the giving of notice, the lapse of time, a determination of materiality, the
satisfaction of any other condition or any combination of the foregoing, would
constitute such a default or event of default, exists with respect to any such
Material Contract.
5.15. Environmental and Safety Matters
Each Loan Party has obtained all Governmental Approvals which are
required under Environmental Laws and is in compliance with all terms and
conditions of such Governmental Approvals the failure with which to be in
compliance would have a Materially Adverse Effect. Each Loan Party is also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws. Neither Borrower is aware of, and has
received notice of, any past, present, or future events, conditions,
circumstances, activities, practices, incidents, actions, or plans which, with
respect to any Loan Party, may interfere with or prevent compliance or
continued compliance with Environmental Laws, or may give rise to any
common-law or legal liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study, or investigation, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant,
chemical, or industrial, toxic, or other Hazardous Material; and there is no
civil, criminal, or administrative action, suit, demand, claim, hearing,
notice, or demand letter, notice or violation, investigation, or proceeding
pending or, to either Borrower's knowledge, threatened, against any of the
other Loan Parties relating in any way to Environmental Laws.
5.16. Compliance with Law; Licenses and Other Governmental
Approvals
(a) Each of the Loan Parties is in compliance with all Applicable
Laws of, and all applicable restrictions imposed by, all Governmental
Authorities in respect of the conduct of their respective business and the
ownership of their respective properties, including without limitation, all
Communications Laws, except for such noncompliances as could not reasonably be
expected to individually or in the aggregate, have a Material Adverse Effect.
Not in limitation of the foregoing, each Loan Party is in compliance in all
material respects with all Applicable Laws concerning, inter alia,
construction, ownership, operation and maintenance of the Licenses and the
facilities associated therewith, and all other Applicable Laws of the FCC, the
Federal Aviation Administration (the "FAA") and any other Governmental
Authority applicable to the Loan Parties and the Licenses. To the knowledge of
each Borrower, none of the owners or lessors of any of the towers or structures
on which any Loan Party leases transmitter site space has failed to comply in
any material respect with any Applicable Laws relating to such towers or
structures, including without limitation, the Communications Laws or Applicable
Laws of the FAA.
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(b) As of the date hereof the Parent and Preferred Networks
Southeast, Inc. are the holders of, and as of the Effective Date (upon the
occurrence thereof) the License Subsidiary will be the holder of, the Licenses
listed in Schedule 5.16., each of which is in full force and effect except as
disclosed in such Schedule. The Licenses so listed constitute all of the
Licenses issued or required by the FCC, any PUC or any other Governmental
Authority for, or used in, the operation of the respective businesses of the
Loan Parties as currently operated. Except as described in such Schedule, none
of any Loan Party's Licenses is currently subject to or operating under any
agreement with third parties, granted by such Loan Party, which encumbers any
of the Licenses, or any FCC waiver of otherwise Applicable Law. Except for the
purpose of consummating the transaction contemplated by this Agreement, such
Licenses have not been amended, changed, modified or altered in any material
respect. There is not pending, nor threatened to the knowledge of either
Borrower, any action, investigation, complaint or other proceeding by or before
the FCC, any PUC or any other Governmental Authority to revoke, cancel,
suspend, modify or refuse to renew, or otherwise relating to, any of the
Licenses (except such actions, investigations, complaints, or other proceedings
which relate to the paging industry generally and do not relate to any specific
License and do not relate specifically to any Loan Party), or to otherwise
investigate the operation of any Loan Party's business, the accuracy of the
ownership or operation of the Licenses, or other regulatory actions which could
have a Material Adverse Effect. There is not issued, pending, nor threatened to
the knowledge of either Borrower, any notice of violation or complaint by the
FCC, any PUC or any other Governmental Authority against any Loan Party with
respect to such Loan Party's business or any of the Transactions.
5.17. Subsidiaries and Capitalization
Schedule 5.17. correctly sets forth the corporate structure and
ownership interests of the Company, its Subsidiaries and the Subsidiaries of
the Parent (and, to the extent not included, all other Loan Parties (excluding
the Parent)) including the correct legal name of each such Person, and the
partners, shareholders or members as applicable, or other Persons holding
equity interests in each such Person and their percentage equity or voting
interest in each such Person. Except as set forth in such Schedule (a) no
securities convertible into capital stock (or any options, warrants or other
rights to acquire any securities convertible into such capital stock) of the
Company, any of the Subsidiaries of the Parent or the Company or any other Loan
Party (excluding the Parent) are outstanding, and (b) the outstanding stock and
securities of or other equity interests, as applicable, in the Company, each
such Subsidiary and other Loan Party (excluding the Parent) are owned by the
Persons indicated on such Schedule, free and clear of all Liens, warrants,
options and rights of others of any kind whatsoever.
5.18. Title to Properties
Except as set forth on Schedule 5.18., each of the Company and the
other Loan Parties have good, indefeasible and insurable title to, or valid
leasehold interests in, all its real properties and good title to its other
assets, free and clear of all Liens other than Permitted Liens.
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5.19. Solvency
After giving effect to the Transactions, the Company, the Parent and
each other Loan Party will be Solvent.
5.20. Conduct of Business
The Parent and Preferred Networks Southeast, Inc., a wholly owned
subsidiary of the Parent, are a carrier's carrier of exclusively wholesale
one-way paging networks services. Preferred Technical Services, Inc., a wholly
owned subsidiary of the Parent, provides engineering support for the wireless
industry, including but not limited to, repair, maintenance, installation and
equipment sales to wireless carriers, manufacturers, and personal communication
service providers. Prior to the Effective Date, neither the Company nor the
License Subsidiary has engaged in any business or incurred any liabilities
except for activities, expenses and liabilities incidental to its organization
and to the carrying out of the Transactions. The sole purpose of the License
Subsidiary is to own all FCC licenses used by the Parent, the Company and their
Subsidiaries.
5.21. Disclosure
No representation or warranty of any Loan Party made or deemed made in
this Agreement, any other Loan Document, any Acquisition Document, the
financial statements referred to in Section 4.1.(n) and (o), or any other
document, certificate or written statement furnished to the Lender by or on
behalf of any such Person for use in connection with any of the Transactions,
contained, as of the date made or deemed made or as of the date thereof, any
untrue statement of a material fact or omitted, omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. There is no material fact known to either Borrower that has had or will
have a Material Adverse Effect and that has not been disclosed herein or in
such other documents, certificates and statements furnished to the Lender for
use in connection with the transactions contemplated hereby.
5.22. Representations and Warranties in Acquisition Documents
Each representation and warranty made or deemed made by any Loan Party
in any of the other Loan Documents or the Acquisition Documents is hereby
deemed made to and for the benefit of the Lender as if the same were set forth
herein in full.
5.23. Representations Regarding Acquisitions
To the extent any representation or warranty contained in this Article
5. relates to an Acquisition and the Transactions relating thereto, such
representation or warranty shall be deemed made only on and as of the (a) the
date such Acquisition has been consummated and (b) the date of the making of
the Loan any of the proceeds of which are used in whole or in part (including
the financing of an Intercompany Loan) to finance such Acquisition.
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5.24. Survival of Representations and Warranties, Etc.
All statements contained in any certificate, financial statement or
other instrument delivered by or on behalf of either Borrower, any Subsidiary
or any other Loan Party to the Lender pursuant to or in connection with this
Agreement or any of the other Loan Documents shall constitute representations
and warranties made by the Borrowers under this Agreement. All representations
and warranties made under this Agreement shall be deemed to be made at and as
of the date hereof, the Effective Date, date of the delivery of a Notice of
Borrowing, the date of the making of any Loan and the date of the consummation
of each Acquisition by a Loan Party, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and
accurate on and as of such earlier date) and except for changes in factual
circumstances specifically permitted hereunder.
6. AFFIRMATIVE COVENANTS
Each of the Borrowers covenants and agrees that, so long as either of
the Commitments remains in effect or the principal or interest on any Loan or
any Obligation shall remain unpaid, each Borrower will, and (as applicable)
will cause each of the other Loan Parties to:
6.1. Financial Statements and Other Information
Deliver to the Lender:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Parent, audited consolidated statements of
income, retained earnings and cash flow of the Parent and its Subsidiaries for
such fiscal year and the related audited consolidated balance sheet of the
Parent and its Subsidiaries as of the end of such fiscal year, accompanied by
(i) an report of the Parent's independent auditors (who shall be of nationally
recognized standing), stating that such financial statements fairly present, in
all material respects, the consolidated financial condition and results of
operations of the Parent and its Subsidiaries in accordance with GAAP and
containing only qualifications acceptable to the Lender and (ii) a schedule
prepared by such auditors setting forth the unaudited consolidating statements
of income, retained earnings and cash flow of the Parent, the Company and the
other Subsidiaries of the Parent for such fiscal year and the related unaudited
consolidating balance sheet as of the end of such fiscal year of the Parent,
the Company and the other Subsidiaries;
(b) as soon as available and in any event within 45 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Company, consolidated and consolidating statements of income, retained earnings
and cash flow of the Parent and its Subsidiaries and of the Company and its
Subsidiaries for such fiscal quarter and for the period from the beginning of
the current fiscal year to the end of such fiscal quarter, and the related
consolidated and consolidating balance sheet as of the end of such period,
accompanied by a certificate of the chief financial officer of the Parent,
which certificate shall state that such consolidated financial statements
fairly present, in all material respects, the consolidated and consolidating
financial condition and results
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of operations of such Persons in accordance with GAAP (subject to normal
year-end adjustments and absence of full footnote disclosures);
(c) simultaneously with the delivery of the financial statements
pursuant to Section 6.1.(a) or (b), a certificate of the chief financial
officer of the Parent (i) to the effect that no Default or Event of Default has
occurred and is continuing (or, if any Default or Event of Default has occurred
and is continuing, describing the same in reasonable detail and describing the
action that the Parent has taken and proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Parent and the Company are in compliance with the covenants
contained in Section 7.3. and in Article 8. in each case as of the end of the
period for which such financial statements are delivered;
(d) simultaneously with the delivery of the annual financial
statements referred to in Section 6.1.(a), a report addressed to the Parent by
the independent auditors who audited such statements (i) stating that, in
connection with their audit of such statements (and without conducting any
procedures other than those customarily conducted in a year-end audit), such
auditors have obtained no knowledge of any condition or event which constitutes
a Default or Event of Default as at the end of such fiscal year of the Parent,
or if such auditors shall have obtained knowledge of any such condition or
event, specifying in such report each such condition or event of which they
have knowledge and the nature and status thereof and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Parent
and the Company are in compliance with the covenants contained in Section 7.3.
and in Article 8.;
(e) promptly upon the receipt thereof, copies of all "management
letters" received by the Parent or any other Loan Party from its independent
accountants;
(f) within 30 days of the end of each calendar month, a Borrowing
Base Certificate as of the last Business Day of such month, together with a
schedule of receivables as of the date of such Borrowing Base Certificate
setting forth an aged trial balance in summary form of each Borrower's then
existing Receivables, and also specifying the name of and the balance due from
(and any rebate due to) each Account Debtor obligated on an aggregate amount of
Receivables which constitutes 5% or more of such Borrower's Eligible
Receivables;
(g) simultaneously with the delivery of the financial statements
pursuant to Section 6.1.(b) and within 45 days following the end of each fiscal
year of the Company, a Loan Availability Certificate as of the end of the
preceding fiscal quarter in form and substance acceptable to the Lender;
(h) as soon as possible, and in any event within 30 days after
any Loan Party knows or has reason to know that any of the events or conditions
specified below have occurred or exist, a statement signed by the chief
financial officer of the Parent setting forth details respecting such event or
condition and the action, if any, which the Parent, any other Loan Party or its
ERISA Affiliates proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to the PBGC by the Parent
or any other Loan Party or any of its ERISA Affiliates as of such date with
respect to such event or condition):
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(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan of
the Parent or any other Loan Party or any of its ERISA Affiliates, as
to which the PBGC has not by regulation waived the requirement of
Section 4043 (a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA
shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan of the Parent or any other Loan Party or
any of its ERISA Affiliates or the termination of any such Plan;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan of the Parent or any other Loan Party
or any of its ERISA Affiliates, or the receipt by the Parent or any
other Loan Party or any of its ERISA Affiliates of a notice from a
Multiemployer Plan of the Parent or any other Loan Party or any of its
ERISA Affiliates that such action has been taken by the PBGC with
respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Parent or any
other Loan Party or any of its ERISA Affiliates under Section 4201 or
4204 of ERISA from a Multiemployer Plan, or the receipt by the Parent
or any other Loan Party or any such ERISA Affiliate of notice from
such a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, which in any
such case could reasonably be expected to result in the imposition of
withdrawal liability upon the Parent or any other Loan Party or any of
its ERISA Affiliates;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Parent or any other Loan Party or any
of its ERISA Affiliates to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
(vi) the fair market value of the assets of any Plan does not
equal or exceed the accumulated benefit obligations with respect to
such Plan, as disclosed on the most recent actuarial report with
respect to such Plan.
(i) promptly after either Borrower obtains knowledge of the
occurrence of any Default or Event of Default, a notice of such Default or
Event of Default describing the same in reasonable detail together with a
description of the action that such Borrower (or such other appropriate party,
as the case may be) has taken and proposes to take with respect thereto;
(j) any amendment to the articles of incorporation or bylaws of
any Loan Party;
(k) any change in the senior management of either Borrower and
any change in the business, assets, liabilities, financial condition, results
of operations or business prospects of any Loan Party which has had or could
reasonably be expected to have a Material Adverse Effect;
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(l) the acquisition, incorporation or other creation of any
Subsidiary, the purpose for such Subsidiary and the nature of the assets and
liabilities thereof;
(m) as soon as possible, and in any event within ten Business
Days after either Borrower receives notice or otherwise has knowledge that any
of the following events have occurred or exist, a statement signed by the chief
financial officer of such Borrower setting forth details regarding such event
or condition and the action, if any, which such Borrower (or such other
appropriate party, as the case may be) proposes to take with respect thereto
(along with all relevant documentation): (A) any violation by any Loan Party of
any Environmental Laws which could reasonably be expected to have a Material
Adverse Effect; (B) any request for information or notice of potential
responsibility under Environmental Laws with respect to cleanup of any property
or facility of any Loan Party or any offsite location; (C) the imposition of
any Lien on any assets of the Company or any other Loan Party under
Environmental Laws; (D) the commencement of any litigation, enforcement action
or investigation with respect to any Loan Party under Environmental Laws; or
(E) any Release or threatened Release of any Hazardous Material at or from any
property or facility of any Loan Party;
(n) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which any Loan Party
shall have provided to its stockholders or filed with the Securities and
Exchange Commission (or any governmental agency substituted therefor), any
national securities exchange or the National Association of Securities Dealers,
Inc.;
(o) promptly upon receipt thereof, copies of any notification or
other communication regarding any claim or potential claim for indemnification
under any Acquisition Documents relating to any Significant Acquisition;
(p) prompt notice of the terms of any proposed amendment to, or
modification or waiver of any of the material terms of any of the Acquisition
Documents relating to any Significant Acquisition;
(q) simultaneously with the delivery of the annual financial
statements referred to in Section 6.1., capital and operating expense budgets,
projections of sources and applications of funds and profit and loss
projections for the Parent and its Subsidiaries on a consolidated basis for
each month of the next succeeding fiscal year, all itemized in reasonable
detail. Any material revisions made in such budgets or projects shall be
furnished promptly to the Lender;
(r) promptly upon the issuance thereof, a copy of any material
License issued to any Loan Party after the date hereof; and
(s) promptly after receipt of written request from the Lender,
such other information regarding the business, affairs or financial condition
of the Parent, the Company or any other Loan Party as the Lender may reasonably
request.
6.2. LITIGATION
Promptly (and in any event within 3 Business Days of receipt) give to
the Lender notice of the filing or commencement of, or any written notice of
intention of any Person to file or
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commence, any action, suit or proceeding affecting any Loan Party, whether at
law or in equity by or before any Governmental Authority which if adversely
determined could reasonably be expected to result in liability to any of the
Loan Parties in an amount equal to or exceeding $250,000 (including the amount
of any deductible paid or required to be paid by the Company or any other Loan
Party under the terms of its insurance policies, but net of any amounts
acknowledged in writing by the applicable insurer(s) to be fully covered by
insurance) or which would otherwise have a Material Adverse Effect, and of any
adverse development in respect of such legal or other proceedings.
6.3. CORPORATE EXISTENCE, ETC.
Except as expressly permitted by this Agreement: (a) preserve and
maintain its corporate existence, and all of its material rights, privileges
and franchises; (b) comply in all material respects with the requirements of
all Applicable Laws, rules, regulations and orders of all Governmental
Authorities; (c) maintain all of its material properties used in its business
in sufficient working order and condition so as to permit such Loan Party to
conduct its business; and (d) preserve and enforce its rights (including rights
to indemnification) under any Material Contracts, except where the failure to
do so would not have a Material Adverse Effect.
6.4. INSURANCE
Keep insured by financially sound and reputable insurers all property
of a character usually insured by entities engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such businesses and carry such other
insurance as is usually carried by such businesses. Without limiting the
obligations of the Loan Parties under the foregoing provisions of this Section,
in the event any of the Loan Parties shall fail to maintain in full force and
effect insurance as required by the foregoing provisions of this Section or any
of the other Loan Documents, then the Lender may upon notice to such Loan
Party, but shall have no obligation to, procure insurance covering the
interests of the Lender in such amounts and against such risks as the Lender
shall deem appropriate, and the Borrowers shall reimburse the Lender in respect
of any premiums paid by the Lender as provided in Section 10.3.
6.5. OBLIGATIONS AND TAXES
Pay its Indebtedness and other obligations in accordance with their
terms and pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or in respect
of its property, and in any event before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might give rise to a Lien upon such properties or
any part thereof; provided, however, that such payment and discharge shall not
be required so long as the validity or amount thereof shall be contested in
good faith by appropriate proceedings which effectively stay the execution of
any such Lien and the Parent shall (or shall cause the applicable Loan Party
to) set aside on its books adequate reserves in accordance with GAAP with
respect thereto.
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6.6. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS
Maintain all financial records in such manner so as to permit the
preparation of financial statements in accordance with GAAP and permit any
representatives designated by the Lender upon reasonable notice to visit and
inspect the properties of the Loan Parties and to inspect their financial and
business records and make extracts therefrom and copies thereof, all at
reasonable times during normal business hours and in a manner so as not to
unreasonably disrupt the operations of the Loan Parties and as often as
reasonably requested, and permit the Lender or any representatives designated
by the Lender upon reasonable notice to discuss the affairs, finances and
condition of any of the Loan Parties with the officers thereof and, after prior
notice to the Parent (so long as no Event of Default has occurred and is
continuing), independent accountants therefor.
6.7. ENVIRONMENTAL AND SAFETY MATTERS
For the purposes of protecting the Lender's security interest in the
Collateral and preserving each Borrower's ability to satisfy its Obligations:
(a) Comply with all Environmental Laws applicable to it or any of
its property or facilities in all material respects.
(b) Keep its properties and facilities free from any Liens which
could reasonably be expected to have a Material Adverse Effect arising under
any Environmental Laws.
(c) Respond promptly to any Release or threatened Release of any
Hazardous Materials in a manner which complies in all material respects with
all Environmental Laws and mitigates any associated risk to human health or the
environment to the maximum extent commercially practicable.
(d) If the Lender at any time has reason to believe that any
property or facility owned or operated by any Loan Party has been or may be
either (i) operated in violation of any Environmental Laws; (ii) contaminated
with any Hazardous Materials; or (iii) subject to any government-imposed
obligation to conduct any environmental investigation or clean-up, any of
which, in the good faith judgment of the Lender may impair in any material
respect the value of the Collateral or the ability of any of the Loan Parties
to satisfy any of their respective Obligations, the Company shall, upon the
written request of the Lender, at the sole cost and expense of the Borrowers,
conduct such investigation or study, through retention of a consulting firm
reasonably satisfactory to the Lender, as is necessary in the good faith
judgment of the Lender to demonstrate that no such impairment could reasonably
be expected to have a Material Adverse Effect.
6.8. ADDITIONAL SECURITY
If and to the extent requested by the Lender from time to time,
execute and deliver such additional documents and take such other action as may
be necessary or desirable in the reasonable opinion of the Lender in order to
assure and confirm that all Obligations are secured in
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a manner acceptable to the Lender by a first priority Lien on substantially all
present and future assets of the Parent, the Company and the other Loan Parties
subject only to Permitted Liens.
6.9. DEPOSIT ACCOUNTS/CASH MANAGEMENT SERVICES
For the purpose of protecting the Lender's security interest in the
Collateral and enabling the Lender to monitor the proceeds of Collateral and
the uses of cash by the Loan Parties, maintain all of its primary operating
accounts (other than an existing payroll account of the Parent maintained at
Wachovia Bank of Georgia, N.A.) and cash management service relationships with
the Lender.
6.10. ENFORCEMENT OF REMEDIES UNDER ACQUISITION DOCUMENTS
If either Borrower becomes aware of or otherwise has knowledge of any
facts that could give rise to any claim for indemnification from any party
under any Acquisition Document which claim exceeds in amount either $250,000 or
10% of the aggregate cash consideration (as determined as provided in the
definition of the term "Significant Acquisition") paid in connection with the
applicable Acquisition, assert or cause the assertion of such claim against
such party before the date on which such claim may no longer be made under such
Acquisition Document, and in asserting any such claim shall comply with all
requirements for asserting such claims under the Acquisition Documents.
6.11. LEASES
The Company shall use its best efforts to obtain the consent of each
lessor and licensor required under the Company's Collateral Assignment of
Leases with respect to its Other Leases as promptly as possible after the
Effective Date. The Parent shall use its best efforts to obtain the consent of
each lessor and licensor required under the Parent's Collateral Assignment of
Leases with respect to its Material Leases and Other Leases as promptly as
possible after the Effective Date. All Material Leases and Other Leases entered
into by the Company or the Parent following the execution of this Agreement
must contain a provision permitting the Company or the Parent, as applicable,
to assign collaterally all of its rights thereunder to the Lender on terms
reasonably satisfactory to the Lender.
6.12. ACQUISITIONS
With respect to each Acquisition, the Borrowers shall deliver to the
Lender the following:
(a) Description of Transaction. A written description of the
Acquisition in detail reasonably satisfactory to the Lender, such description
to include a description of (i) the purchase price of such Acquisition, (ii)
the method and structure of payment thereof and (iii) the other parties to such
Acquisition.
(b) Historical Financial Statements. If then available (i) an
audited (or unaudited if audited statements are not available) balance sheet,
statement of operations and statement of cash flows for such Target (if assets
which do not constitute an Asset Group are being acquired from a Person, such
financial statement shall be with respect to such Person) for the three fiscal
years
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most recently ended and (ii) an unaudited balance sheet, statement of
operations and statement of cash flows for such Target (or such Person) for the
fiscal quarter most recently ending (collectively, the "Acquisition Historical
Financial Statements").
(c) Pro Forma Compliance Certificate. Unless not required as
provided below, a certificate of the chief financial officer of the Parent (i)
setting forth in reasonable detail the computations necessary to determine
whether the Parent and the Company would have been in compliance with the
covenants contained in Section 7.3. and in Article 8. determined on a combined
basis with the Target as of the end of the fiscal quarter most recently ended
and (ii) to the effect that no Default or Event of Default has occurred and is
continuing or would occur after giving effect to such Acquisition;
(d) Pro Forma Financial Statements. If such Acquisition relates
to an existing TCC of the Company, pro forma financial statements in form
reasonably satisfactory to the Lender reflecting the combined financial
condition and results of operations the Company and the Target on a combined
basis for the prior two fiscal years (the "Combined Financial Statements").
(e) Corporate Documents. If such Acquisition involves any New
Subsidiaries, the Lender shall have received the following documents, each
certified as indicated below:
(i) a copy of the certificate of incorporation, articles of
organization or other comparable organizational instrument of each
such New Subsidiary, certified as of a recent date by the Secretary of
State of the jurisdiction of its formation, and a certificate as of a
recent date from such Secretary of State as to the good standing of
such New Subsidiary;
(ii) a certificate as of a recent date from the Secretary of
State of each state in which each such New Subsidiary is required to
qualify to do business as a foreign corporation or limited liability
company, as the case may be, to the effect that such New Subsidiary is
so qualified, or, if unavailable, evidence satisfactory to the Lender
that each such New Subsidiary has taken appropriate steps to so
qualify;
(iii) a certificate of the secretary (or member in the case
of a limited liability company) of each such New Subsidiary, dated the
date of such Acquisition and certifying (A) that attached thereto is a
true and complete copy of such New Subsidiary's by-laws (or operating
agreement in the case of a limited liability company) as in effect on
the date of such certificate, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by such New Subsidiary's
board of directors (or members in the case of a limited liability
company) authorizing the execution, delivery and performance of each
of the Loan Documents to which such New Subsidiary is or is to be a
party, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that such New
Subsidiary's certificate of incorporation, articles of organization or
other comparable organizational instrument has not been amended since
the date of the certification thereto furnished pursuant to subsection
(i) above, and (D) as to the incumbency and specimen signature of each
of such New Subsidiary's officers (or members in the case of a limited
liability company) executing each of such Loan
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Documents (and the Lender may conclusively rely on such certificate
until the Lender receives notice in writing from such New Subsidiary,
to the contrary); and
(iv) a certificate of another officer (or member in the case
of a limited liability company) of such New Subsidiary as to the
incumbency and specimen signature of the secretary of such New
Subsidiary.
(f) Acquisition Documents. Fully executed copies of all of the
Acquisition Documents and any amendments thereto (or if not executed at the
time of delivery as required below, the most current drafts then available).
(g) Assignment of Acquisition Documents. Unless not required as
provided below, an Assignment of Acquisition Documents duly executed by any New
Subsidiary or any other existing Loan Party having rights under the any of the
Acquisition Documents being executed in connection with such Acquisition. In
addition, the Lender shall have received the acknowledgment with respect to the
Assignment of Acquisition Documents, in the form attached thereto.
(h) Lien Searches. UCC, tax, judgment and lien search reports in
form and substance satisfactory to the Lender with respect to the Target and
each New Subsidiary in all necessary or appropriate jurisdictions and under all
legal and appropriate trade names indicating that there are no prior liens on
any of the Collateral other than Permitted Liens or Liens to be released prior
to or at the time of the consummation of such Acquisition.
(i) Security Agreements. A Security Agreement from each New
Subsidiary involved in such Acquisition, together with appropriate UCC
financing statements as may be requested by the Lender.
(j) Pledge Agreements. From each Loan Party owning any issued and
outstanding securities of each such New Subsidiary, (i) if such Loan Party has
previously executed and delivered a Pledge Agreement, an amendment (in form and
substance satisfactory to the Lender) to such Pledge Agreement subjecting to
the Lien thereof such securities or (ii) if such Loan Party not has previously
executed and delivered a Pledge Agreement, a Pledge Agreement granting to the
Lender a Lien in such securities. In addition, the Lender shall have received
each of the following: (x) all certificates, if any, representing all of such
securities, (y) stock powers duly endorsed in blank by the applicable Loan
Parties relating to all such certificates and (z) if such Pledge Agreement
covers membership interest in a limited liability company, the consent of such
Person and each of its members substantially in the form attached to the Pledge
Agreement.
(k) Guaranties. Guaranty from each such New Subsidiary
(l) Opinions of Counsel. An opinion of counsel to the Loan
Parties regarding (i) the due organization of each such New Subsidiary; (ii)
the corporate authority of any New Subsidiary or other Loan Party delivering a
Loan Document pursuant to this Section; (iii) the execution, delivery and
enforceability of such Loan Documents; (iv) noncontravention of Applicable Law
by such Acquisition or by the execution, delivery and performance by such New
Subsidiary and such
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Loan Parties of such Loan Documents; (v) validity and perfection of any
security interests granted under any Security Document delivered under this
Section and (vi) such other matters as the Lender or its counsel may reasonably
request.
(m) Other Documents. The Lender shall have received such other
documents, instruments, agreements and certifications as the Lender or its
counsel may reasonably request.
With respect to a Significant Acquisition, the items referred to in the
preceding subsections (a) through (m) must be delivered to the Lender at least
20 days prior to the execution and delivery of the definitive Acquisition
Documents for such Acquisition. With respect to any other Acquisition, the
items referred to in subsections (a), (b), (e), and (h) through (j) must be
delivered to the Lender prior to the execution and delivery of the definitive
Acquisition Documents for such Acquisition while the balance of the items
(other than the certificate referred to in the preceding subsection (c) and the
Assignment of Acquisition Documents, neither of which shall be required) must
be delivered to the Lender not later than 30 days following the execution and
delivery of the definitive Acquisition Documents for such Acquisition. The
Borrowers agree not to amend, supplement, restate or otherwise modify the terms
of any Acquisition Document prior to the consummation of the applicable
Acquisition, or waive any condition to the effectiveness of such Acquisition
contained in such Acquisition Documents, without the Lender's prior written
consent, such consent not to be unreasonably withheld.
7. NEGATIVE COVENANTS
Each Borrower covenants and agrees that, so long as either of the
Commitments remains in effect or the principal or interest on any Loan or any
Obligation shall remain unpaid, neither Borrower will, nor will it permit any
of the Loan Parties to:
7.1. PROHIBITION OF FUNDAMENTAL CHANGES
Effect any of the following: (a) any transaction of merger,
consolidation, recapitalization, reorganization, liquidation or dissolution not
otherwise expressly permitted hereunder without the Lender's prior written
consent; or (b) the sale, transfer, lease, contribution or other conveyance, or
the granting of options, warrants or other rights (excluding options, warrants
or other rights with respect to the Parent's stock) with respect to, any of its
assets to any Person other than sales of assets in the ordinary course of
business without the Lender's prior written consent; or (c) engage in any line
of business other than those engaged in or similar to those engaged in by the
Loan Parties as described in Section 5.20.; or (d) any Acquisition unless (i)
at the time of such Acquisition, the Target is engaged in the same or similar
line of business as those described in Section 5.20., (ii) no Default or Event
of Default shall have occurred and be continuing or would occur after giving
effect to such Acquisition, (iii) the provisions of Section 6.12. shall have
been complied with and (iv) if the amount of consideration (as determined as
provided in the definition of the term "Significant Acquisition") to be paid by
the Parent, the Company and their respective Subsidiaries in connection with
such Acquisition is greater than or equal to $1,000,000, the Lender shall have
given its prior written consent to such Acquisition. The Borrowers agree to
provide to the Lender, in addition to items delivered pursuant to Section
6.12., such information regarding such Acquisition as the Lender may reasonably
request. The Lender agrees that it will
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respond to a request for its consent under the preceding clause (iv) no later
than 10 calendar days prior to the date of execution and delivery of the
definitive Acquisition Documents for such Acquisition. Failure of the Lender to
give any such response within such time shall constitute a denial by the Lender
of its consent. The aggregate amount of consideration (as determined as
provided in the definition of the term "Significant Acquisition") paid by the
Parent, the Company and their respective Subsidiaries in connection with all
Acquisitions which do not require the Lender's consent as provided above shall
not exceed $5,000,000.
7.2. LIMITATION ON LIENS
Without the Lender's prior written consent, create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except Permitted Liens.
7.3. INDEBTEDNESS
Create, incur or suffer to exist any Indebtedness except (a)
Indebtedness to the Lender under any of the Loan Documents; (b) Indebtedness
existing on the Effective Date and described on Schedule 5.13. which is
acceptable to the Lender; (c) Indebtedness under the Intercompany Note in an
aggregate principal amount not to exceed $18,000,000 at any time outstanding;
(d) Indebtedness in an aggregate amount not to exceed $250,000 during any
fiscal year of the Borrowers; (e) Indebtedness otherwise permitted by Section
7.4. and (f) loans and advances to employees of the Borrowers for moving,
entertainment, travel and other similar expenses in the ordinary course of
business consistent with past practices.
7.4. INVESTMENTS
Make or permit to remain outstanding any Investments except (a)
Investments in Cash Equivalents as required under Section 8.1., (b)
Intercompany Loans and (c) the ownership of Subsidiaries as set forth on
Schedule 5.17., and other Subsidiaries the acquisition of which is permitted by
Section 7.1.(d).
7.5. RESTRICTED PAYMENTS
Make any Restricted Payment; provided, however, that Subsidiaries of
the Company may make dividends, payments or other distributions to the Company
or to any Wholly-Owned Subsidiary of the Company. Neither Borrower shall create
or otherwise cause or suffer to exist or become effective, or permit any
Subsidiary or any other Loan Party to create or otherwise cause or suffer to
exist or become effective, any consensual encumbrance or restriction of any
kind on the ability of any such Person to: (a) pay dividends or make any other
distribution on any of such Subsidiary's capital stock or other securities
owned by either Borrower, any of their Subsidiaries or any other Loan Party;
(b) pay any Indebtedness owed to either Borrower, any of their Subsidiaries or
any other Loan Party; (c) make loans or advances to either Borrower, any of
their Subsidiaries or any other Loan Party; or (d) transfer any of its property
or assets to either Borrower, any of their Subsidiaries or any other Loan
Party.
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7.6. TRANSACTIONS WITH AFFILIATES
Permit to exist or enter into, and will not permit any of its
respective Subsidiaries or any of the other Loan Parties to enter into or
permit to exist, any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
any Loan Party or with any director, officer or employee of any Loan Party,
except transactions in the ordinary course of business and upon fair and
reasonable terms which are no less favorable than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate.
7.7. AMENDMENT OF CERTAIN DOCUMENTS
Enter into any amendment, modification or waiver of any of the terms
of any of the Acquisition Documents which amendment, modification or waiver
would have a Material Adverse Effect in the reasonable judgment of the Lender.
8. FINANCIAL COVENANTS
So long as either of the Commitments remains in effect or the
principal or interest on any Loan or any Obligation shall remain unpaid:
8.1. CASH COVERAGE OF DEBT SERVICE
The Parent and its Subsidiaries must at all times hold on a
consolidated basis cash and Cash Equivalents in an aggregate amount greater
than or equal to the projected consolidated Debt Service of the Parent and its
Subsidiaries for the period commencing on the date of determination through the
Termination Date.
8.2. TOTAL LIABILITIES TO NET WORTH
The Parent shall not permit the ratio of Total Liabilities to Net
Worth of the Parent and its Subsidiaries determined on a consolidated basis to
exceed 3.0 to 1.0 at any time.
8.3. MINIMUM NET WORTH
The Parent shall maintain its Net Worth determined on a consolidated
basis with its Subsidiaries greater than or equal to (a) $25,000,000 at all
times through and including December 31, 1996 and (b) at all times thereafter,
$12,000,000 plus 50% of the Net Proceeds of any Equity Issuance after December
31, 1996.
8.4. DEBT SERVICE COVERAGE RATIOS
The Company shall maintain a Pre-Distribution Debt Service Coverage
Ratio greater than or equal to 1.5 to 1.0, and a Post-Distribution Debt Service
Coverage Ratio greater than or equal to 1.05 to 1.00, in each case as of the
end of each of the Company's fiscal quarters.
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9. EVENTS OF DEFAULT
If one or more of the following events (herein collectively called
"Events of Default" and singularly called an "Event of Default") shall occur
and be continuing:
9.1. PAYMENTS UNDER LOAN DOCUMENTS
The Company or any Guarantor shall default in the payment when due of
any principal of any Loan and such default shall continue unremedied for a
period of 5 calendar days. The Company shall default in the payment when due of
any interest on any Loan or any fee or any other Obligations payable by it
hereunder or under any other Loan Document, or any other Loan Party or any
Guarantor shall default in the payment when due of any other amount payable by
it under any Loan Document to which such Loan Party is a party, and such
default shall continue unremedied for a period of 10 calendar days.
9.2. OTHER INDEBTEDNESS
Any Loan Party shall default in the payment when due of any principal
of or interest on any Indebtedness having a principal amount outstanding,
individually or in the aggregate, equal to or exceeding $500,000 (other than
the Obligations) and such default shall continue unremedied beyond any
applicable grace or cure periods; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness of any Loan Party shall occur if the effect of such event is to
cause, or to permit the holder thereof to cause (with the giving of notice or
lapse of time or both), such Indebtedness to become due or to be required to be
prepaid (whether by redemption, purchase or otherwise) prior to its stated
maturity, and such event shall remain unremedied beyond any applicable grace or
cure periods.
9.3. REPRESENTATIONS AND WARRANTIES
Any representation, warranty or certification made or deemed to be
made in any Loan Document by any Loan Party or any certificate, financial
statement or other information furnished in writing to the Lender pursuant to
the provisions hereof or thereof, shall prove to have been false or misleading
in any material respect as of the time made or deemed to be made.
9.4. OTHER OBLIGATIONS
(i) Either Borrower shall default in the performance of any of its
obligations under Section 2.12., Section 6.1., Article 7. or Article 8.; (ii)
either Borrower shall default in the performance of any of its other
obligations in this Agreement not otherwise specifically referred to in this
Article 9. and such default shall continue unremedied for a period of 10
calendar days after either Borrower receives notice or otherwise has actual
knowledge thereof; (iii) an "Event of Default" as defined in any other Loan
Document shall have occurred and be continuing; or (iv) any Guarantor shall
fail to comply with any of its other obligations under its Guaranty not
otherwise specifically referred to in this Article 9. and such failure shall
continue unremedied for a period of 30 days after such Guarantor receives
notice or otherwise has actual knowledge thereof.
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9.5. ABILITY TO PAY DEBTS
Any Loan Party shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due.
9.6. VOLUNTARY PROCEEDINGS
Any Loan Party shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or readjustment of debts, (v) acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing.
9.7. INVOLUNTARY PROCEEDINGS
A proceeding or case shall be commenced against any Loan Party,
without its application or consent, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of all or any substantial part of
its assets, or (iii) similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such case or proceeding shall continue undismissed or unstayed for a period
of 60 consecutive calendar days; or an order for relief against any Loan Party
shall be entered in an involuntary case under the Bankruptcy Code.
9.8. JUDGMENTS
A judgment or judgments for the payment of money in excess of $500,000
in the aggregate (exclusive of judgment amounts to the extent covered by
insurance where the Parent has submitted a claim and the insurer has not
contested liability in respect of such judgment) shall be rendered by a court
or courts against any Loan Party and the same shall not be vacated, bonded or
discharged (or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within 60 days from the date of entry
thereof.
9.9. ERISA EVENT
(a) Any ERISA Event shall have occurred with respect to any Loan Party
and the sum of the Insufficiency of such Plan (determined as of the date of
occurrence of such ERISA Event) and the Insufficiency of any and all other
Plans (determined as of the date of occurrence of such ERISA Event) of any Loan
Party with respect to which an ERISA Event shall have occurred (or the
liability of any Loan Party or its ERISA Affiliates related to such ERISA
Event) exceeds $500,000; or (b) any Loan Party or any of its ERISA Affiliates
shall have been notified by a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan and the imposition of such
liability is reasonably likely to be incurred in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
any Loan Party and its
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ERISA Affiliates as withdrawal liability (determined as of the date of such
notification indemnification), requires payments exceeding $500,000 in the
aggregate; or (c) any Loan Party or any of its ERISA Affiliates shall have been
notified by a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated within the meaning of Title IV of ERISA,
and as a result of such reorganization or termination the aggregate annual
contributions of such Person and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the plan
years of such Multiemployer Plans immediately preceding the plan year in which
such reorganization or termination occurs by an amount exceeding $500,000.
9.10. FAILURE OF SECURITY
The Lender shall not have or shall cease to have a valid and perfected
first priority security interest in the Collateral (subject to Permitted
Liens).
9.11. CHANGE IN CONTROL
A Change in Control shall have occurred or the Company or the License
Subsidiary shall cease to be Wholly-Owned Subsidiaries of the Parent or the
Parent shall cease to be the manager of the Company or the License Subsidiary.
9.12. ADDITIONAL CAPITAL
The Parent shall fail to raise an aggregate amount of Net Proceeds of
Equity Issuances and Subordinated Debt greater than or equal to $20,000,000
during the period commencing on the date hereof and ending on July 1, 1997.
9.13. REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of an Event of Default the following provisions
shall apply:
(a) Acceleration; Termination of Facilities.
(i) Automatic. Upon the occurrence of an Event of Default
specified in Section 9.6. or 9.7., (A)(i) the principal of, and all
accrued interest on, the Loans at the time outstanding and (ii) all of
the other Obligations, including, but not limited to, the other
amounts owed to the Lender under this Agreement, the Notes or any of
the other Loan Documents, shall become immediately and automatically
due and payable by the Borrowers without presentment, demand, protest,
or other notice of any kind, all of which are expressly waived by the
Borrowers and (B) the Commitments shall immediately and automatically
terminate.
(ii) Optional. If any other Event of Default shall have
occurred and be continuing, the Lender may: (I) declare (1) the
principal of, and accrued interest on, the Loans at the time
outstanding and (2) all of the other Obligations, including, but not
limited to, the other amounts owed to the Lender under this Agreement,
the Notes or any of the other Loan Documents, to be forthwith due and
payable, whereupon the same shall
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immediately become due and payable without presentment, demand,
protest or other notice of any kind, all of which are expressly waived
by the Borrowers and (II) terminate the Commitments.
(b) Loan Documents. The Lender may exercise any and all of its
rights under any and all of the other Loan Documents.
(c) Applicable Law. The Lender may exercise all other rights and
remedies it may have under any Applicable Law.
(d) Appointment of Receiver. To the extent permitted by
Applicable Law, the Lender shall be entitled to the appointment of a receiver
for the assets and properties of the Borrowers, without notice of any kind
whatsoever and without regard to the adequacy of any security for the
Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the Collateral and/or the business
operations of the Borrowers and to exercise such power as the court shall
confer upon such receiver.
(e) Involuntary Bankruptcy. Upon the occurrence of a Default under
Section 9.7., the Commitments shall automatically terminate.
9.14. PERFORMANCE BY LENDER
If either Borrower shall fail to perform any covenant, duty or
agreement contained in any of the Loan Documents on its part to be performed,
the Lender may perform or attempt to perform such covenant, duty or agreement
on behalf of such Borrower after the expiration of any cure or grace periods
set forth herein. In such event, such Borrower shall, at the request of the
Lender, promptly pay any amount reasonably expended by the Lender in such
performance or attempted performance to the Lender, together with interest
thereon at the applicable Default Rate from the date of such expenditure until
paid. Notwithstanding the foregoing, the Lender shall not have any liability or
responsibility whatsoever for the performance of any obligation of either
Borrower under this Agreement or any other Loan Document.
10. MISCELLANEOUS
10.1. WAIVER
No failure on the part of the Lender to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or the Note or other Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
10.2. NOTICES
All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
delivered personally, mailed by certified
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or registered mail, return receipt requested and postage prepaid, sent via a
nationally recognized overnight courier, or sent via facsimile. Such notices,
demands and other communications will be sent to the address indicated below:
To a Borrower:
5300 Oakbrook Parkway, Suite 320
Norcross, Georgia 30093
Attention: Chief Financial Officer
Telephone No.: (770) 806-6979
Telecopy No.: (770) 806-6978
with a copy to:
Sutherland, Asbill and Brennan
999 Peachtree Street, Suite 2300
Atlanta, Georgia 30309-3996
Attention: Mark D. Kaufman, Esq.
Telephone No.: (404) 853-8000
Telecopy No.: (404) 853-8806
To the Lender:
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Michael Paulson
Telephone No.: (404) 607-4569
Telecopy No.: (404) 607-6338
with a copy to:
Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Paul M. Cushing, Esq.
Telephone No.: (404) 881-7000
Telecopy No.: (404) 881-7777
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party;
provided, however, that the failure to deliver copies of notices as indicated
above shall not affect the validity of any notice. Any such communication shall
be deemed to have been received (i) when delivered, if personally delivered, or
sent by nationally-recognized overnight courier or sent via facsimile or (ii)
on the third Business Day following the date on which the piece of mail
containing such communication is posted if sent by certified or registered
mail.
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10.3. EXPENSES
Each Borrower will pay all present and future expenses of the Lender
in connection with the negotiation, preparation, execution and delivery of this
Agreement, the Notes and each of the other Loan Documents, whenever the same
shall be executed and delivered, including appraisers' fees, search fees,
recording fees and the fees and disbursements of each special and local counsel
retained by the Lender. Further, each Borrower shall pay all future costs and
expenses of the Lender in connection with (a) the negotiation, preparation,
execution and delivery of any waiver, amendment or consent by the Lender
relating to this Agreement, the Notes or any of the other Loan Documents; (b)
any restructuring, refinancing or "workout" of the transactions contemplated by
this Agreement, the Notes and the other Loan Documents, or any material
amendment to the terms of this Agreement or any other Loan Document, including
the fees and disbursements of counsel to the Lender; (c) consulting with one or
more Persons engaged by the Lender, including appraisers, accountants and
lawyers, concerning or related to the servicing of this Agreement or the
nature, scope or value of any right or remedy of the Lender hereunder, under
the Notes or under any of the other Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the fees
and disbursements of such Persons; (d) the collection or enforcement of the
obligations of the Borrower or any Loan Party under this Agreement, the Notes
or any other Loan Document including the fees and disbursements of counsel to
the Lender if such collection or enforcement is done by, through or with the
assistance of an attorney; (e) prosecuting or defending any claim in any way
arising out of, related to, or connected with this Agreement, the Notes or any
of the other Loan Documents, which expenses shall include the fees and
disbursements of counsel to the Lender and of experts and other consultants
retained by the Lender; (f) the exercise by the Lender of any right or remedy
granted to it under this Agreement, the Notes or any of the other Loan
Documents including the fees and disbursements of counsel to the Lender if such
exercise is done by, through or with the assistance of any attorney; (g)
gaining possession of, maintaining, handling, preserving, storing, shipping,
appraising, selling, preparing for sale and advertising to sell any Collateral,
whether or not a sale is consummated; and (h) to the extent not already covered
by any of the preceding subsections, any bankruptcy or other proceeding of the
type described in Section 9.6. or 9.7., and the fees and disbursements of
counsel to the Lender incurred in connection with the representation of the
Lender in any matter relating to or arising out of any such proceeding
including, without limitation (i) any motion for relief from any stay or
similar order, (ii) the negotiation, preparation, execution and delivery of any
document relating to the Obligations and (iii) the negotiation and preparation
of any debtor-in-possession financing or any plan of reorganization of either
Borrower or any other Loan Party, whether proposed by a Loan Party, the Lender
or any other Person, and whether such fees and expenses are incurred prior to,
during or after the commencement of such proceeding or the confirmation or
conclusion of any such proceeding.
10.4. STAMP, INTANGIBLE AND RECORDING TAXES
Each Borrower will pay any and all stamp, intangible, registration,
recordation and similar taxes, fees or charges and shall indemnify the Lender
against any and all liabilities with respect to or resulting from any delay in
the payment or omission to pay any such taxes, fees or charges, which may be
payable or determined to be payable in connection with the execution, delivery,
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recording, performance or enforcement of this Agreement, the Notes and any of
the other Loan Documents or the perfection of any rights or Liens thereunder.
10.5. SETOFF
In addition to any rights now or hereafter granted under Applicable
Law and not by way of limitation of any such rights, the Lender is hereby
authorized by each Borrower, at any time or from time to time, without notice
to either Borrower or to any other Person, any such notice being hereby
expressly waived, to set-off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness at any time held or owing by the Lender or any affiliate of
the Lender, to or for the credit or the account of a Borrower against and on
account of any of the Obligations, irrespective of whether or not the Lender
shall have declared any or all of the Loans and all other Obligations to be due
and payable, and although such obligations shall be contingent or unmatured.
10.6. INDEMNIFICATION
Each Borrower agrees to indemnify the Lender and its directors,
officers, employees and agents for, and hold each of them harmless against, any
and all losses, liabilities, claims (including Environmental Claims), damages
or expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the extensions of
credit hereunder or any actual or proposed use by either Borrower or any other
Loan Party of the proceeds of any of the extensions of credit hereunder or the
past, present or future business activities of either Borrower or any other
Loan Party including, without limitation, the fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses that are determined pursuant to a final, non-appealable order of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Person to be indemnified).
10.7. AMENDMENTS, ETC.
Any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents may be amended or waived and any departure therefrom
may be consented to if, but only if, such amendment, waiver or consent is in
writing signed by the Lender and, in the case of an amendment, by the Borrower.
Unless otherwise specified in such waiver or consent, a waiver or consent given
hereunder shall be effective only in the specific instance and for the specific
purpose for which given.
10.8. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
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10.9. ASSIGNMENTS AND PARTICIPATIONS
Neither Borrower may assign its rights or obligations hereunder or
under the other Loan Documents without the prior consent of the Lender. The
Lender may assign to one or more Persons, or sell participations to one or more
Persons in, all or a portion of its rights and obligations hereunder, under the
Notes and the other Loan Documents. The Lender may, in connection with any
assignment or proposed assignment or sale or proposed sale of a participation,
disclose to the assignee or proposed assignee or participant or proposed
participant any information relating to either Borrower or any other Loan Party
furnished to the Lender by or on behalf of either Borrower or any other Loan
Party.
10.10. SURVIVAL
The obligations of the Company and its Subsidiaries under Sections
3.4., 10.3. and 10.6. shall survive the repayment of the Loans and the
termination of the Commitments and this Agreement.
10.11. TABLE OF CONTENTS: DESCRIPTIVE HEADINGS
The table of contents and captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
10.12. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which need not contain the signature of more than one party and all of which
taken together shall constitute one and the same original instrument.
10.13. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF GEORGIA.
10.14. ARBITRATION
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
LOAN DOCUMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT,
SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL
ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES"
SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THIS
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AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
THE PARENT'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
B RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED
TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A
WAIVER BY THE LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR
ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF
AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE
A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION,
TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
10.15. ACKNOWLEDGMENTS
Each Borrower hereby acknowledges that: (a) it has been advised by
legal counsel in the negotiation, execution and delivery of this Agreement and
the other Loan Documents to which it is a party; (b) the Lender has no
fiduciary relationship with or fiduciary duty to any of the Loan Parties, and
the relationship between the Lender on one hand, and Borrowers on the other
hand, is solely that of debtor and creditor; and (c) no joint venture exists
between the Lender on one hand, and any Loan Party on the other hand.
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10.16. CONFIDENTIALITY
Except as otherwise provided by Applicable Law, the Lender shall
utilize all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as confidential or proprietary by the
Borrowers in accordance with the Lender's customary procedure for handling
confidential information of this nature and in accordance with safe and sound
banking practices but in any event may make disclosure: (a) to any of its
Affiliates (provided they shall agree to keep such information confidential in
accordance with the terms of this Section); (b) as reasonably required by any
bona fide transferee or participant in connection with the contemplated
transfer of any of the Loans or the Commitments, or participations therein, as
permitted hereunder; (c) as required by any Governmental Authority or
representative thereof or pursuant to legal process; (d) to the Lender's
independent auditors and other professional advisors (provided they shall be
notified of the confidential nature of the information); and (e) after the
happening and during the continuance of an Event of Default, to any other
Person, in connection with the exercise of the Lender's rights hereunder or
under any of the other Loan Documents.
10.17. OBLIGATIONS WITH RESPECT TO LOAN PARTIES
The obligations of the Borrowers to direct or prohibit the taking of
certain actions by the other Loan Parties as specified herein and in the other
Loan Documents shall be absolute and not subject to any defense either Borrower
may have that it does not control such Loan Parties.
10.18. ENTIRE AGREEMENT
This Agreement, the Notes and the other Loan Documents embody the
final, entire agreement among the parties hereto and supersede any and all
prior commitments, agreements, representations, and understandings, whether
written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent
oral agreements or discussions of the parties hereto.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and year first above written.
THE PARENT:
PREFERRED NETWORKS, INC.
By: /s/ Mark H. Dunaway
---------------------------------------
Name: Mark H. Dunaway
---------------------------------
Title: CEO
---------------------------------
THE COMPANY:
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By: /s/ Mark H. Dunaway
-----------------------------------
Name: Mark H. Dunaway
------------------------------
Title: CEO
-----------------------------
THE LENDER:
NATIONSBANK, N.A. (SOUTH)
By: /s/ Michael S. Paulson
---------------------------------------
Name: Michael S. Paulson
---------------------------------
Title: Assistant Vice President
---------------------------------
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EXHIBIT A
FORM OF ASSIGNMENT OF RIGHTS UNDER ACQUISITION DOCUMENTS
THIS ASSIGNMENT OF RIGHTS UNDER ACQUISITION DOCUMENTS dated as of
__________, 199__ executed and delivered by [NAME OF LOAN PARTY], a corporation
organized under the laws of the State of [___________] (the "Assignor") in
favor of NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, [the Assignor, PNI Systems, LLC (the "Company")][Preferred
Networks, Inc. (the "Parent"), the Assignor][Preferred Networks, Inc. (the
"Parent"), PNI Systems, LLC (the "Company")] and the Lender have entered into a
certain Credit Agreement dated as of August 8, 1996 (as amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which the Lender has agreed, subject to the terms thereof, to make
available to the Borrower certain financial accommodations;
WHEREAS, the Assignor and the entities listed as [Sellers] therein (the
"Sellers") have entered into that certain [Asset/Stock Purchase/Merger
Agreement] dated as of __________, 199__ (as amended, supplemented, restated or
otherwise modified from time to time, the "Purchase Agreement") regarding the
Acquisition by the Assignor of _________ of the Sellers;
[WHEREAS, the Parent owns, directly or indirectly, all of the outstanding
capital stock and other equity interests of the Assignor;
WHEREAS, the Parent, the Assignor and the other Subsidiaries of the
Parent, though separate legal entities, are mutually dependent on each other in
the conduct of their respective businesses and have determined it to be in
their mutual best interests to obtain financing from the Lender through their
collective efforts;
WHEREAS, the Assignor acknowledges that it will receive direct and
indirect benefits from the Lender making such financial accommodations
available to the Borrowers under the Credit Agreement and, accordingly, the
Assignor agreed to guaranty the Borrowers' obligations to the Lender on the
terms and conditions contained in that certain Guaranty dated as of __________,
199__ (as the same may be amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, the "Guaranty");
WHEREAS, the Assignor is executing and delivering this Agreement to secure
its obligations owing to the Lender under the Guaranty and the other Loan
Documents to which the Assignor is a party;]
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WHEREAS, as a condition to the continued extension of such financial
accommodations under the Credit Agreement, the Lender has required, among other
things, that the Assignor assign to the Lender on the terms and conditions
contained herein all of the Assignor's rights and remedies under and with
respect to the Purchase Agreement, including without limitation, all of its
rights and remedies with respect to any and all rights of indemnification
thereunder, all as collateral security for the Obligations.
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Assignor agrees as follows:
Section 1. Assignment. As security for the Obligations, the Assignor
hereby assigns and transfers to the Lender, and grants to the Lender a security
interest in, all of the Assignor's right, title and interest in, to and under
(a) the Purchase Agreement and all of the documents, instruments and agreements
executed and delivered in connection therewith, including without limitation,
those described on Schedule 1 attached hereto (collectively, the "Acquisition
Documents"), including without limitation (i) the Assignor's rights and
remedies with respect to any breach by any other party to an Acquisition
Document of any of its representations, warranties and covenants thereunder and
(ii) any and all rights of the Assignor to indemnification arising under or
pursuant to any Acquisition Document and (b) all products and proceeds of the
foregoing (all of the foregoing, collectively, the "Collateral").
Section 2. Covenants. The Assignor covenants and agrees as follows:
(a) The Assignor shall at all times duly and punctually perform in all
material respects all of the terms, conditions and covenants of the Acquisition
Documents on the Assignor's part to be kept, observed and performed.
(b) The Assignor will not sell, assign, grant a Lien in, or otherwise
transfer to any Person any of the Collateral other than to the Lender.
(c) The Assignor (i) will give the Lender prompt notice of the terms of
any proposed amendment or modification of any of the terms of, or the proposed
termination of, any Assigned Document and (ii) will not, without the Lender's
prior written consent, amend or otherwise modify, or waive the application of
or consent to the departure from, any of the terms of any Acquisition Document,
or terminate any Acquisition Document.
(d) The Assignor shall promptly deliver to the Lender a copy of any notice
given to or by the Assignor under or in connection with any Acquisition
Document.
Section 3. Representations and Warranties. The Assignor represents and
warrants to the Lender as follows:
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(a) True, correct and complete copies of the Acquisition Documents
(including all amendments, supplements and modifications thereto) have been
delivered to the Lender.
(b) Each Acquisition Document is in full force and effect and is the
legal, valid and binding obligation of the Assignor and each other Person a
party thereto, enforceable against the Assignor and each such Person in
accordance with its terms.
(c) Neither the Assignor, nor to the Assignor's knowledge any other Person
a party to an Acquisition Document, is in default thereunder.
(d) The Assignor has not assigned any of its right, title or interest in,
to or under any of the Collateral to any Person other than the Lender.
(e) The Assignor has full authority and the legal right to assign to the
Lender, and to grant to the Lender a security interest in, the Acquisition
Documents and the other Collateral, and the Assignor has obtained all consents
necessary for the valid and binding assignment of and the effectiveness and
enforceability of such security interest and assignment under this Agreement.
(f) All of the Collateral is free and clear of all Liens.
Section 4. Payments. So long as no Event of Default shall have occurred
and be continuing, the Assignor shall have the right to receive all amounts
paid or payable in connection with the Acquisition Documents. Upon the
occurrence and during the continuance of any Event of Default, the Lender shall
have the right to receive and retain the payments which the Assignor would
otherwise be authorized to receive and retain pursuant to the immediately
preceding sentence. If, notwithstanding the foregoing, the Assignor shall
receive any amount which it is not entitled to receive hereunder, the Assignor
shall hold all such amounts it receives in trust for the Lender, without
commingling the same with other funds or property of or held by the Assignor,
and shall promptly deliver the same to the Lender immediately upon receipt by
the Assignor in the identical form received, together with any necessary
endorsements.
Section 5. Enforcement by Assignor. Prior to the occurrence of an Event
of Default, insofar as the Assignor may have any right, privilege or claim
under any Acquisition Document, including without limitation, its rights and
remedies with respect to indemnification, the Assignor will use prudent
business judgment concerning its enforcement of such rights.
Section 6. Lender Not Obligated. Notwithstanding any other provision of
this Agreement to the contrary, the Assignor expressly acknowledges and agrees
that neither this Agreement, nor any action taken by the Lender pursuant
hereto, shall cause the Lender to be under any obligation or liability in any
respect whatsoever to any party to any Acquisition Document or to any other
Person for the observance or performance of any of
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the representations, warranties, conditions, covenants, agreements or terms
contained in any Acquisition Document.
Section 7. Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Lender shall, at its election, without notice of
election and without demand except to the extent required under Applicable Law,
have the right to do any one or more of the following, all of which are hereby
authorized by the Assignor: (a) exercise any or all of the rights available to
a secured party under the UCC or any other Applicable Law; (b) exercise any or
all of its rights and remedies under the Credit Agreement and the other Loan
Documents; and (c) assert, either directly or on behalf of the Assignor, any
right, privilege or claim the Assignor may have from time to time under any of
the Acquisition Documents as the Lender may deem proper and to receive and
collect any and all damages, awards and other monies resulting therefrom.
Section 8. Application of Proceeds. All proceeds received by the Lender
in connection with the exercise of any of its rights or remedies hereunder
shall be applied by the Lender in the order provided for in the applicable Loan
Documents. The Assignor shall remain liable and will pay, on demand, any
deficiency remaining in respect of the Obligations.
Section 9. Further Assurances. At any time and from time to time, upon
the written request of the Lender, and at the sole cost and expense of the
Assignor, the Assignor will promptly execute and deliver such further
instruments and documents and take such further action as the Lender may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted.
Section 10. Rights Cumulative. The rights and remedies of the Lender
under this Agreement are cumulative and not exclusive of any rights or remedies
which it would otherwise have. In exercising its rights and remedies the
Lender may be selective and no failure or delay by the Lender in exercising any
right shall operate as a waiver of it, nor shall any single or partial exercise
of any power or right preclude its other or further exercise or the exercise of
any other power or right.
Section 11. Lender Appointed Attorney-in-Fact. The Assignor hereby
irrevocably appoints the Lender as the Assignor's attorney-in-fact, with full
authority in the place and stead of the Assignor and in the name of the
Assignor or otherwise, from time to time upon the occurrence and during the
continuance of an Event of Default in the Lender's discretion, to take any
action and to execute any instrument or document which the Lender may deem
necessary or advisable to accomplish the purposes of this Agreement and to
exercise any rights and remedies the Lender may have under this Agreement or
Applicable Law. The power-of-attorney granted hereby is irrevocable and
coupled with an interest.
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Section 12. Notices. Notices, requests and other communications required
or permitted hereunder shall be given in accordance with the applicable terms
of the [Credit Agreement][Guaranty].
Section 13. Termination. Upon indefeasible payment in full of all of the
Obligations, this Agreement shall terminate. Any affidavit, certificate or
other written statement of any officer of the Lender based on the books and
records of the Lender and stating that any part of the Obligations remains
unpaid or unperformed, shall, absent manifest error, be and constitute
conclusive evidence of the continuing effectiveness of this Agreement and any
Person receiving any such affidavit, certificate or statement, may, and is
hereby authorized to, rely thereon.
Section 14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
Section 15. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Assignor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 16. Benefits. The terms, covenants and conditions contained
herein shall inure to the benefit of the Lender, and its successors and
assigns, and shall be binding on the Assignor and its successors and assigns.
Section 17. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 18. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
Section 19. No Third-Party Beneficiaries. This Agreement is solely for
the benefit of the parties hereto and their respective successors and permitted
assigns. There are no other Persons which are intended to be benefited in any
way whatsoever by this Agreement.
Section 20. Definitions. [As used herein, the term "Obligations" shall
mean: (a) all obligations and indebtedness of the Assignor owing to the Lender
of every kind, nature and description, under or with respect to the Guaranty,
this Agreement or any of the other
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Loan Documents, whether direct or indirect, absolute or contingent, due or not
due, contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note; (b) all other obligations and indebtedness owing by the
Assignor to the Lender and all future advances made to the Assignor by the
Lender, however and whenever created, arising or evidenced, whether direct or
indirect, through assignment from third parties, whether absolute or contingent,
or otherwise, now or hereafter existing, or due or to become due, including,
without limitation, obligations under all guaranties, letters of credit and
overdrafts; and (c) all renewals, modifications, extensions and supplements to
any of the foregoing. Without limitation of the foregoing, the term
"Obligations" shall include any Indebtedness of the Assignor to any other Loan
Party which now or hereafter becomes owing to the Lender as assignee of such
other Loan Party pursuant to any of the Security Documents.] Terms not
otherwise defined herein are used herein with the respective definitions given
them in the Credit Agreement.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the Assignor has executed and delivered this
Assignment of Rights Under Acquisition Documents under seal as of the date
first written above.
[NAME OF LOAN PARTY]
By:
-----------------------------
Name:
---------------------
Title:
---------------------
ACKNOWLEDGMENT AND AGREEMENT
Each of the undersigned (each a "Seller") acknowledges receipt of a copy
of the within and foregoing Assignment of Rights Under Acquisition Documents
(the "Assignment"). Capitalized terms not otherwise defined herein are used
herein with the respective meanings given them in the Assignment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the Sellers, each of
the Sellers agrees as follows:
Section 1. Consent to Assignment. Each of the Sellers consents to the
execution and delivery of the Assignment by the Assignor and the assignment by
the Assignor to the Lender of, and the grant by the Assignor to the Lender of a
security interest in, all of the Assignor's right, title and interest in, to
and under the Acquisition Documents and the other Collateral. Upon receipt by
a Seller of written notice from the Lender that an Event of Default has
occurred and is continuing under the Credit Agreement, such Seller shall
immediately thereupon, and at all times thereafter, (a) make all payments due
under all of the Acquisition Documents to which such Seller is a party directly
to the Lender, without setoff, deduction or counterclaim and (b) permit the
Lender, at the Lender's option and to the fullest extent permitted under
Applicable Law and in accordance with the Assignment, to exercise all of the
rights and benefits of the Assignor under or in respect of such Acquisition
Documents and the other Collateral which the Lender desires to exercise, all to
the complete and absolute exclusion of the Assignor as permitted by the
Assignment, including without limitation, all rights to indemnification. Each
of the Sellers acknowledges and agrees that any exercise by the Lender of any
such rights and benefits shall not discharge or otherwise release the Assignor
from any of its obligations under or in respect of any of the Acquisition
Documents and the other Collateral.
Section 2. No Obligation of Lender. Each of the Sellers agrees that
nothing contained in the Assignment shall obligate or be construed to obligate
the Lender to
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perform any of the terms, covenants and conditions contained in any of the
Acquisition Documents or otherwise to impose any obligation upon the Lender
with respect thereto.
Section 3. Benefits. This Acknowledgment shall be binding upon each of
the Sellers and their respective successors and assigns, and shall inure to the
benefit of the Lender and its successors and assigns.
IN WITNESS WHEREOF, each of the Sellers has executed this Acknowledgment
and Agreement under seal as of the date first written above.
[APPROPRIATE SIGNATURE
BLOCKS FOR SELLERS]
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SCHEDULE 1
Acquisition Documents
(List Purchase Agreement, Bills of Sale, Assignments of Leases,
and other Acquisition Documents)
<PAGE> 78
EXHIBIT B
FORM OF GUARANTY
THIS GUARANTY dated as of ____________, 199__ executed and delivered by
________________, a _________________ organized under the laws of _____________
(the "Guarantor") in favor of NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, Preferred Networks, Inc. (the "Parent"), PNI Systems, LLC
(the "Company") and the Lender have entered into that certain Credit Agreement
dated as of August 8, 1996 (as amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, the "Credit
Agreement"), pursuant to which the Lender has agreed, subject to the terms
thereof, to extend certain financial accommodations to the Borrowers; and
[WHEREAS, the Guarantor owns, directly or indirectly, [all][___%] of
the issued and outstanding capital stock of, or other equity interests in, the
Guarantor;]
WHEREAS, the Guarantor and the other Subsidiaries of the Borrowers,
though separate legal entities, are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation and have
determined it to be in their mutual best interests to obtain financing from the
Lender through their collective efforts;
WHEREAS, the Guarantor acknowledges that it will receive direct and
indirect benefits from the Lender making such financial accommodations
available to the Borrowers under the Credit Agreement and, accordingly, the
Guarantor is willing to guarantee the Borrowers' obligations to the Lender on
the terms and conditions contained herein; and
WHEREAS, the Guarantor's execution and delivery of this Guaranty is
one of the conditions precedent to the Lender making, or continuing to make,
such financial accommodations to the Borrowers.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
Section 1. Guaranty. The Guarantor hereby absolutely, irrevocably and
unconditionally guaranties the due and punctual payment and performance when
due, whether at stated maturity, by acceleration or otherwise, of all of the
Obligations [of the Company].
Section 2. Guaranty of Payment and Not of Collection. This Guaranty
is a guaranty of payment, and not of collection, and a debt of the Guarantor
for its own
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account. Accordingly, the Lender shall not be obligated or required before
enforcing this Guaranty against the Guarantor: (a) to pursue any right or
remedy the Lender may have against any other Loan Party or any other Person or
commence any suit or other proceeding against any other Loan Party or any other
Person in any court or other tribunal; (b) to make any claim in a liquidation
or bankruptcy of any other Loan Party or any other Person; or (c) to make
demand of any other Loan Party or any other Person or to enforce or seek to
enforce or realize upon any collateral security held by the Lender which may
secure any of the Obligations. In this connection, the Guarantor hereby waives
the right of the Guarantor to require any holder of the Obligations to take
action against either Borrower as provided in Official Code of Georgia
Annotated Section 10-7-24.
Section 3. Guaranty Absolute. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the documents
evidencing the same, regardless of any Applicable Law now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Lender with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute and unconditional in accordance with its terms and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including without limitation, the
following (whether or not the Guarantor consents thereto or has notice
thereof):
(a) (i) any change in the amount, interest rate or due date or
other term of any of the Obligations, (ii) any change in the time, place or
manner of payment of all or any portion of the Obligations, (iii) any amendment
or waiver of, or consent to the departure from or other indulgence with respect
to, the Credit Agreement, any other Loan Document, or any other document or
instrument evidencing or relating to any Obligations, or (iv) any waiver,
renewal, extension, addition, or supplement to, or deletion from, or any other
action or inaction under or in respect of, the Credit Agreement, any of the
other Loan Documents, or any other documents, instruments or agreements
relating to the Obligations or any other instrument or agreement referred to
therein or evidencing any Obligations or any assignment or transfer of any of
the foregoing;
(b) any lack of validity or enforceability of the Credit
Agreement, any of the other Loan Documents, or any other document, instrument
or agreement referred to therein or evidencing any Obligations or any
assignment or transfer of any of the foregoing;
(c) any furnishing to the Lender of any security for the
Obligations, or any sale, exchange, release or surrender of, or realization on,
any collateral securing any of the Obligations;
(d) any settlement or compromise of any of the Obligations, any
security therefor, or any liability of any other party with respect to the
Obligations, or any subordination of the payment of the Obligations to the
payment of any other liability of either Borrower or any other Loan Party;
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(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Guarantor, any other Loan Party or any other Person, or any action taken with
respect to this Guaranty by any trustee or receiver, or by any court, in any
such proceeding;
(f) any act or failure to act by either Borrower or any other
Person which may adversely affect the Guarantor's subrogation rights, if any,
against either Borrower to recover payments made under this Guaranty;
(g) any application of sums paid by any other Loan Party or any
other Person with respect to the liabilities of either Borrower to the Lender,
regardless of what liabilities of such Borrower remain unpaid;
(h) any defect, limitation or insufficiency in the borrowing
powers of either Borrower or in the exercise thereof; or
(i) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Guarantor hereunder.
Section 4. Action with Respect to Obligations. The Lender may, at any
time and from time to time, without the consent of, or notice to, the
Guarantor, and without discharging the Guarantor from its obligations hereunder
take any and all actions described in Section 3. and may otherwise: (a) amend,
modify, alter or supplement the terms of any of the Obligations, including, but
not limited to, extending or shortening the time of payment of any of the
Obligations or changing the interest rate that may accrue on any of the
Obligations; (b) amend, modify, alter or supplement the Credit Agreement or any
other Loan Document; (c) sell, exchange, release or otherwise deal with all, or
any part, of any collateral securing any of the Obligations; (d) release any
Loan Party or other Person liable in any manner for the payment or collection
of the Obligations; (e) exercise, or refrain from exercising, any rights
against any other Loan Party or any other Person; and (f) apply any sum, by
whomsoever paid or however realized, to the Obligations in such order as the
Lenders shall elect.
Section 5. Representations and Warranties. The Guarantor hereby makes
to the Lender all of the representations and warranties made by the Borrowers
with respect to or in any way relating to the Guarantor in the Credit Agreement
and the other Loan Documents, as if the same were set forth herein in full.
Section 6. Covenants. The Guarantor will comply with all covenants
which the Borrowers are to cause the Guarantor to comply with under the terms
of the Credit Agreement or any of the other Loan Documents.
Section 7. Waiver. The Guarantor, to the fullest extent permitted by
Applicable Law, hereby waives notice of acceptance hereof or any presentment,
demand, protest or
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notice of any kind, and any other act or thing, or omission or delay to do any
other act or thing, which in any manner or to any extent might vary the risk of
the Guarantor or which otherwise might operate to discharge the Guarantor from
its obligations hereunder.
Section 8. Inability to Accelerate. If the Lender is prevented under
Applicable Law or otherwise from demanding or accelerating payment of any of
the Obligations by reason of any automatic stay or otherwise, the Lender shall
be entitled to receive from the Guarantor, upon demand therefor, the sums which
otherwise would have been due had such demand or acceleration occurred.
Section 9. Reinstatement of Obligations. If claim is ever made on the
Lender for repayment or recovery of any amount or amounts received in payment
or on account of any of the Obligations, and the Lender repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body of competent jurisdiction, or (b) any settlement or
compromise of any such claim effected by the Lender with any such claimant
(including either Borrower or a trustee in bankruptcy for either Borrower),
then and in such event the Guarantor agrees that any such judgment, decree,
order, settlement or compromise shall be binding on it, notwithstanding any
revocation hereof or the cancellation of the Credit Agreement, any of the other
Loan Documents, or any other instrument evidencing any liability of either
Borrower, and the Guarantor shall be and remain liable to the Lender for the
amounts so repaid or recovered to the same extent as if such amount had never
originally been paid to the Lender.
Section 10. Subrogation. Upon the making by the Guarantor of any
payment hereunder for the account of either Borrower, the Guarantor shall be
subrogated to the rights of the payee against such Borrower; provided, however,
that the Guarantor shall not enforce any right or receive any payment by way of
subrogation or otherwise take any action in respect of any other claim or cause
of action the Guarantor may have against either Borrower arising by reason of
any payment or performance by the Guarantor pursuant to this Guaranty, unless
and until all of the Obligations have been indefeasibly paid and performed in
full. If any amount shall be paid to the Guarantor on account of or in respect
of such subrogation rights or other claims or causes of action, the Guarantor
shall hold such amount in trust for the benefit of the Lender and shall
forthwith pay such amount to the Lender to be credited and applied against the
Obligations, whether matured or unmatured, in accordance with the terms of the
Credit Agreement or to be held by the Lender as collateral security for any
Obligations existing.
Section 11. Payments Free and Clear. All sums payable by the
Guarantor hereunder, whether of principal, interest, fees, expenses, premiums
or otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any Taxes), and if the Guarantor
is required by Applicable Law or by any Governmental Authority to make any such
deduction or withholding, the Guarantor shall pay to the Lender such additional
amount as will result in the receipt by the Lender of the full amount payable
hereunder had such deduction or withholding not occurred or been required.
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Section 12. Set-off. In addition to any rights now or hereafter
granted under any of the other Loan Documents or Applicable Law and not by way
of limitation of any such rights, the Guarantor hereby authorizes the Lender,
at any time or from time to time, without any prior notice to the Guarantor or
to any other Person, any such notice being hereby expressly waived, to set-off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender, or any affiliate of the Lender, to or for the
credit or the account of the Guarantor against and on account of any of the
Obligations, although such obligations shall be contingent or unmatured.
Section 13. Subordination. The Guarantor hereby expressly covenants
and agrees for the benefit of the Lender that all obligations and liabilities
of either Borrower to the Guarantor of whatever description, including without
limitation, all intercompany receivables of the Guarantor from either Borrower
(collectively, the "Junior Claims") shall be subordinate and junior in right of
payment to all Obligations. If an Event of Default shall have occurred and be
continuing, then the Guarantor shall not accept any direct or indirect payment
(in cash, property, securities by setoff or otherwise) from either Borrower on
account of or in any manner in respect of any Junior Claim until all of the
Obligations have been indefeasibly paid in full.
Section 14. Avoidance Provisions. It is the intent of the Guarantor
and the Lender that in any Proceeding, the Guarantor's maximum obligation
hereunder shall equal, but not exceed, the maximum amount which would not
otherwise cause the obligations of the Guarantor hereunder (or any other
obligations of the Guarantor to the Lender) to be avoidable or unenforceable
against the Guarantor in such Proceeding as a result of Applicable Law,
including without limitation, (a) Section 548 of the Bankruptcy Code of 1978,
as amended (the "Bankruptcy Code") and (b) any state fraudulent transfer or
fraudulent conveyance act or statute applied in such Proceeding, whether by
virtue of Section 544 of the Bankruptcy Code or otherwise. The Applicable Laws
under which the possible avoidance or unenforceability of the obligations of
the Guarantor hereunder (or any other obligations of the Guarantor to the
Lender) shall be determined in any such Proceeding are referred to as the
"Avoidance Provisions". Accordingly, to the extent that the obligations of the
Guarantor hereunder would otherwise be subject to avoidance under the Avoidance
Provisions, the maximum Obligations for which the Guarantor shall be liable
hereunder shall be reduced to that amount which, as of the time any of the
Obligations are deemed to have been incurred under the Avoidance Provisions,
would not cause the obligations of the Guarantor hereunder (or any other
obligations of the Guarantor to the Lender), to be subject to avoidance under
the Avoidance Provisions. This Section is intended solely to preserve the
rights of the Lender hereunder to the maximum extent that would not cause the
obligations of the Guarantor hereunder to be subject to avoidance under the
Avoidance Provisions, and neither the Guarantor nor any other Person shall have
any right or claim under this Section as against the Lender that would not
otherwise be available to such Person under the Avoidance Provisions.
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Section 15. Information. The Guarantor assumes all responsibility
for being and keeping itself informed of the financial condition of the Loan
Parties, and of all other circumstances bearing upon the risk of nonpayment of
any of the Obligations and the nature, scope and extent of the risks that the
Guarantor assumes and incurs hereunder, and agrees that neither the Lender nor
any Lender shall have any duty whatsoever to advise the Guarantor of
information regarding such circumstances or risks.
Section 16. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 17. Dispute Resolution. ANY CONTROVERSY OR CLAIM BETWEEN THE
GUARANTOR AND THE LENDER, INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
GUARANTY MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS GUARANTY APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE GUARANTOR'S DOMICILE AT THE TIME OF THIS GUARANTY'S EXECUTION AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL
ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS GUARANTY; OR (II) BE A
WAIVER BY THE LENDER OF
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THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS GUARANTY.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
Section 18. Loan Accounts. The Lender may maintain books and
accounts setting forth the amounts of principal, interest and other sums paid
and payable with respect to the Obligations, and in the case of any dispute
relating to any of the outstanding amount, payment or receipt of any of the
Obligations or otherwise, the entries in such books and accounts shall
constitute prima facie evidence of the outstanding amount of such Obligations
and the amounts paid and payable with respect thereto. The failure of the
Lender to maintain such books and accounts shall not in any way relieve or
discharge the Guarantor of any of its obligations hereunder.
Section 19. Waiver of Remedies. No delay or failure on the part of
the Lender in the exercise of any right or remedy it may have against the
Guarantor hereunder or otherwise shall operate as a waiver thereof, and no
single or partial exercise by the Lender of any such right or remedy shall
preclude other or further exercise thereof or the exercise of any other such
right or remedy.
Section 20. Termination. This Guaranty shall remain in full force
and effect until the indefeasible payment in full of the Obligations and the
termination or cancellation of the Credit Agreement.
Section 21. Successors and Assigns. Each reference herein to the
Lender shall be deemed to include such Person's respective successors and
assigns (including, but not limited to, any holder of the Obligations) in whose
favor the provisions of this Guaranty also shall inure, and each reference
herein to the Guarantor shall be deemed to include the Guarantor's successors
and assigns, upon whom this Guaranty also shall be binding. The Lender may, in
accordance with the applicable provisions of the Credit Agreement, assign,
transfer or sell any Obligations, or grant or sell participations in any
Obligations, to any Person without the consent of, or notice to, the Guarantor
and without releasing,
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discharging or modifying the Guarantor's obligations hereunder. The Guarantor
hereby consents to the delivery by the Lender to any assignee or participant
(or any prospective assignee or participant) of any financial or other
information regarding the Guarantor. The Guarantor may not assign or transfer
its obligations hereunder to any Person.
Section 22. Amendments. This Guaranty may not be amended except in
writing signed by the Lender and the Guarantor.
Section 23. Payments. All payments to be made by the Guarantor
pursuant to this Guaranty shall be made in Dollars, in immediately available
funds to the Lender at its Lending Office, not later than 11:00 a.m., on the
date one Business Day after demand therefor.
Section 24. Notices. All notices, requests and other communications
hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given (a) to the Guarantor at its address set forth below
its signature hereto, (b) to the Lender at its address for notices provided for
in the Credit Agreement, or (c) as to each such party at such other address as
such party shall designate in a written notice to the other party. Each such
notice, request or other communication shall be effective (i) if mailed, when
received; (ii) if telecopied, when transmitted; or (iii) if hand delivered,
when delivered; provided, however, that any notice of a change of address for
notices shall not be effective until received.
Section 25. Severability. In case any provision of this Guaranty
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 26. Headings. Section headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.
Section 27. Definitions. (a) For the purposes of this Guaranty:
"Proceeding" means any of the following: (i) a voluntary or
involuntary case concerning the Guarantor shall be commenced under the
Bankruptcy Code of 1978, as amended; (ii) a custodian (as defined in such
Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or
takes charge of, all or any substantial part of the property of the Guarantor;
(iii) any other proceeding under any Applicable Law, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding-up or composition
for adjustment of debts, whether now or hereafter in effect, is commenced
relating to the Guarantor; (iv) the Guarantor is adjudicated insolvent or
bankrupt; (v) any order of relief or other order approving any such case or
proceeding is entered by a court of competent jurisdiction; (vi) the Guarantor
makes a general assignment for the benefit of creditors; (vii) the Guarantor
shall fail to pay, or shall state that it is unable to pay, or shall be unable
to pay, its debts generally as they become due; (viii) the Guarantor shall call
a meeting of its creditors with a view to arranging a composition or adjustment
of its debts; (ix) the
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Guarantor shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing; or (x) any corporate action shall
be taken by the Guarantor for the purpose of effecting any of the foregoing.
(b) Terms not otherwise defined herein are used herein with the
respective meanings given them in the Credit Agreement.
[Signature on Next Page]
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IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.
[GUARANTOR]
By:
----------------------------------
Name
------------------------------
Title:
----------------------------
Address for Notices:
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier:
--------------------------
Telephone:
---------------------------
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EXHIBIT C
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of __________, 199___ executed by
_______________________, a ____________ (the "Pledgor") in favor of
NATIONSBANK, N.A. (SOUTH) (the "Pledgee").
[Include the following if Pledgor is Preferred Networks, Inc.]
[WHEREAS, the Pledgor, PNI Systems, LLC and the Pledgee have entered
into that certain Credit Agreement dated as of August 8, 1996 (as the same may
be amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") pursuant to which the Pledgee has agreed to extend certain
financial accommodations to the Pledgor and the other Borrower subject to the
terms thereof;]
[Include the following if Pledgor is PNI Systems, LLC]
[WHEREAS, Preferred Networks, Inc., the Pledgor and the Pledgee have
entered into that certain Credit Agreement dated as of August 8, 1996 (as the
same may be amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Pledgee has agreed to
extend certain financial accommodations to the Pledgor and the other Borrower
subject to the terms thereof;]
[Include the following if Pledgor is a Subsidiary]
[WHEREAS, Preferred Networks, Inc., PNI Systems, LLC and the Pledgee
have entered into that certain Credit Agreement dated as of August 8, 1996 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time, the "Credit Agreement") pursuant to which the Pledgee has agreed to
extend certain financial accommodations to the Borrowers subject to the terms
thereof;
WHEREAS, the Pledgor is an Affiliate of the Borrowers;
WHEREAS, the Pledgor, the Borrowers and the other Subsidiaries of the
Borrowers, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses as an integrated operation and
have determined it to be in their mutual best interests to obtain financing
from the Lender through their collective efforts;
WHEREAS, the Pledgor acknowledges that it will receive direct and
indirect benefits from the Pledgee making such financial accommodations
available to the Borrowers under the Credit Agreement and, accordingly, the
Pledgor agreed to guaranty the Borrowers' obligations to the Pledgee on the
terms and conditions contained in that
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certain Guaranty dated as of the date hereof (as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with its terms, the "Guaranty") executed by the Pledgor in favor of the
Pledgee;
WHEREAS, the Pledgor is executing and delivering this Agreement to
secure its obligations owing to the Pledgee under the Guaranty and the other
Loan Documents to which the Pledgor is a party;]
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement and the extension of such financial accommodations under the
Credit Agreement that the Pledgor execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
Section 1. Pledge. The Pledgor hereby pledges, hypothecates, assigns,
transfers, sets over and delivers unto the Pledgee, and grants to the Pledgee a
security interest in, all of the Pledgor's right, title and interest in, to and
under the following, whether now owned or hereafter acquired or arising
(collectively, the "Pledged Collateral"): (a) all of the common stock, shares,
membership interests, equity interests and other securities (collectively,
"Securities") of each Person (each an "Issuer") described in Schedule 1
attached hereto; (b) any additional Securities of any of such Issuers as may
from time to time be issued to the Pledgor or otherwise acquired by the
Pledgor; (c) any additional Securities of any Issuer as may hereafter at any
time be delivered to the Pledgee by or on behalf of the Pledgor; [Include the
following if Debtor is PNI Systems, LLC - (d) the Intercompany Note, together
with (i) all books and accounts, papers and documents in any way evidencing or
relating to the Intercompany Note, (ii) the Pledgor's right (A) to give all
consents, waivers and releases thereunder, (B) to take all action upon the
happening of any breach or default giving rise to any right (including rights
to payment of money, rights of indemnification and setoff, and rights to defer
payment of amounts or to compel specific performance) in the Pledgor's favor
under the Intercompany Note, and (C) to do any and all other things whatsoever
which the Pledgor is or may become entitled to do under the Intercompany Note;]
(e) all of the rights of the Pledgor as a member of any Issuer that is a
limited liability company to: (i) capital of, profits of (in each case whether
or not distributed) and distributions of or from such Issuer, whether cash or
noncash, and whether prior to or in connection with the liquidation of such
Issuer; (ii) operate the business of such Issuer and deal with and receive the
benefit from such Issuer's assets; (iii) receive proceeds of any indemnity,
warranty or guaranty under any agreement between the Pledgor, the other members
of such Issuer and such Issuer, or any of them; (iv) have access to such
Issuer's books and records and to other information concerning or affecting
such Issuer;] (f) any cash or additional Securities or other property at any
time and from time to time receivable or otherwise distributable in respect of,
in exchange for, or in substitution of, any of the property referred to in any
of the immediately preceding clauses (a) through (e); and (g) any and all
products and proceeds of any of the foregoing,
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together with and all other rights, titles, interests, powers, privileges and
preferences pertaining to said property.
Section 2. Obligations Secured. This Agreement is made, and the
security interest created hereby is granted to the Pledgee, to secure the
prompt performance and payment in full of the [Obligations][following
(collectively, the "Obligations"): (a) all obligations and indebtedness of the
Pledgor owing to the Pledgee of every kind, nature and description, under or
with respect to the Guaranty, this Agreement or any of the other Loan
Documents, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note; (b) all other obligations and indebtedness owing by the
Pledgor to the Pledgee and all future advances made to the Pledgor by the
Pledgee, however and whenever created, arising or evidenced, whether direct or
indirect, through assignment from third parties, whether absolute or
contingent, or otherwise, now or hereafter existing, or due or to become due,
including, without limitation, obligations under all guaranties, letters of
credit and overdrafts; and (c) all renewals, modifications, extensions and
supplements to any of the foregoing. Without limitation of the foregoing, the
term "Obligations" shall include any Indebtedness of the Pledgor to any other
Loan Party which now or hereafter becomes owing to the Pledgee as assignee of
such other Loan Party pursuant to any of the Security Documents.]
Section 3. Representations and Warranties. The Pledgor hereby
represents and warrants to the Pledgee as follows:
(a) Validly Issued, etc. All of the Securities of each Issuer
have been validly issued and are fully paid and nonassessable.
(b) Title and Liens. The Pledgor is, and will at all times
continue to be, the legal and beneficial owner of the Pledged Collateral and
none of the Pledged Collateral is subject to any Lien other than Permitted
Liens.
(c) No Approval. No consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of the
pledge effected hereby.
(d) Outstanding Shares. The Securities pledged by the Pledgor
hereunder constitute all of the issued and outstanding capital stock,
membership interests and other equity interests of each Issuer.
Section 4. No Liens or Sale of Collateral. The Pledgor will not
create, assume, incur or permit or suffer to exist or to be created, assumed or
incurred, any Lien on any of the Pledged Collateral (or any interest therein),
other than Permitted Liens, and will not sell, lease, assign, transfer or
otherwise dispose of all or any portion of the Pledged Collateral (or any
interest therein).
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Section 5. Additional Securities.
(a) During the period this Agreement is in effect, the Pledgor
shall not permit any Issuer to issue any additional shares of capital stock,
membership interests or other equity securities or interests to any Person
other than the Pledgor. Further, the Pledgor shall not permit any Issuer to
amend or modify its articles or certificate of incorporation, articles of
organization, other similar organizational instrument, and in the case of a
limited liability company, its operating agreement, in a manner which would
affect the voting, liquidation, preference or other rights of a holder of the
Securities pledged hereunder.
(b) The Pledgor agrees that, until this Agreement has terminated
in accordance with its terms, any additional Securities of an Issuer at any
time issued to the Pledgor or otherwise acquired by the Pledgor shall be
promptly delivered or otherwise transferred to the Pledgee as additional
Pledged Collateral and shall be subject to the Lien of, and the terms and
conditions of, this Agreement.
Section 7. Voting Rights; Dividends, etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to an owner of the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms and conditions of this Agreement or any of
the other Loan Documents; provided, however, that the Pledgor shall
not exercise, or shall refrain from exercising, any such right or
power if any such action would have a materially adverse effect on the
value of such Pledged Collateral in the judgment of the Pledgee;
(ii) the Pledgor shall be entitled to retain and use any
and all cash dividends paid on the Pledged Collateral, but any and all
stock and/or liquidating dividends, other distributions in property,
return of capital or other distributions made on or in respect of any
Pledged Collateral, whether resulting from a subdivision, combination
or reclassification of outstanding Securities of an Issuer which are
pledged hereunder or received in exchange for Pledged Collateral or
any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets or on the liquidation, whether
voluntary or involuntary, of an Issuer, or otherwise, shall be and
become part of the Pledged Collateral pledged hereunder and, if
received by the Pledgor, shall forthwith be delivered to the Pledgee
to be held as collateral subject to the terms and conditions of this
Agreement.
The Pledgee agrees to execute and deliver to the Pledgor, or cause to be
executed and delivered to the Pledgor, as appropriate, at the sole cost and
expense of the Pledgor, all such proxies, powers of attorney, dividend orders
and other instruments as the Pledgor
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may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and/or consensual rights and powers which Pledgor is entitled to
exercise pursuant to clause (i) above and/or to receive the dividends and other
amounts which Pledgor is authorized to retain pursuant to clause (ii) above.
(b) Upon the occurrence of an Event of Default, all rights of the
Pledgor to exercise the voting and/or consensual rights and powers which
Pledgor is entitled to exercise pursuant to subsection (a)(i) above and/or to
receive the dividends and other amounts which Pledgor is authorized to receive
and retain pursuant to subsection (a)(ii) above shall cease, and all such
rights thereupon shall become immediately vested in the Pledgee, which shall
have, to the extent permitted by law, the sole and exclusive right and
authority to exercise such voting and/or consensual rights and powers which the
Pledgor shall otherwise be entitled to exercise pursuant to subsection (a)(i)
above and/or to receive and retain the dividends and other amounts which the
Pledgor shall otherwise be authorized to retain pursuant to subsection (a)(ii)
above. Any and all money and other property paid over to or received by the
Pledgee pursuant to the provisions of this subsection (b) shall be retained by
the Pledgee as additional collateral hereunder and shall be applied in
accordance with the provisions of Section 10. If the Pledgor shall receive any
dividends or other property which it is not entitled to receive under this
Section, the Pledgor shall hold the same in trust for the Pledgee, without
commingling the same with other funds or property of or held by the Pledgor,
and shall promptly deliver the same to the Pledgee upon receipt by the Pledgor
in the identical form received, together with any necessary endorsements.
Section 8. Event of Default Defined. For purposes of this Agreement,
"Event of Default" shall mean (a) the Pledgor shall fail to observe or perform
any covenant or agreement contained in this Agreement; or (b) an Event of
Default under and as defined in the Credit Agreement shall occur and be
continuing.
Section 9. Remedies upon Default.
(a) In addition to any right or remedy that the Pledgee may have
under the Credit Agreement, the other Loan Documents or otherwise under
Applicable Law, if an Event of Default shall have occurred, the Pledgee may
exercise any and all the rights and remedies of a secured party under the
Uniform Commercial Code as in effect in any applicable jurisdiction (the
"Code") and may otherwise sell, assign, transfer, endorse and deliver the whole
or, from time to time, any part of the Pledged Collateral at a public or
private sale or on any securities exchange, for cash, upon credit or for other
property, for immediate or future delivery, and for such price or prices and on
such terms as the Pledgee in its discretion shall deem appropriate. The
Pledgee shall be authorized at any sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent
and agree that they are purchasing the Pledged Collateral for their own account
in compliance with the Securities Act of 1933, as amended (the "Securities
Act") and upon consummation of any such sale the Pledgee shall have the right
to assign, transfer, endorse and deliver to the purchaser or purchasers thereof
the Pledged Collateral
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so sold. Each purchaser at any sale of Pledged Collateral shall take and hold
the property sold absolutely free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the fullest extent permitted by
Applicable Law) all rights of redemption, stay and/or appraisal which the
Pledgor now has or may at any time in the future have under any Applicable Law
now existing or hereafter enacted. The Pledgor agrees that, to the extent
notice of sale shall be required by Applicable Law, at least 10 days' prior
written notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification, but notice given in any other reasonable manner or at any other
reasonable time shall constitute reasonable notification. Such notice, in case
of public sale, shall state the time and place for such sale, and, in the case
of sale on a securities exchange, shall state the exchange on which such sale
is to be made and the day on which the Pledged Collateral, or portion thereof,
will first be offered for sale at such exchange. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or
places as the Pledgee may fix and shall state in the notice or publication (if
any) of such sale. At any such sale, the Pledged Collateral, or portion
thereof to be sold, may be sold in one lot as an entirety or in separate
parcels, as the Pledgee may determine in its sole and absolute discretion. The
Pledgee shall not be obligated to make any sale of the Pledged Collateral if it
shall determine not to do so regardless of the fact that notice of sale of the
Pledged Collateral may have been given. The Pledgee may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case the sale of all or any part of the
Pledged Collateral is made on credit or for future delivery, the Pledged
Collateral so sold may be retained by the Pledgee until the sale price is paid
by the purchaser or purchasers thereof, but the Pledgee shall not incur any
liability to the Pledgor in case any such purchaser or purchasers shall fail to
take up and pay for the Pledged Collateral so sold and, in case of any such
failure, such Pledged Collateral may be sold again upon like notice. At any
public sale made pursuant to this Agreement, the Pledgee, to the extent
permitted by Applicable Law, may bid for or purchase, free from any right of
redemption, stay and/or appraisal on the part of the Pledgor (all said rights
being also hereby waived and released to the extent permitted by Applicable
Law), any part of or all the Pledged Collateral offered for sale and may make
payment on account thereof by using any claim then due and payable to the
Pledgee from the Pledgor as a credit against the purchase price, and the
Pledgee may, upon compliance with the terms of sale and to the extent permitted
by Applicable Law, hold, retain and dispose of such property without further
accountability to the Pledgor therefor. For purposes hereof, a written
agreement to purchase all or any part of the Pledged Collateral shall be
treated as a sale thereof; the Pledgee shall be free to carry out such sale
pursuant to such agreement and the Pledgor shall not be entitled to the return
of any Pledged Collateral subject thereto, notwithstanding the fact that after
the Pledgee shall have entered into such an agreement all Events of Default may
have been remedied or the Obligations may have been paid in full as herein
provided. The Pledgor hereby waives any right to require any marshaling of
assets and any similar right.
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(b) In addition to exercising the power of sale herein conferred
upon it, the Pledgee shall also have the option to proceed by suit or suits at
law or in equity to foreclose this Agreement and sell the Pledged Collateral or
any portion thereof pursuant to judgment or decree of a court or courts having
competent jurisdiction.
(c) The rights and remedies of the Pledgee under this Agreement
are cumulative and not exclusive of any rights or remedies which it would
otherwise have.
Section 10. Application of Proceeds of Sale and Cash. The proceeds
of any sale of the whole or any part of the Pledged Collateral, together with
any other moneys held by the Pledgee under the provisions of this Agreement,
shall be applied by the Pledgee in the following order:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable attorneys'
fees incurred if the Pledgee endeavored to collect the Obligations by or
through an attorney at law;
(b) Second: to the payment of the interest due upon any of the
Obligations, in any order which the Pledgee may elect;
(c) Third: to the payment of the principal due upon any of the
Obligations in any order which the Pledgee may elect; and
(d) Fourth: the balance (if any) of such proceeds shall be paid
to the Pledgor or to whomsoever may be legally entitled thereto.
The Pledgor shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Obligations.
Section 11. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby
constitutes and appoints the Pledgee as the attorney-in-fact of the Pledgor
with full power of substitution either in the Pledgee's name or in the name of
the Pledgor to carry out the provisions of this Agreement and to take any
action and execute any instrument which the Pledgee may deem necessary or
advisable to accomplish the purposes hereof, and to do all acts and things and
execute all documents in the name of the Pledgor or otherwise, deemed by the
Pledgee as necessary, proper and convenient in connection with the
preservation, perfection or enforcement of its rights hereunder. Nothing
herein contained shall be construed as requiring or obligating the Pledgee to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by it, or to present or file any claim or notice, or to
take any action with respect to the Pledged Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken by the Pledgee or omitted to be taken with respect
to the Pledged Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Pledgor or to any claim or action
against the
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Pledgee. The power or attorney granted herein is irrevocable and coupled
with an interest.
Section 12. Expenses. The Pledgor will pay, on demand, all
out-of-pocket expenses incurred by the Pledgee in connection with: (a) the
collection or enforcement of the Obligations including reasonable fees and
disbursements of counsel to the Pledgee if such collection or enforcement is
done through or by an attorney; and (b) the exercise by the Pledgee of any
right or remedy granted to it under this Agreement whether or not a Default or
Event of Default has occurred, including, without limitation, the expenses
incurred by the Pledgee in connection with the collection of Receivables
directly from account debtors.
Section 13. Further Assurances. The Pledgor shall, at its sole cost
and expense, take all action that may be necessary or desirable in the
Pledgee's sole discretion, so as at all times to maintain the validity,
perfection, enforceability and priority of the Pledgee's security interest in
the Pledged Collateral, or to enable the Pledgee to exercise or enforce its
rights hereunder or thereunder, including without limitation (a) delivering to
the Pledgee, endorsed or accompanied by such instruments of assignment as the
Pledgee may specify, any and all chattel paper, instruments, letters of credit
and all other advices of guaranty and documents evidencing or forming a part of
the Pledged Collateral and (b) executing and delivering financing statements,
pledges, designations, notices and assignments, in each case in form and
substance satisfactory to the Pledgee, relating to the creation, validity,
perfection, priority or continuation of the security interest granted
hereunder. Not in limitation of the foregoing, with respect to any Issuer
which is a limited liability company, the Pledgor agrees to deliver to the
Pledgee a Consent and Waiver in the form attached hereto as Exhibit A signed by
all of the other members of such Issuer and by such Issuer. The Pledgor hereby
authorizes the Pledgee to execute and file in all necessary and appropriate
jurisdictions (as determined by the Pledgee) one or more financing or
continuation statements (or any other document or instrument referred to in the
immediately preceding clause (b)) in the name of the Pledgor and to sign the
Pledgor's name thereto. The Pledgor authorizes the Pledgee to file any such
financing statement, document or instrument without the signature of the
Pledgor to the extent permitted by applicable law. To the extent permitted by
Applicable Law, a carbon, photographic, xerographic or other reproduction of
this Agreement or any financing statement is sufficient as a financing
statement. Any property comprising part of the Pledged Collateral required to
be delivered to the Pledgee pursuant to this Pledge Agreement shall be
accompanied by proper instruments of assignment duly executed by the Pledgor
and by such other instruments or documents as the Pledgee may reasonably
request.
Section 14. Securities Act. In view of the position of the Pledgor
in relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act or any similar
Applicable Law hereafter enacted analogous in purpose or effect (such Act and
any such similar Applicable Law as from time to time in effect being called the
"Federal Securities Laws") with respect to any disposition of the Pledged
Collateral permitted hereunder. The Pledgor understands that
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compliance with the Federal Securities Laws might very strictly limit the
course of conduct of the Pledgee if the Pledgee were to attempt to dispose of
all or any part of the Pledged Collateral in accordance with the terms hereof,
and might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Collateral could dispose of the same. Similarly,
there may be other legal restrictions or limitations affecting the Pledgee in
any attempt to dispose of all or part of the Pledged Collateral in accordance
with the terms hereof under applicable Blue Sky or other state securities laws
or similar Applicable Law analogous in purpose or effect. The Pledgor
recognizes that in light of the foregoing restrictions and limitations the
Pledgee may, with respect to any sale of the Pledged Collateral, limit the
purchasers to those who will agree, among other things, to acquire such Pledged
Collateral for their own account, for investment, and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that in
light of the foregoing restrictions and limitations, the Pledgee, in its sole
and absolute discretion, may, in accordance with Applicable Law, (a) proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Collateral or part thereof shall have been filed under
the Federal Securities Laws and (b) approach and negotiate with a single
potential purchaser to effect such sale. The Pledgor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Pledgee shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral in accordance with the
terms hereof at a price that the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more than a
single purchaser were approached. The provisions of this Section will apply
notwithstanding the existence of public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Pledgee sells.
Section 16. FCC Matters. Notwithstanding any other provision of this
Agreement to the contrary, any foreclosure on, sale, transfer or other
disposition of, or the exercise of any right to vote or consent with respect
to, any of the Pledged Collateral as provided herein or any other action taken
or proposed to be taken by the Pledgee hereunder which would affect the
operational, voting or other control of an Issuer that holds a License granted
by the FCC, shall be pursuant to the Communications Laws and to any other
Applicable Laws of any state, and, to the extent required thereby, subject to
the prior approval of the FCC or any applicable state PUC. Upon the occurrence
and during the continuance of an Event of Default, the Pledgor shall assist,
and cause each Issuer to assist, in obtaining all necessary approvals of the
FCC and applicable state PUCs, if required, for any action or transactions
contemplated by this Agreement, including, without limitation, the preparation,
execution and filing with the FCC of the assignor's or transferor's portion of
any applications for consent to the assignment of any license or transfer of
control necessary or appropriate under the rules and regulations of the FCC or
applicable state PUCs, for approval of the transfer or assignment of any
portion of the Pledged Collateral. The Pledgor acknowledges that there is no
adequate remedy at law for failure by the Pledgor to comply with the provisions
of this Section and that such
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failure would not be adequately compensated in dollar damages, and therefore
the Pledgor agrees, without limiting the right of the Pledgee to seek and
obtain specific performance of other obligations of the Pledgor contained in
this Agreement, that the agreements contained in this paragraph may be
specifically enforced.
Section 17. Indemnification. The Pledgor agrees to indemnify and
hold the Pledgee and any corporation controlling, controlled by, or under
common control with, the Pledgee and any officer, attorney, director,
shareholder, agent or employee of the Pledgee or any such corporation (each an
"Indemnified Person"), harmless from and against any claim, loss, damage,
action, cause of action, liability, cost and expense or suit of any kind or
nature whatsoever (collectively, "Losses"), brought against or incurred by an
Indemnified Person, in any manner arising out of or, directly or indirectly,
related to or connected with this Agreement, including without limitation, the
exercise by the Pledgee of any of its rights and remedies under this Agreement
or any other action taken by the Pledgee pursuant to the terms of this
Agreement; provided, however, the Pledgor shall not be liable to an Indemnified
Person for any Losses to the extent that such Losses result from the gross
negligence or willful misconduct of such Indemnified Person. The Pledgor's
obligations under this section shall survive the termination of this Agreement
and the payment in full of the Obligations.
Section 18. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall
remain in full force and effect until it terminates in accordance with its
terms. The Pledgor and the Pledgee hereby agree that the security interest
created by this Agreement in the Pledged Collateral shall not terminate and
shall continue and remain in full force and effect notwithstanding the transfer
to the Pledgor or any person designated by it of all or any portion of the
Pledged Collateral.
Section 19. No Waiver. Neither the failure on the part of the
Pledgee to exercise, nor the delay on its part in exercising any right, power
or remedy hereunder, nor any course of dealing between the Pledgee and the
Pledgor shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power, or remedy hereunder preclude any other or
the further exercise thereof or the exercise of any other right, power or
remedy.
Section 20. Notices. All notices and other communications required
or otherwise provided for hereunder shall be given in accordance with the
notice provisions of the [Credit Agreement][Guaranty].
SECTION 21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 22. Amendments. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Pledgor herefrom shall in
any event be
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effective unless the same shall be in writing and signed by the parties hereto,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 23. Binding Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Pledgor shall not be
permitted to assign this Agreement or any interest herein or in the Pledged
Collateral, or any part thereof, or any cash or property held by the Pledgee as
collateral under this Agreement.
Section 24. Termination. Upon indefeasible payment in full of all of
the Obligations, this Agreement shall terminate.
Section 25. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
Section 26. Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE PLEDGOR'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL
ONLY, UPON A
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SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR
UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A
WAIVER BY THE PLEDGEE OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR
ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE PLEDGEE
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER.
THE PLEDGEE MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY,
OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
Section 27. Headings. Section headings used herein are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
Section 28. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute but one agreement.
Section 29. Definitions. Terms not otherwise defined herein are used
herein with the respective meanings given to them in the Credit Agreement.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge
Agreement under seal as of this the date first written above.
[THE PLEDGOR]
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
Agreed to, accepted and acknowledged
as of the date first written above.
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------------
Name:
--------------------------
Title:
-------------------------
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Schedule 1 to Pledge Agreement
Pledged Shares
<TABLE>
<CAPTION>
Issuer No. of Securities Type of Securities Certificate Nos.
------ ----------------- ------------------ ----------------
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
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EXHIBIT A
CONSENT AND WAIVER
Each of the undersigned members of ______________, a ___________
limited liability company (the "Company"), hereby consent to the Pledge
Agreement dated as of _________, 19___ executed by __________ (the "Pledgor")
in favor of NationsBank, N.A. (South) (the "Pledgee") (the "Pledge Agreement";
all capitalized terms not otherwise defined herein shall have the meanings set
forth in the Pledge Agreement), and consents to the Pledgor's grant of a
security interest in the Pledgor's membership interest in the Company and the
other Pledged Collateral. Each of the undersigned agrees that, by acceptance
of the Pledge Agreement, the Pledgee does not assume any obligations with
respect to the Company or to the constituent members and, without the prior
written consent of the Pledgee, none of the undersigned shall: (i) amend,
modify or terminate the articles of organization or the operating agreement of
the Company or (ii) take any action that would have the effect of diluting the
interest of the Pledgor in the Company. Each of the undersigned further agrees
that, upon the written request of the Pledgee after an Event of Default, the
Pledgor may be removed as member of the Company and replaced with the assignee
designated in such request. If the Pledgee so requests after an Event of
Default, each of the undersigned covenants and agrees to execute an amendment
to the Company's operating agreement to reflect any such assignee's
substitution in place of the Pledgor as a member of the Company, provided that
such assignee shall adopt the operating agreement and agrees to be bound by the
terms and provisions thereof. In the event that any such assignee is admitted
as a member in the Company in substitution of the Pledgor, the undersigned
agrees that such assignee shall not be liable for the obligations of the
Pledgor with respect to the Company arising before such assignees' admission to
the Company, except to the extent required by law. Each of the undersigned
agrees that neither the execution and delivery of the Pledge Agreement, the
enforcement by the Pledgee of any of its rights thereunder, or the transfer (or
agreement to transfer) by the Pledgee of any of the Collateral shall constitute
a default under the articles of organization or operating agreement of the
Company, and each of the undersigned expressly waives any rights it may have
under the articles of organization or operating agreement of the Company as a
result of the foregoing. Each of the undersigned hereby waives any and all
rights under the articles of organization or operating agreement of the Company
which, whether exercised by the undersigned or not, would prevent, inhibit or
interfere with the granting of a security interest in the Pledged Collateral to
the Pledgee, the foreclosure of such security interest in the Pledged
Collateral by the Pledgee or the full realization by the Pledgee of any of its
other rights under or in respect of the Pledge Agreement.
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IN WITNESS WHEREOF, each of the undersigned has executed this Consent
and Waiver under seal as of the date first above written.
[ISSUER]
By:
----------------------------------
Name:
-----------------------------
Title
--------------------------
[LIST MEMBERS]
By:
----------------------------
Name:
--------------------------
Title
--------------------------
C-16
<PAGE> 104
EXHIBIT D
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of __________, 199__ executed and
delivered by ___________________, a __________ organized under the laws of
________________, with its principal place of business and chief executive
office located at _______________________, ________ County, __________ (the
"Debtor"), in favor of NATIONSBANK, N.A. (SOUTH) with an office located at 600
Peachtree Street, 18th Floor, Atlanta, Georgia 30308 (the "Secured Party").
[Include the following if Debtor is Preferred Networks, Inc.]
[WHEREAS, the Debtor, PNI Systems, LLC and the Secured Party have
entered into that certain Credit Agreement dated as of August 8, 1996 (as the
same may be amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Secured Party has agreed to
extend certain financial accommodations to the Debtor and the other Borrower
subject to the terms thereof;]
[Include the following if Debtor is PNI Systems, LLC]
[WHEREAS, Preferred Networks, Inc., the Debtor and the Secured Party
have entered into that certain Credit Agreement dated as of August 8, 1996 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time, the "Credit Agreement") pursuant to which the Secured Party has agreed
to extend certain financial accommodations to the Debtor and the other Borrower
subject to the terms thereof;]
[Include the following if Debtor is a Subsidiary]
[WHEREAS, Preferred Networks, Inc., PNI Systems, LLC and the Secured
Party have entered into that certain Credit Agreement dated as of August 8,
1996 (as the same may be amended, supplemented, restated or otherwise modified
from time to time, the "Credit Agreement") pursuant to which the Secured Party
has agreed to extend certain financial accommodations to the Debtor and the
other Borrower subject to the terms thereof;
WHEREAS, the Debtor is an Affiliate of the Borrowers;
WHEREAS, the Debtor, the Borrowers and the other Subsidiaries of the
Borrowers, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses as an integrated operation and
have determined it to be in their mutual best interests to obtain financing
from the Lender through their collective efforts;
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<PAGE> 105
WHEREAS, the Debtor acknowledges that it will receive direct and
indirect benefits from the Secured Party making such financial accommodations
available to the Borrowers under the Credit Agreement and, accordingly, the
Debtor agreed to guaranty the Borrowers' obligations to the Secured Party on
the terms and conditions contained in that certain Guaranty dated as of the
date hereof (as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, the "Guaranty")
executed by the Debtor in favor of the Secured Party;
WHEREAS, the Debtor is executing and delivering this Agreement to
secure its obligations owing to the Secured Party under the Guaranty and the
other Loan Documents to which the Debtor is a party;]
WHEREAS, it is a condition precedent to the Secured Party's extension
of such financial accommodations under the Credit Agreement that the Debtor
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Debtor, the Debtor hereby agrees with the Secured
Party as follows:
Section 1. Grant of Security. To secure the prompt and complete
payment, observance and performance when due (whether at stated maturity, by
acceleration or otherwise) of all of the Obligations, the Debtor hereby
collaterally assigns and pledges to the Secured Party, and grants to the
Secured Party a security interest in, the Collateral.
Section 2. Representations and Warranties. The Debtor represents and
warrants to the Secured Party as follows:
(a) Name; Taxpayer ID Number. The correct corporate name of the
Debtor is set forth in the first paragraph of this Agreement, and the Debtor
does not conduct and, since its formation has not conducted, business under any
trade name or other fictitious name. The Internal Revenue Service taxpayer
identification number of the Debtor is ______________.
(b) Loan Document Representations. The Debtor hereby makes to the
Secured Party all of the representations and warranties made by the Borrowers
with respect to or in any way relating to the Debtor in the Credit Agreement
and the other Loan Documents, as if the same were set forth herein in full.
(c) Liens. None of the Collateral or other properties of the
Debtor is, as of the date hereof, subject to any Lien, except Permitted Liens.
(d) Chief Executive Office. The chief executive office and
principal place of business of the Debtor and the books and records relating to
the Receivables and the other Collateral are located at the Debtor's address
set forth in the first paragraph of this
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<PAGE> 106
Agreement, and, except as set forth on Schedule 2(d), have been located there
for the five-year period ending on the date hereof. The Debtor has not changed
its name, identity or corporate structure in any way since the Debtor's
formation.
(e) Places of Business. The addresses (including the applicable
counties) of all of the current places of business of the Debtor, and all other
places of business of the Debtor during the five-year period ending on the date
hereof, are set forth on Schedule 2(e) attached hereto.
(f) Inventory. All Inventory is in good condition, meets all
standards imposed by any Governmental Authority having regulatory authority
over such goods, their use or sale, and is currently either usable or salable
in the normal course of the Debtor's business. All Inventory is located on one
or more of the places set forth on Schedule 2(e) hereof or is in transit to one
of such locations.
(j) Equipment. All Equipment of the Debtor is in good order and
repair and is located on or at one or more of the places set forth on Schedule
2(e) hereof. During the five-year period ending on the date hereof, no
Inventory or Equipment of the Debtor was located at any other place of business
except as set forth on Schedule 2(e) hereof.
(k) Security Interest. It is the intent of the Debtor that this
Agreement create a valid and perfected first-priority security interest in the
Collateral, securing the payment of the Obligations.
Section 3. Continued Priority of Security Interest.
(a) The Security Interest shall at all times be valid, perfected
and of first priority and enforceable against the Debtor and all other Persons,
in accordance with the terms of this Agreement, as security for the
Obligations.
(b) The Debtor shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Secured Party may
request, so as at all times to maintain the validity, perfection,
enforceability and priority of the Security Interest in the Collateral in
conformity with the requirements of Section 3(a), or to enable the Secured
Party to exercise or enforce its rights hereunder, including without
limitation: (i) paying all taxes, assessments and other claims lawfully levied
or assessed on any of the Collateral, except to the extent that such taxes,
assessments and other claims constitute Permitted Liens; (ii) obtaining
landlords', mortgagees', mechanics', bailees', warehousemen's or processors'
releases, subordinations or waivers with respect to any or all of the
Collateral, in form and substance satisfactory to the Secured Party; (iii)
delivering to the Secured Party, endorsed or accompanied by such instruments of
assignment as the Secured Party may specify, any and all chattel paper,
instruments, letters of credit and all other advices of guaranty and documents
evidencing or forming a part of the Collateral; (iv) at the request of the
Secured Party, marking conspicuously each document included in the Collateral
and marking all chattel paper and each of its records pertaining to the
Collateral, with a legend,
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<PAGE> 107
in form and substance satisfactory to the Secured Party, indicating that such
document, chattel paper, or Collateral is subject to the Security Interest; and
(v) executing and delivering financing statements, pledges, notices and
assignments, in each case in form and substance satisfactory to the Secured
Party, relating to the creation, validity, perfection, priority or continuation
of the Security Interest under the UCC or other Applicable Law.
(c) The Secured Party is hereby authorized to execute and file in
all necessary and appropriate jurisdictions (as determined by the Secured
Party) one or more financing or continuation statements (or any other document
or instrument referred to in Section 3(b)(v) above) in the name of the Debtor
and to sign the Debtor's name thereto. The Debtor authorizes the Secured Party
to file any such financing statement, document or instrument without the
signature of the Debtor to the extent permitted by Applicable Law. Further, to
the extent permitted by Applicable Law, a carbon, photographic, xerographic,
photostatic, microphotographic, optical image reproduction or other
reproduction of this Agreement or of any financing statement is sufficient as a
financing statement.
Section 4. Covenants Regarding Contracts.
(a) Anything herein to the contrary notwithstanding, (i) the
Debtor shall remain liable under all Assigned Contracts to the extent set forth
therein to perform its duties and obligations thereunder to the same extent as
if this Agreement had not been executed, (ii) the exercise by the Secured Party
of any of its rights hereunder shall not release the Debtor from any of its
duties or obligations under any of the Assigned Contracts (except to the extent
that such exercise prevents the Debtor from satisfying such duties and
obligations), and (iii) the Secured Party shall not have any duties,
obligations or liability under any of the Assigned Contracts or duties by
reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the duties or obligations of the Debtor thereunder, to make any payment,
to make any inquiry as to the nature or sufficiency of any payment received by
the Debtor or the sufficiency of any performance by any party under any such
contract or agreement, or to take any action to collect or enforce any claim
for payment assigned hereunder.
(b) The Debtor shall perform and observe all the terms and
provisions of the Assigned Contracts to be performed or observed by it,
maintain the Assigned Contracts in full force and effect to the extent of the
Debtor's normal business practices, and enforce the Assigned Contracts in
accordance with their terms to the extent of the Debtor's normal business
practices.
Section 5. Covenants Regarding Collateral Generally.
(a) Verification. After the occurrence of a Default or Event of
Default, the Secured Party shall have the right at any time and from time to
time, in the name of the Secured Party or in the name of the Debtor, to verify
the validity, amount or any other matter relating to any Receivables by mail,
telephone or otherwise.
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<PAGE> 108
(b) Delivery of Instruments. In the event any of the Collateral
becomes evidenced by a promissory note, trade acceptance or any other
instrument, the Debtor will immediately thereafter deliver such instrument to
the Secured Party, appropriately endorsed to the Secured Party.
(c) Defense of Title. The Debtor shall at all times be the sole
owner of each and every item of Collateral and shall defend its title in and
to, and the Security Interest in, the Collateral against the claims and demands
of all Persons.
(d) Maintenance of Collateral. The Debtor shall maintain all
physical property that constitutes Collateral in good and workable condition,
with reasonable allowance for wear and tear, and shall exercise proper custody
over all such property.
(e) Insurance. The Debtor shall at all times maintain insurance
on the Collateral against loss or damage by fire, theft, burglary, pilferage,
loss in transit and such other hazards and risks as the Secured Party shall
reasonably specify, in amounts and under policies issued by the Debtor's
present insurers or other insurers acceptable to the Secured Party. All
premiums on such insurance shall be paid by the Debtor and certified copies of
the policies, or other evidence of insurance acceptable to the Secured Party,
shall be delivered to the Secured Party promptly upon the Secured Party's
request. The Debtor will not use or permit the Collateral to be used
unlawfully or outside of any insurance coverage. All insurance policies
required under this Section shall contain loss payable clauses on New York
standard loss payee forms or other forms satisfactory to the Secured Party,
naming the Secured Party as loss payee, and providing that: (i) all proceeds
thereunder shall be payable directly to the Secured Party; (ii) no such
insurance shall be affected by any act or neglect of the insured or owner of
the property described in such policy; (iii) such policies and loss payable
clauses may not be canceled, amended or terminated with respect to the Secured
Party unless at least thirty days' prior written notice is given to the Secured
Party; and (iv) there shall be no recourse against the Secured Party for
payment of premiums or other amounts with respect thereto. Any proceeds of
insurance referred to in this Section which are paid to the Secured Party shall
be applied to the payment or prepayment of the Obligations in accordance with
Section 12 hereof.
(f) Location of Office. The Debtor's chief executive office,
principal place of business, and its books and records relating to the
Collateral will continue to be kept at the address set forth in the first
paragraph of this Agreement and the Debtor will not change the location of such
office and place of business or such books and records without giving the
Secured Party at least 30 days' prior written notice thereof.
(g) Location of Collateral. All Inventory, other than Inventory
in transit to any such location, and all Equipment will at all times be kept by
the Debtor at the current locations set forth on Schedule 2(e), and shall not,
without the prior written consent of the Secured Party, be removed therefrom
except in connection with sales thereof in the ordinary course of business.
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(h) Change of Name, Structure, Etc. Without giving the Secured
Party at least 30 day's prior written notice, the Debtor will not (i) change is
name, identity or structure or (ii) conduct business under any trade name or
other fictitious name.
(i) Records Relating to Collateral. The Debtor will at all times
keep complete and accurate records of Inventory and Equipment, itemizing and
describing the kind, type and quantity of Inventory and Equipment and the
Debtor's cost therefor and a current price list for any Inventory, and keep
complete and accurate records of all other Collateral.
(j) Inspection. The Debtor shall permit any representatives
designated by the Secured Party upon reasonable notice to visit and inspect the
properties of the Debtor and to inspect its financial and business records and
make extracts therefrom and copies thereof, all at reasonable times during
normal business hours and in a manner so as not to unreasonably disrupt the
operations of the Debtor and as often as reasonably requested. The Debtor
shall permit the Secured Party or any representatives designated by the Secured
Party upon reasonable notice to discuss the affairs, finances and condition of
any of the Debtor with the its officers and, after prior notice to the Debtor
(so long as no Event of Default has occurred and is continuing), the
independent accountants for the Debtor.
(k) Other Information. The Debtor shall furnish to the Secured
Party such other information with respect to the Collateral, including, but not
limited to, physical listings of Inventory and Equipment, as the Secured Party
may request from time to time.
(l) Payments Directly to Secured Party. The Secured Party may at
any time and from time to time after the occurrence of a Default or Event of
Default notify, or request the Debtor to notify, in writing or otherwise, any
account debtor or other obligor with respect to any one or more of the
Receivables or Assigned Contracts to make payment to the Secured Party or any
agent or designee of the Secured Party directly, at such address as may be
specified by the Secured Party. If, notwithstanding the giving of any notice,
any Account Debtor or other such obligor shall make payment to the Debtor, the
Debtor shall hold all such payments it receives in trust for the Secured Party,
without commingling the same with other funds or property of or held by the
Debtor, and shall promptly deliver the same to the Secured Party or any such
agent or designee immediately upon receipt by the Debtor in the identical form
received, together with any necessary endorsements.
(m) Sale of Collateral. The Debtor shall not sell, lease or
transfer or otherwise dispose of any Collateral outside the ordinary course of
its business; provided, however, the Debtor may dispose of its Inventory in the
ordinary course of its business so long as no Default or Event of Default shall
have occurred. The inclusion of "proceeds" of the Collateral under the
Security Interest shall not be deemed a consent by the Secured Party to any
other sale or other disposition of any part or all of the Collateral.
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Section 6. Covenants. So long as any Obligations remain unpaid or
unperformed, the Debtor shall comply with all covenants which the Borrowers are
to cause the Debtor to comply with under the terms of the Credit Agreement or
any of the other Loan Documents.
Section 7. Liens. The Debtor shall not create, assume, incur or
permit or suffer to exist or to be created, assumed or incurred, any Lien upon
any of the Collateral other than Permitted Liens.
Section 8. The Secured Party Appointed Attorney-in-Fact. The Debtor
hereby irrevocably appoints the Secured Party the Debtor's attorney-in-fact,
with full authority in the place and stead of the Debtor and in the name of the
Debtor or otherwise, from time to time in the Secured Party's discretion to
take any action and to execute any instrument or document which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement and to exercise any rights and remedies the Secured Party may have
under this Agreement or Applicable Law, including, without limitation: (i) to
obtain and adjust insurance required to be maintained pursuant to the terms of
this Agreement or any other Loan Document; (ii) to ask, demand, collect, sue
for, recover, compromise, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral including
any Receivable; (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i) or (ii)
above; (iv) to sell or assign any Receivable upon such terms, for such amount
and at such time or times as the Secured Party deems advisable, to settle,
adjust, compromise, extend or renew any Receivable or to discharge and release
any Receivable; and (v) to file any claims or take any action or institute any
proceedings which the Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to any of the Collateral. The power-of-attorney
granted hereby shall be irrevocable and coupled with an interest.
Section 9. The Secured Party May Perform. If the Debtor fails to
perform any agreement contained herein, the Secured Party may, without notice
to the Debtor, itself perform, or cause performance of, such agreement, and the
expenses of the Secured Party incurred in connection therewith shall be payable
by the Debtor under Section 15 hereof.
Section 10. The Secured Party's Duties. The powers conferred on the
Secured Party hereunder are solely to protect its interest in the Collateral
and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Secured Party shall have no duty
as to any Collateral. The Secured Party shall be deemed to have exercised
reasonable care in the custody of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the Secured
Party accords its own property; it being understood that the Secured Party
shall be under no obligation to take any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral, but may
do so at its option, and all reasonable expenses
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incurred in connection therewith shall be for the sole account of the Debtor
and shall be added to the Obligations.
Section 11. Remedies. The Secured Party may take any or all of the
following actions upon the occurrence of an Event of Default hereunder.
(a) Inventory and Equipment.
(i) Entry. The Secured Party may enter upon any premises
on which Inventory or Equipment may be located and, without resistance
or interference by the Debtor, take physical possession of any or all
thereof and maintain such possession on such premises or move the same
or any part thereof to such other place or places as the Secured Party
shall choose, without being liable to the Debtor on account of any
loss, damage or depreciation that may occur as a result thereof, other
than for actions that were not taken in good faith.
(ii) Assembly. The Debtor shall, upon request of and
without charge to the Secured Party, assemble the Inventory and
Equipment and maintain or deliver it into the possession of the
Secured Party or any agent or representative of the Secured Party at
such place or places as the Secured Party may designate and as are
reasonably convenient to both the Secured Party and the Debtor.
(iii) Warehousing. The Secured Party may, at the expense
of the Debtor, cause any of the Inventory and Equipment to be placed
in a public or field warehouse, and the Secured Party shall not be
liable to the Debtor on account of any loss, damage or depreciation
that may occur as a result thereof, other than for actions that were
not taken in good faith.
(b) Use of Premises and Patents. The Secured Party may:
(i) without notice, demand or other process, and without
payment of any rent or any other charge enter any of the Debtor's
premises and, without breach of the peace, until the Secured Party
completes the enforcement of its rights in the Collateral, take
possession of such premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of the
Debtor's equipment, for the purpose of (A) completing any work in
process, preparing any Inventory and Equipment for disposition and
disposing thereof and (B) collecting any Receivable; and
(ii) in the exercise of the rights of the Secured Party
under this Agreement, without payment or compensation of any kind, use
any and all trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and the like to the extent of the
rights of the Debtor therein, and the Debtor grants a license to the
Secured Party for this purpose.
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<PAGE> 112
(c) Cash Collateral. The Secured Party may apply any cash
Collateral to the payment of the Obligations in any order in which the Secured
Party may elect or use such cash in connection with the exercise of any of its
other rights hereunder.
(d) Rights as a Secured Creditor. The Secured Party may exercise
all of the rights and remedies of a secured party under the UCC and under any
other Applicable Law, including, without limitation, the right, without notice
except as specified below and with or without taking possession thereof, to
sell the Collateral or any part thereof in one or more parcels at public or
private sale at any location chosen by the Secured Party, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms
as the Secured Party may deem commercially reasonable. The Debtor agrees that,
to the extent notice of sale shall be required by law, at least 10 days' notice
to the Debtor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification, but
notice given in any other reasonable manner or at any other reasonable time
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(e) Waiver of Marshaling. The Debtor hereby waives any right to
require any marshaling of assets and any similar right.
(f) Appointment of Receiver. The Secured Party shall be entitled
to the appointment of a receiver, without notice of any kind whatsoever and
without regard to the adequacy of any security for the Obligations or the
solvency of any party bound for its payment, to take possession of all or any
portion of the Collateral and/or the business operations of the Debtor and to
exercise such power as the court shall confer upon such receiver.
(g) Receivables/Assigned Contracts. The Secured Party shall have
the exclusive right to assert, either directly or on behalf of the Debtor, any
and all rights and claims the Debtor may have under any Receivables and/or any
of the Assigned Contracts as the Secured Party may deem proper and to receive
and collect any and all Receivables and Assigned Contracts and any and all
rent, fees, damages, awards and other monies arising thereunder or resulting
therefrom and to apply the same on account of any of the Obligations.
Section 12. Application of Proceeds. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable attorneys'
fees if the Secured Party endeavored to collect the Obligations by or through
an attorney at law;
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(b) Second: to the payment of the interest due upon any of the
Obligations, in any order which the Secured Party may elect;
(c) Third: to the payment of the principal due upon any of the
Obligations in any order which the Secured Party may elect; and
(d) Fourth: the balance (if any) of such proceeds shall be paid
to the Debtor or to whomsoever may be legally entitled thereto.
The Debtor shall remain liable and shall pay, on demand, any deficiency
remaining in respect of the Obligations, together with interest thereon at a
rate per annum equal to the highest rate then payable hereunder on such
Obligations, which interest shall constitute part of the Obligations.
Section 13. FCC Matters. Notwithstanding any other provision of this
Agreement to the contrary, any foreclosure on, sale, transfer or other
disposition of, or the exercise of any right to vote or consent with respect
to, any of the Collateral as provided herein or any other action taken or
proposed to be taken by the Secured Party hereunder which would affect the
operational, voting or other control of the Debtor or any other Loan Party that
holds a License granted by the FCC, shall be pursuant to the Communications
Laws and to any other Applicable Laws of any state, and, to the extent required
thereby, subject to the prior approval of the FCC or any applicable state PUC.
Upon the occurrence and during the continuance of an Event of Default, the
Debtor shall assist, and cause each of its Subsidiaries to assist, in obtaining
all necessary approvals of the FCC and applicable state PUCs, if required, for
any action or transactions contemplated by this Agreement, including, without
limitation, the preparation, execution and filing with the FCC of the
assignor's or transferor's portion of any applications for consent to the
assignment of any license or transfer of control necessary or appropriate under
the rules and regulations of the FCC or applicable state PUCs, for approval of
the transfer or assignment of any portion of the Pledged Collateral. The
Debtor acknowledges that there is no adequate remedy at law for failure by the
Debtor to comply with the provisions of this Section and that such failure
would not be adequately compensated in dollar damages, and therefore the Debtor
agrees, without limiting the right of the Secured Party to seek and obtain
specific performance of other obligations of the Debtor contained in this
Agreement, that the agreements contained in this paragraph may be specifically
enforced.
Section 14. Rights Cumulative. The rights and remedies of the
Secured Party under this Agreement, the Credit Agreement and the other Loan
Documents shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. In exercising its rights and remedies the Secured
Party may be selective and no failure or delay by the Secured Party in
exercising any right shall operate as a waiver of it, nor shall any single or
partial exercise of any power or right preclude its other or further exercise
or the exercise of any other power or right.
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Section 15. Expenses. The Debtor will pay, on demand, all
out-of-pocket expenses incurred by the Secured Party in connection with: (a)
the collection or enforcement of the Obligations including reasonable fees and
disbursements of counsel to the Secured Party if such collection or enforcement
is done through or by an attorney; and (b) the exercise by the Secured Party of
any right or remedy granted to it under this Agreement whether or not a Default
or Event of Default has occurred, including, without limitation, the expenses
incurred by the Secured Party in connection with the collection of Receivables
directly from account debtors.
Section 16. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Debtor herefrom shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 17. Notices. Unless otherwise provided herein, all notices
and other communications provided for hereunder shall be in given in accordance
with the applicable provisions of the [Credit Agreement] [Guaranty].
Section 18. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until indefeasible payment in full of the Obligations,
(ii) be binding upon the Debtor, its successors and assigns and (iii) inure the
benefit of the Secured Party, and its successors and assigns. The Debtor's
successors and assigns shall include, without limitation, a receiver, trustee
or debtor-in-possession thereof or therefore.
Section 19. Applicable Law; Severability. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under Applicable Law,
but if any provision of this Agreement shall be prohibited by or invalid under
Applicable Law, such provisions shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.
Section 20. Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN THE DEBTOR
AND THE SECURED PARTY, INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
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RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE DEBTOR'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL
ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A
WAIVER BY THE SECURED PARTY OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC.
91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
SECURED PARTY HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT OF A RECEIVER. THE SECURED PARTY MAY EXERCISE SUCH SELF HELP
RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING
BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Section 21. Indemnification. The Debtor agrees to indemnify and hold
the Secured Party harmless from and against any claim, loss, damage, action,
cause of action, liability, cost and expense or suit of any kind or nature
whatsoever, brought against or incurred by the Secured Party, in any manner
arising out of or, directly or indirectly, related to or connected with the
operation of the Debtor's business, any action taken by
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the Secured Party with respect to any Receivable or Assigned Contract pursuant
to this Agreement or any other action taken by the Secured Party pursuant to
the terms of this Agreement, including, without limitation, claims brought
against the Secured Party by any Account Debtor.
Section 22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
Section 23. Definitions. (a) For the purposes of this Agreement:
"Agreement" means this Security Agreement, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"Assigned Contract" means any contract or agreement to which the
Debtor is a party or which runs in favor of the Debtor and which constitutes
part of the Collateral.
"Collateral" means all of the Debtor's right, title and interest in
and to each of the following, wherever located and whether now or hereafter
existing, or now owned or hereafter acquired or arising:
(a) all Receivables of the Debtor;
(b) all Inventory;
(c) all Equipment;
(d) all rights of the Debtor as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and reclamation)
with respect to any Inventory or other properties of the Debtor;
(e) all patents, trademarks, trade names, service marks, trade
secrets, copyrights, mask works and exclusive licenses (including all pending
patents, trademarks, trade names, service marks and copyrights and all
applications, materials, documents and other matter relating thereto), all
inventions, and all manufacturing, engineering and production plans,
blueprints, drawings, specifications, processes and systems, all computer
programs, data bases, systems and software (including source and object codes),
goodwill, choses-in-action, and all other general intangibles of every nature,
type and description, whether now owned or hereafter acquired by the Debtor;
(f) all documents of title, policies and certificates of
insurance, chattel paper and instruments of the Debtor;
(g) all books, records, files and correspondence in any way
related to any of the foregoing or otherwise pertaining to the business
operations of the Debtor;
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(h) any and all balances, credits, deposits, accounts, items and
monies of the Debtor now or hereafter with the Secured Party or any affiliate
of the Secured Party or deposited with the Secured Party or any financial
institution selected by the Secured Party pursuant to any lock box, deposit,
escrow or other collection agreement or otherwise, and all property of the
Debtor of every kind and description now or hereafter in the possession or
control of the Secured Party for any reason; and
(i) any and all products and proceeds of any of the foregoing
(including, but not limited to, any claims to any items referred to in this
definition, and any claims of the Debtor against third parties for loss of,
damage to or destruction of, any or all of the Collateral or for proceeds
payable under, or unearned premiums with respect to, policies of insurance) in
whatever form, including, but not limited to, cash, instruments, general
intangibles, accounts receivable, goods, documents and chattel paper.
"Debtor" has the meaning set forth in the first paragraph hereof.
"Equipment" means all equipment, machinery, apparatus, fittings,
fixtures and other tangible personal property (other than Inventory) of every
kind and description used in the Debtor's business operations or owned by the
Debtor or in which the Debtor has an interest, and all parts, accessories and
special tools and all increases and accessions thereto and substitutions and
replacements therefor.
"Inventory" means (a) all inventory of the Debtor and all goods
intended for sale or lease by the Debtor, or for display or demonstration; (b)
all work-in-process; (c) all raw materials and other materials and supplies of
every nature and description used or which might be used in connection with the
manufacture, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in the Debtor's business; and (d) all
documents relating to any of the foregoing.
[The following definition is to be included only of the Debtor is not a
Borrower]
"Obligations" means, individually and collectively:
(i) all obligations and indebtedness of the Debtor, owing to the
Secured Party of every kind, nature and description, under or with respect to
the Guaranty, this Agreement or any of the other Loan Documents, whether direct
or indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note;
(ii) all other obligations and indebtedness owing by the Debtor to
the Secured Party and all future advances made to the Debtor by the Secured
Party, however and whenever created, arising or evidenced, whether direct or
indirect, through assignment from third parties, whether absolute or
contingent, or otherwise, now or hereafter existing,
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or due or to become due, including, without limitation, obligations under all
guaranties, letters of credit and overdrafts;
(iii) any and all renewals, modifications, extensions and
supplements to any of the foregoing.
Without limitation of the foregoing, the term "Obligations" shall include any
Indebtedness of the Debtor to any other Loan Party which now or hereafter
becomes owing to the Secured Party as assignee of such other Loan Party
pursuant to any of the Security Documents or otherwise.
"Secured Party" has the meaning set forth in the first paragraph
hereof.
"Security Interest" means the Lien of the Secured Party upon, and the
collateral assignments to the Secured Party of, the Collateral effected hereby
or pursuant to the terms hereof.
(b) Unless otherwise set forth herein to the contrary, all terms
not otherwise defined herein and which are defined in the UCC are used herein
with the meanings ascribed to them in the UCC. Terms not otherwise defined
herein or in the UCC are used herein with the respective meanings given them in
the Credit Agreement.
[Signature on Next Page]
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<PAGE> 119
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to
be duly executed and delivered under seal by its duly authorized officers as of
the day first above written.
-------------------------------
By:
. ---------------------------
Name:
----------------------
Title:
---------------------
Agreed and accepted as of the
date first written above.
NATIONSBANK, N.A. (SOUTH)
By:
--------------------------
Name:
---------------------
Title:
--------------------
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SCHEDULE 2(d)
Prior Locations of Chief Executive Office
(To be Completed by Debtor)
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<PAGE> 121
SCHEDULE 2(e)
Places of Business; Locations of Collateral
CURRENT PLACES OF BUSINESS AND LOCATIONS OF COLLATERAL:
(To be Completed by Debtor)
PRIOR PLACES OF BUSINESS AND LOCATION OF COLLATERAL:
(To be Completed by Debtor)
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<PAGE> 122
EXHIBIT E
FORM OF NOTICE OF BORROWING
[Date]
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August 8,
1996 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") by and among Preferred Networks, Inc., PNI
Systems, LLC and NationsBank, N.A. (South) (the "Lender"). Capitalized terms
used herein, and not otherwise defined herein, have their respective meanings
given them in the Credit Agreement.
1. This Notice of Borrowing is given by _______________________
(the "Borrower").
2. Pursuant to Section 2.1 or 2.2, as applicable, of the Credit
Agreement, the Borrower hereby requests that the Lender make a Loan
to the Borrower in an amount equal to $___________________.
3. The Borrower requests that the Loan be made available to the
Borrower on ____________, 199__.
4. WITH RESPECT TO LOANS TO PNI SYSTEMS, LLC ONLY, the Borrower
hereby requests that such Loan be of the following Type:
[CHECK ONE BOX ONLY]
[ ] Base Rate Loan
[ ] LIBOR Loan, with an initial Interest Period for a duration of:
[CHECK ONE BOX ONLY] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months
5. The Lender is instructed to make such proceeds available to
the Borrower as follows:____________________________.
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<PAGE> 123
6. The Borrower represents and warrants to the Lender that the
proceeds of the Loan requested hereby are to be used in accordance
with Section 2.12 of the Credit Agreement.
7. The Borrower further represents and warrants that as of the
date hereof, the statements set forth in Section 4.2(a) through (c)
of the Credit Agreement are true and correct.
-------------------------------
By:
---------------------------
Name:
-------------------
Title:
-------------------
E-2
<PAGE> 124
EXHIBIT F
FORM OF NOTICE OF CONTINUATION
[Date]
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August 8,
1996 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") by and among Preferred Networks, Inc., PNI
Systems, LLC (the "Company") and NationsBank, N.A. (South) (the "Lender").
Capitalized terms used herein, and not otherwise defined herein, have their
respective meanings given them in the Credit Agreement.
Pursuant to Section 3.6 of the Credit Agreement, the Company hereby
requests a Continuation of all or a portion of a Loan under the Credit
Agreement, and in that connection sets forth below the information relating to
such Continuation as required by the applicable terms of the Credit Agreement:
1. The requested date of such Continuation is ____________,
199__.
2. The aggregate principal amount of the Loan subject to the
requested Continuation is $________________________ and the portion
of such principal amount subject to such Continuation is
$__________________________.
3. The current Interest Period of the Loan subject to such
Continuation ends on ________________, 199__.
4. The duration of the Interest Period for the Loan or portion
thereof subject to such Continuation is:
[CHECK ONE BOX ONLY] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months
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<PAGE> 125
5. The Company further represents and warrants that as of the
date hereof, the statements set forth in Sections 4.2(a) through (c)
of the Credit Agreement are true and correct.
IN WITNESS WHEREOF, the Company has executed this Notice as of the date
first written above.
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By:
-----------------------------
Name:
----------------------
Title:
----------------------
F-2
<PAGE> 126
EXHIBIT G
FORM OF NOTICE OF CONVERSION
[Date]
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August 8,
1996 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") by and among Preferred Networks, Inc., PNI
Systems, LLC (the "Company") and NationsBank, N.A. (South) (the "Lender").
Capitalized terms used herein, and not otherwise defined herein, have their
respective meanings given them in the Credit Agreement.
Pursuant to Section 3.6 of the Credit Agreement, the Company hereby
requests a Conversion of all or a portion of a Loan of one Type into a Loan of
another Type under the Credit Agreement, and in that connection sets forth
below the information relating to such Conversion as required by the applicable
terms of the Credit Agreement:
1. The requested date of such Conversion is ____________, 199__.
2. The Type of Loan to be Converted pursuant hereto is currently a:
[CHECK ONE BOX ONLY] [ ] Base Rate Loan
[ ] LIBOR Loan
3. The aggregate principal amount of the Loan subject to the
requested Conversion is $________________________ and the portion of
such principal amount subject to such Conversion is
$__________________________.
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<PAGE> 127
4. The amount of such Loan to be so Converted is to be converted
into a Loan of the following Type:
[CHECK ONE BOX ONLY]
[ ] Base Rate Loan
[ ] LIBOR Loan, with an initial Interest Period for a duration of:
[CHECK ONE BOX ONLY] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months
5. The Company further represents and warrants that as of the
date hereof, the statements set forth in Sections 4.2(a) through (c)
of the Credit Agreement are true and correct.
IN WITNESS WHEREOF, the Company has executed this Notice as of the date
first written above.
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By:
-----------------------------
Name:
------------------------
G-2
<PAGE> 128
EXHIBIT H
FORM OF COMPANY NOTE
$18,000,000 Atlanta, Georgia
August 8, 1996
FOR VALUE RECEIVED, the undersigned, PNI SYSTEMS, LLC, a Georgia limited
liability company (the "Company") hereby unconditionally promises to pay to the
order of NATIONSBANK, N.A. (SOUTH) (the "Lender"), at its office at 600
Peachtree Street, 18th Floor, Atlanta, Georgia 30308 or at such other address
as may be specified by the Lender to the Company, the principal sum of EIGHTEEN
MILLION AND NO/100 DOLLARS ($18,000,000), or such lesser amount as may be the
aggregate principal amount outstanding of all Company Loans made by the Lender
to the Company pursuant to, and in accordance with the terms of, the Credit
Agreement.
The Company agrees to pay principal at said office, in like money, from
time to time on the dates and at the times specified in the Credit Agreement.
The Company further agrees to pay interest at said office, in like money, on
the unpaid principal amount owing hereunder from time to time on the dates and
at the rates and at the times specified in the Credit Agreement.
The date and amount of each Company Loan made by the Lender to the Company
under the Credit Agreement, each payment of principal in respect thereof and
the accrual of interest under this Note, shall be recorded by the Lender on its
books; provided, however, that the failure of the Lender to make any such
recordation shall not affect the obligation of the Company to make a payment
when due of any amount owing under this Note. Any such recordations made by
the Lender on its books shall be prima facie evidence of the amounts recorded
therein.
This Note is the "Company Note" referred to in that certain Credit
Agreement dated as of August 8, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), by and among
Preferred Networks, Inc., the Company and the Lender, and is subject to, and
entitled to, all provisions and benefits thereof. Capitalized terms used
herein and not defined herein shall have the respective meanings given to such
terms in the Credit Agreement. The Credit Agreement, among other things, (a)
provides for the making of Company Loans by the Lender to the Company from time
to time in an aggregate amount not to exceed at any time outstanding the Dollar
amount first above mentioned, (b) permits the prepayment of the Company Loans
by the Company subject to certain terms and conditions and (c) provides for the
acceleration of the Company Loans upon the occurrence of certain specified
events.
This Note is secured by the Collateral and the holder hereof shall be
entitled to the benefits thereof and to the other Loan Documents (to the extent
and with the effect as therein provided).
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<PAGE> 129
The Company hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Company Note under seal as of the date written above.
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
ATTEST:
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
(CORPORATE SEAL)
H-2
<PAGE> 130
EXHIBIT I
FORM OF PARENT NOTE
$2,000,000 Atlanta, Georgia
August 8, 1996
FOR VALUE RECEIVED, the undersigned, PREFERRED NETWORKS, INC., a Delaware
corporation (the "Parent") hereby unconditionally promises to pay to the order
of NATIONSBANK, N.A. (SOUTH) (the "Lender"), at its office at 600 Peachtree
Street, 18th Floor, Atlanta, Georgia 30308 or at such other address as may be
specified by the Lender to the Parent, the principal sum of TWO MILLION AND
NO/100 DOLLARS ($2,000,000), or such lesser amount as may be the aggregate
principal amount outstanding of all Parent Loans made by the Lender to the
Parent pursuant to, and in accordance with the terms of, the Credit Agreement.
The Parent agrees to pay principal at said office, in like money, from
time to time on the dates and at the times specified in the Credit Agreement.
The Parent further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time on the dates and at
the rates and at the times specified in the Credit Agreement.
The date and amount of each Parent Loan made by the Lender to the Parent
under the Credit Agreement, each payment of principal in respect thereof and
the accrual of interest under this Note, shall be recorded by the Lender on its
books; provided, however, that the failure of the Lender to make any such
recordation shall not affect the obligation of the Parent to make a payment
when due of any amount owing under this Note. Any such recordations made by
the Lender on its books shall be prima facie evidence of the amounts recorded
therein.
This Note is the "Parent Note" referred to in that certain Credit
Agreement dated as of August 8, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), by and among the
Parent, PNI Systems, LLC and the Lender, and is subject to, and entitled to,
all provisions and benefits thereof. Capitalized terms used herein and not
defined herein shall have the respective meanings given to such terms in the
Credit Agreement. The Credit Agreement, among other things, (a) provides for
the making of Parent Loans by the Lender to the Parent from time to time in an
aggregate amount not to exceed at any time outstanding the Dollar amount first
above mentioned, (b) permits the prepayment of the Parent Loans by the Parent
subject to certain terms and conditions and (c) provides for the acceleration
of the Parent Loans upon the occurrence of certain specified events.
This Note is secured by the Collateral and the holder hereof shall be
entitled to the benefits thereof and to the other Loan Documents (to the extent
and with the effect as therein provided).
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<PAGE> 131
The Parent hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Parent
Note under seal as of the date written above.
PREFERRED NETWORKS, INC.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
ATTEST:
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
(CORPORATE SEAL)
I-2
<PAGE> 132
EXHIBIT J
FORM OF INTERCOMPANY NOTE
$18,000,000 Atlanta, Georgia
__________, 1996
FOR VALUE RECEIVED, the undersigned, PREFERRED NETWORKS, INC., a Delaware
corporation (the "Parent") hereby unconditionally promises to pay to the order
of PNI SYSTEMS, LLC (together with any other holder hereof, the "Holder"), at
its office at 5300 Oakbrook Parkway, Suite 320, Norcross, Georgia 30093, or at
such other address as may be specified by the Holder to the Parent, the
principal sum of EIGHTEEN MILLION AND NO/100 DOLLARS ($18,000,000), or such
lesser amount as may be the aggregate principal amount outstanding of all loans
(each an "Intercompany Loan") made by the Holder to the Parent pursuant to this
Note.
The Parent agrees to pay principal at said office, in like money, from
time to time on DEMAND by the Holder. The Parent further agrees to pay
interest at said office, in like money, on the outstanding principal balance of
Intercompany Loans owing hereunder at the variable rate equal to (a) the lowest
rate of interest payable from time to time on Company Loans outstanding under
and as defined in the Credit Agreement dated as of August 8, 1996 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") by and among the Parent, the Holder and NationsBank, N.A (South) or
(b) if no such Company Loans shall be then outstanding under the Credit
Agreement or if such Credit Agreement shall have been terminated, at the rate
of interest publicly announced by NationsBank, N.A (South) as its prime lending
rate. All accrued and unpaid interest shall be payable on DEMAND.
The date and amount of each Intercompany Loan made by the Holder to the
Parent under this Note, each repayment of principal in respect thereof and the
accrual of interest under this Note, shall be recorded by the Holder on its
books; provided, however, that the failure of the Holder to make any such
recordation shall not affect the obligation of the Parent to make a payment
when due of any amount owing under this Note. Any such recordations made by
the Holder on its books shall be prima facie evidence of the amounts recorded
therein.
The Parent hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF GEORGIA.
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<PAGE> 133
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
under seal as of the date written above.
PREFERRED NETWORKS, INC.
By:
------------------------------
Name:
------------------------
Title:
------------------------
ATTEST:
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
(CORPORATE SEAL)
PAY TO THE ORDER OF NATIONSBANK, N.A. (SOUTH)
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By:
--------------------------
Name:
--------------------
Title:
-------------------
J-2
<PAGE> 134
EXHIBIT K
FORM OF COLLATERAL ASSIGNMENT OF LEASES
THIS COLLATERAL ASSIGNMENT OF LEASES dated as of ____________, 1996,
executed and delivered by ____________, a ____________ corporation (the
"Borrower") in favor of NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, the Borrower, [Preferred Networks, Inc.][PNI Systems, LLC] and
the Lender have entered into that certain Credit Agreement dated as of August
8, 1996 (as amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Lender has agreed, subject
to the terms thereof, to extend certain financial accommodations to the
Borrower; and
WHEREAS, as a condition to the Lender extending any such financial
accommodations to the Borrower, the Lender has required, among other things,
that the Borrower collaterally assign to the Lender, and grant to the Lender a
security interest in, the Borrower's rights under the various leases, licenses
and other agreement used by the Borrower in connection with its business, all
as additional security for the Secured Obligations.
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Borrower, the Borrower agrees as follows:
Section 4. Assignment and Security Interest. As security for the prompt
payment and performance of the Secured Obligations, the Borrower hereby
collaterally assigns to the Lender, and grants to the Lender a security
interest in, the following (collectively, the "Collateral"): (a) all of the
Borrower's right, title and interest in, to and under each lease, license and
other agreement used by the Borrower in connection with its business
(collectively, the "Assigned Agreements"), including without limitation, those
described on Schedule I attached hereto, together with all other documents,
instruments, agreements, certificates and opinions delivered in connection with
any of the Assigned Agreements, all as the same may be amended, supplemented,
restated or otherwise modified from time to time (together with the Assigned
Agreements, the "Assigned Documents"), including without limitation, all rights
of the Borrower to (i) the use, occupancy or other benefits of the property the
subject to any of the Assigned Documents; (ii) amend or otherwise modify any of
the Assigned Documents and to waive any other party's performance thereunder;
(iii) sublease, sublicense or assign any of the Assigned Documents; (iv)
damages arising out of, or for, breach or default in respect of any of the
Assigned Documents and (v) perform and exercise all rights and remedies
available to the Borrower under or in respect of any of the Assigned Documents;
(b) all of the Borrower's books and records in any way relating to the Assigned
Documents and (c) all products and proceeds of any of the foregoing.
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<PAGE> 135
Section 5. Covenants. The Borrower covenants and agrees as to each
Assigned Document that the Borrower: (a) shall at all times duly and
punctually perform all of the terms, conditions and covenants of the Assigned
Documents on the Borrower's part to be kept, observed and performed; (b) will
not sell, assign, grant a Lien in, or otherwise transfer to any Person any of
the Collateral; (c) will not amend or otherwise modify any of the terms of any
Assigned Document, or terminate any Assigned Document, without the Lender's
prior written consent; and (d) shall promptly deliver to the Lender a copy of
any notice or other written communication given to or by the Borrower under or
in connection with any Assigned Document.
Section 6. Representations and Warranties. The Borrower represents and
warrants to the Lender as follows: (a) true, correct and complete copies of
the Assigned Documents (including all amendments, supplements and modifications
thereto) have been delivered to the Lender; (b) each Assigned Document is in
full force and effect and is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms; (c)
the Borrower is not in default under any Assigned Document; (d) the Borrower
has not assigned any of its right, title or interest in, to or under any of the
Collateral to any Person and all of the Collateral is free and clear of all
Liens except for Permitted Liens; (e) the Borrower has full authority and the
legal right to assign collaterally to the Lender, and to grant to the Lender a
security interest in, the Assigned Documents and the other Collateral and the
Borrower has obtained all consents necessary for the valid and binding
assignment of and the effectiveness and enforceability of such security
interest under this Agreement; and (f) none of the Assigned Documents, nor any
type of memorandum or "short form" thereof, has been filed of public record in
any jurisdiction.
Section 7. Borrower's Right to Enforce. So long as no Event of Default
shall have occurred, the Lender will not exercise or enforce, or seek to
exercise or enforce, or avail itself of, any of the rights, powers, privileges,
authorizations and benefits assigned and transferred to the Lender pursuant to
this Agreement, and the Borrower may exercise or enforce, or seek to exercise
or enforce, such rights, powers, privileges, authorizations and benefits in
conformity with the provisions of this Agreement and the other Loan Documents.
If the Borrower shall fail to perform or comply with any term or condition
imposed upon the Borrower under any of the Assigned Documents, or the Borrower
shall fail to exercise any right or remedy of the Borrower thereunder, then,
without waiving or releasing the Borrower from any of its obligations hereunder
or under such Assigned Document, the Lender may (but shall not obligated to)
take any action the Lender deems necessary or desirable to preserve and protect
any of the Borrower's or the Lender's rights thereunder.
Section 8. Remedies. Upon the occurrence of an Event of Default, the
Lender shall, at its election, without notice of election and without demand,
have the right to do any one or more of the following acts, all of which are
hereby authorized by the Borrower: (a) exercise any or all of the rights
available to a secured party under the UCC or any
K-2
<PAGE> 136
other Applicable Law; (b) exercise any or all of its rights and remedies
under the Credit Agreement and the other Loan Documents; (c) exercise any or
all of the Borrower's rights under any or all of the Assigned Documents to the
exclusion of the Borrower; (d) with respect to any Assigned Agreement
constituting a lease of real property, enter into and take control and
possession of such real property without assuming any obligations of the
Borrower under the applicable Assigned Documents and (e) assign or sublease all
of the Borrower's right, title and interest in and to any of the Assigned
Documents to any Person who shall assume all of the Borrower's obligations
thereunder.
Section 9. Lender Not Obligated. Notwithstanding any other provision of
this Agreement or any other Loan Document to the contrary, the Borrower
expressly acknowledges and agrees that it shall continue to observe and perform
all of the conditions and obligations contained in the Assigned Documents to be
observed and performed by it, and that neither this Agreement, nor any action
taken pursuant hereto, shall cause the Lender to be under any obligation or
liability in any respect whatsoever to any party to any Assigned Document or to
any other Person for the observance or performance of any of the
representations, warranties, conditions, covenants, agreements or terms therein
contained.
Section 10. Further Assurances. At any time and from time to time, upon
the request of the Lender, and at the sole expense of the Borrower, the
Borrower will promptly execute and deliver such further instruments and
documents and take such further action as the Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted.
Section 11. Rights Cumulative. The rights and remedies of the Lender
under this Agreement are cumulative and not exclusive of any rights or remedies
which it would otherwise have. In exercising its rights and remedies the
Lender may be selective and no failure or delay by the Lender in exercising any
right shall operate as a waiver of it, nor shall any single or partial exercise
of any power or right preclude its other or further exercise or the exercise of
any other power or right.
Section 12. Lender Appointed Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Lender as the Borrower's attorney-in-fact, with full
authority in the place and stead of the Borrower and in the name of the
Borrower or otherwise, from time to time in the Lender's discretion upon the
occurrence of an Event of Default, to take any action and to execute any
instrument or document which the Lender may deem necessary or advisable to
accomplish the purposes of this Agreement and to exercise any rights and
remedies the Lender may have under this Agreement or Applicable Law. The
power-of-attorney granted hereby is irrevocable and coupled with an interest.
Section 13. Notices. Notices, requests and other communications required
or permitted hereunder shall be given in accordance with the applicable terms
of the Credit Agreement.
K-3
<PAGE> 137
Section 14. Termination. Upon indefeasible payment in full of all of the
Secured Obligations, this Agreement shall terminate. Any affidavit,
certificate or other written statement of any officer of the Lender, stating
that any part of the Secured Obligations remains unpaid or unperformed, shall
be and constitute conclusive evidence of the continuing effectiveness of this
Agreement and any Person receiving any such affidavit, certificate or
statement, may, and is hereby authorized by the Borrower to, rely thereon.
Section 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
Section 16. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Borrower herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 17. Benefits. The terms, covenants and conditions contained
herein shall inure to the benefit of the Lender, and its successors and
assigns, and shall be binding on the Borrower and its successors and assigns.
Section 18. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 19. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
Section 20. Definitions. Capitalized terms not otherwise defined herein
are used herein as with the respective meanings given them in the Credit
Agreement.
[Signatures on Next Page]
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<PAGE> 138
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Collateral Assignment of Leases under seal as of the date first written above.
----------------------------
By:
-------------------------------
Name:
------------------------
Title:
-----------------------
ATTEST:
By:
------------------------------
Name:
------------------------
Title:
-----------------------
(CORPORATE SEAL)
Agreed and Accepted:
NATIONSBANK, N.A. (SOUTH)
By:
------------------------------
Name:
-----------------------
Title:
----------------------
K-5
<PAGE> 139
SCHEDULE I
Assigned Agreements
1. [Lease] dated ______________, 19___ between the Borrower and [Lessor]
regarding [describe property subject to lease].
K-6
<PAGE> 140
EXHIBIT N
FORM OF INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT dated as of _______________, 199_ by and
between ______________________________ (the "Purchase Money Lender") and
NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, Preferred Networks, Inc., PNI Systems, LLC (the "Borrower") and
the Lender have entered into that certain Credit Agreement dated as of August
8, 1996 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Lender has made available
to the Borrower certain financial accommodations;
WHEREAS, the Borrower and the Purchase Money Lender have entered into that
certain [description of credit agreement] dated ____________, 19__ (the
"Purchase Money Agreement"), pursuant to which the Purchase Money Lender
provides purchase money financing to the Borrower to finance the Borrower's
purchase of certain inventory and other goods from the Purchase Money Lender;
WHEREAS, the Purchase Money Lender and the Lender desire to enter into
this Agreement, among other things, to delineate their relative rights with
respect to the Borrower and for the other purposes set forth herein; and
WHEREAS, the parties' execution and delivery of this Agreement is a
condition precedent to [the effectiveness of the Credit Agreement][the Lender
consenting to the Borrower's incurrence of indebtedness to the Purchase Money
Lender and to the Borrower's grant of a security interest to the Purchase Money
Lender in certain of the Borrower's assets].
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto, intending to be legally bound thereby, hereby agree as follows:
Section Notice of Defaults; Cure Rights. Each party hereto shall give
the other party written notice of the occurrence of any event of default under
its Credit Documents which event of default would permit such party to take any
Remedial Action. A party in receipt of such notice shall have the right, but
not the obligation, to cure such event of default in a manner reasonably
satisfactory to the party giving such notice within 30 days of receipt of such
notice.
Section Limitations on Actions. Whether or not an event of default
under the Credit Agreement shall have occurred and be continuing, the Purchase
Money Lender shall not take any Remedial Action upon the occurrence of an event
of default under the
N-1
<PAGE> 141
Purchase Money Agreement or any related Credit Documents unless and until one
of the following shall have occurred: (a) 90 days shall have passed since the
Lender received notice from the Purchase Money Lender pursuant to the
immediately preceding Section 1 regarding such event of default and such event
of default shall still be continuing; (b) the Lender shall have given its
written consent to the taking of Remedial Action by the Purchase Money Lender;
(c) the Lender shall have commenced a foreclosure action against any of the
property of the Borrower or (d) the Lender shall have commenced or joined in a
Bankruptcy Proceeding.
Section Amendment of Purchase Money Documents. The Purchase Money
Lender agrees that the Purchase Money Agreement and the related Credit
Documents may only be amended, and the Borrower's compliance thereunder may
only be waived, with the prior written consent of the Lender (which consent
will not be unreasonably withheld).
Section Specific Performance. In addition to any other remedies
available to the parties hereunder or otherwise, at a time any party fails to
comply with any provision of this Agreement applicable to such party, the party
may demand specific performance of this Agreement. The parties hereby
irrevocably waive any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance. If a party
hereto, in violation of this Agreement, shall institute or participate in any
action suit or proceeding against the Borrower, the Borrower may interpose as a
defense or dilatory plea this Agreement and the other party is irrevocably
authorized to intervene and to interpose such defense or plea in the Borrower's
name.
Section Indulgences Not Waivers. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver by a party hereunder shall be effective unless
it is in writing and signed by the party making such waiver, and then only to
the extent specifically stated in such writing.
Section Validity of Obligations. The provisions of this Agreement are
solely for the purpose of defining the relative rights the Purchase Money
Lender and the Lender and shall not impair, as between the Lender and the
Borrower or Purchase Money Lender and the Borrower, the obligations of the
Borrower, which are unconditional and absolute, to pay the indebtedness and
other obligations in accordance with the applicable Credit Documents.
Section Duration. This Agreement shall become effective when executed
by the parties hereto and shall remain in effect until (a) all indebtedness and
other obligations owing to the Lender under or in respect of the Credit
Agreement and the related Credit Documents have been indefeasibly paid and
discharged in full or (b) all indebtedness and other obligations owing to
Purchase Money Lender under or in respect of the Purchase
N-2
<PAGE> 142
Money Agreement and the related Credit Documents have been indefeasibly paid and
discharged in full.
Section Adequate Assurances. Each of the parties hereto agrees to
execute any further agreement, documents or instruments and take such other
actions as may be reasonably necessary to effect the purposes of this
Agreement. The Purchase Money Lender agrees that it shall cause to be added to
the Purchase Money Agreement a legend substantially in the following form:
"The rights and remedies of [Name of Purchase Money Lender], and
its successors and assigns, under this instrument are subject to
the terms and conditions of that certain Intercreditor Agreement
dated as of ________, 19__ by and between NationsBank N.A. (South)
and [Name of Purchase Money Lender]."
Section 9. LITIGATION. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY
MATTER CONCERNED WITH THIS AGREEMENT, EACH OF THE PARTIES HERETO, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF GEORGIA LOCATED IN FULTON COUNTY AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE NORTHERN DISTRICT OF THE STATE OF GEORGIA, IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
Section 10. Amendment. No amendment, modification or waiver of any
provision of this Agreement shall be effective unless in writing and signed by
the Lender and the Purchase Money Lender.
Section 11. Successors and Assigns. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties hereto and their respective
successors and assigns. The Purchase Money Lender may not assign its rights
under the Purchase Money Agreement or any of the other documents, instruments
and agreements executed and delivered in connection therewith unless the
assignee acknowledges in writing that it is bound by the terms of this
Agreement.
Section 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 13. No Third Party Beneficiaries. The provisions of this
Agreement are not intended, nor shall they be construed, to confer upon or give
the Borrower or any other Person other than the parties hereto any rights,
remedies or claims hereunder or by reason hereof.
N-3
<PAGE> 143
Section 14. Severability. The provisions of this Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, it is the intent of the parties
that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
Section 15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original but which together
shall constitute one instrument.
Section 16. Definitions. In addition to such other terms as are defined
elsewhere herein, as used in this Agreement the following terms shall have the
following meanings:
"Bankruptcy Proceeding" means any receivership, insolvency, bankruptcy
proceeding under the Bankruptcy Code of 1978, as amended or other bankruptcy or
reorganization law, assignment for the benefit of creditors, reorganization or
other arrangement with creditors, sale of all or substantially all of the
assets of the Borrower, or any other marshaling of the assets or liabilities of
the Borrower.
"Collateral" means any asset of the Borrower securing in any way any of
its indebtedness or other obligations owing to the Lender or the Purchase Money
Lender.
"Credit Documents" means the Credit Agreement, the Purchase Money
Agreement and any document, instrument and agreement executed and delivered in
connection therewith.
"Remedial Action" means (a) demanding, instituting an action for, taking,
receiving or repossessing from the Borrower or any other person whether by
court proceeding, self-help, repossession, setoff or otherwise, the whole or
any portion of the Collateral or foreclosing upon the whole or any portion of
the Collateral, whether by judicial action, public or private sale, by
notification of account debtors, by power of sale or otherwise; (b) demanding
or suing for any payment, credit or distribution in respect of any obligations
owing by the Borrower to the Purchase Money Lender in respect of the Purchase
Money Agreement or any of the related Credit Documents or otherwise; (c) the
commencement, or joining with any other creditor in commencing, a Bankruptcy
Proceeding and (d) the exercise of any other right or remedy in respect of any
of the Collateral, under the Purchase Money Agreement or any of the related
Credit Documents or otherwise under applicable law to collect or enforce any of
the obligations secured thereby.
[Signatures on Next Page]
N-4
<PAGE> 144
IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor
Agreement to be executed and delivered as of the date first above written.
THE PURCHASE MONEY LENDER:
------------------------------
By:
--------------------------
Title:
-------------------
Address for Notices:
----------------------------
----------------------------
Attention:
------------------
Telephone:
------------------
Telecopy:
------------------
THE LENDER:
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------
Title:
--------------------
Address for Notices:
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Michael Paulson
Telephone: (404) 607-4569
Telecopy: (404) 607-6338
[Acknowledgment on Next Page]
N-5
<PAGE> 145
[INTERCREDITOR AGREEMENT DATED _________, 199__ FOR PREFERRED NETWORKS, INC.]
The undersigned acknowledges the terms
of the foregoing Intercreditor
Agreement, consents thereto, and
acknowledges that it is not a party to
such Intercreditor Agreement.
PREFERRED NETWORKS, INC.
By:
---------------------------------
Title:
--------------------------
N-6
<PAGE> 146
SCHEDULE 5.1
The jurisdictions where each of the Loan Parties is qualified to
do business is as follows:
PREFERRED NETWORKS, INC.
<TABLE>
<S> <C> <C> <C>
Georgia Virginia South Carolina Pennsylvania
North Carolina New Jersey Kentucky Florida
Illinois Maryland Washington D.C. New York
Tennessee Alabama Massachusetts Connecticut
Michigan
</TABLE>
PREFERRED NETWORKS SOUTHEAST, INC.
Florida
Georgia
PREFERRED TECHNICAL SERVICES, INC.
Georgia
PNI SPECTRUM, LLC
Georgia
PNI SYSTEMS, LLC
Georgia
<PAGE> 147
SCHEDULE 5.4
Governmental Approvals for Documents
1. FCC approval for the transfer of all FCC licenses held in the
name of Parent and Preferred Networks Southeast, Inc., a Georgia corporation,
to the License Subsidiary.
<PAGE> 148
SCHEDULE 5.9
ERISA
1. That certain Cash or Deferred Profit Sharing Plan otherwise
known as "The Preferred Networks, Inc. 401(k) Plan" effective as of January 1,
1996.
<PAGE> 149
SCHEDULE 5.10
INTELLECTUAL PROPERTY
NONE
<PAGE> 150
SCHEDULE 5.11
TAXES
NONE
<PAGE> 151
SCHEDULE 5.13
EXISTING INDEBTEDNESS
<TABLE>
<S> <C>
GLENAYRE ELECTRONICS, INC. 3,395,968
ASSOCIATES CAPITAL SERVICES CORPORATION 1,280,718
NEC AMERICA, INC. 245,000
---------
TOTAL 4,921,686
=========
</TABLE>
<PAGE> 152
SCHEDULE 5.16
COMPLIANCE WITH LAWS; LICENSE AND OTHER GOVERNMENTAL APPROVALS
See Attached
<PAGE> 153
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNKG726 DAYTONA BEACH FL 931.2625 0 6/10/96
KNKG726 ORANGE CITY FL 0 6/10/96
KNKG726 PALM BAY FL 0 6/10/96
KNKG726 OAK HILL FL 0 6/10/96
KNLV959 COCOA FL 931.2625 0 6/26/96
KNLV976 SANFORD FL 931.2625 0
KNLV980 MELBOURNE FL 931.2625 0 6/26/96
KNLV980 TITUSVILLE FL 0 6/26/96
KNLW201 BARBERVILLE FL 931.2625 0 7/15/96
KNLW202 UMATILLA FL 931.2625 0 7/15/96
KNNI768 JENSEN FL 157.7400 1/29/96 1/26/01 950110142 11/13/95 11/30/95
KNN1768 NOKOMIS FL 1/29/96 1/26/01 950110142 11/13/95 11/30/95
KNNI768 OKEECHOBEE FL 1/29/96 1/26/01 950110142 11/13/95 11/30/95
KNNI768 PORT SAINT LUCIE FL 1/29/96 1/26/01 950110142 11/13/95 11/30/95
KNNI768 STUART FL 1/29/96 1/26/01 950110142 11/13/95 11/30/95
KNN1769 BELLE GLADE FL 157.7400 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNNI769 CAPE CORAL FL 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNN1769 CLEWISTON FL 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNNI769 FORT MYERS FL 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNNI769 LOXAHATCHEE FL 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNN1769 WEST PALM BEACH FL 1/26/96 1/26/01 950110141 11/13/95 11/30/95
KNN1827 BROOKSVILLE FL 157.7400 2/2/96 2/2/01 950110145 11/13/95 12/6/95
KNN1827 CHRISTMAS FL 2/2/96 2/2/01 950110145 11/13/95 12/6/95
KNN1827 ORLANDO FL 2/2/96 2/2/01 950110145 11/13/95 12/6/95
KNNI827 ORLANDO FL 2/2/96 2/2/01 950110145 11/13/95 12/6/95
KNN1827 TITUSVILLE FL 2/2/96 2/2/01 950110145 11/13/95 12/6/95
KNNJ280 JACKSONVILLE FL 157.7400 2/2/96 2/2/01 950110068 11/13/95 12/1/95
KNNJ280 MCCLENNEY FL 2/2/96 2/2/01 950110068 11/13/95 12/1/95
KNNJ280 JACKSONVILLE BCH FL 2/2/96 2/2/01 950110068 11/13/95 12/1/95
KNNL889 ALABASTER AL 157.7400 2/29/96 3/1/01 952910030 10/18/95 12/28/95
KNNL889 COOK SPRINGS AL 2/29/96 3/1/01 952910030 10/18/95 12/28/95
KNNL889 HUEYTOWN AL 2/29/96 3/1/01 952910030 10/18/95 12/28/95
KNNL985 MCDONOUGH GA 157.7400 2/29/96 3/1/01 953130076 11/9/95 1/24/96
KNNL985 NORCROSS GA 2/29/96 3/1/01 953130076 11/9/95 1/24/96
KNNN256 MCDONOUGH GA 462.8250 3/12/96 3/12/01 953630008 12/29/95 1/11/96
KNNN256 NORCROSS GA 3/12/96 3/12/01 953630008 12/29/95 1/11/96
KNNN256 WOODSTOCK GA 75.6600 3/12/96 3/12/01 953630008 12/25/96 1/11/96
</TABLE>
PAGE 1
<PAGE> 154
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNNN985 BRONX NY 157.7400 3/23/96 3/23/01 950110104 11/13/95 12/8/95
KNNN985 BRONX NY 3/23/96 3/23/01 950110104 11/13/95 12/8/95
KNNN985 HUNTINGTON STTN NY 3/23/96 3/23/01 950110104 11/13/95 12/8/95
KNNN985 MANORVILLE NY 3/23/96 3/23/01 950110104 11/13/95 12/8/95
KNNN985 SELDEN NY 3/23/96 3/23/01 950110104 11/13/95 12/8/95
KNNP412 HOCKLEY TX 157.7400 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP412 HOUSTON TX 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP412 HOUSTON TX 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP412 HUMBLE TX 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP412 SAN MARCOS TX 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP412 WALLISVILLE TX 4/3/96 4/3/01 952780125 10/5/95 12/27/95
KNNP458 BENTON AR 157.7400 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP458 BREDLOW CORNER AR 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP458 LITTLE ROCK AR 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP458 LITTLE ROCK AR 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP458 N LITTLE ROCK AR 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP458 WRIGHTSVILLE AR 3/23/96 3/23/01 952780046 10/5/95 12/27/95
KNNP459 HAMPSHIRE TX 157.7400 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP459 HOUSTON TX 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP459 KATY TX 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP459 NEW BRAUNFELS TX 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP459 SEALY TX 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP459 BAYTOWN TX 3/23/96 3/23/01 952780126 10/5/95 12/27/95
KNNP460 HEMPSTEAD TX 157.7400 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP460 LIBERTY TX 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP460 ORANGE TX 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP460 ROSE HILL TX 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP460 VIDOR TX 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP460 WOODLANDS TX 3/23/96 3/23/01 952780124 10/5/95 12/27/95
KNNP461 HUTCHINSON KS 157.7400 3/23/96 3/23/01 952780043 10/5/95 12/27/95
KNNP461 LAWRENCE KS 3/23/96 3/23/01 952780043 10/5195 12/27/95
KNNP461 LAWRENCE KS 3/23/96 3/23/01 952780043 10/5/95 12/27/95
KNNP461 MATFIELD GREEN KS 3/23/96 3/23/01 952780043 10/5/95 12/27/95
KNNP461 OVERLAND PARK KS 3/23/96 3/23/01 952780043 10/5/95 12/27/95
KNNP461 SPRING HILL KS 3/23/96 3/23/01 952780043 10/5/95 12/27/95
KNNP462 BAY CITY TX 157.7400 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP462 BAY CITY TX 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP462 CORPUS CHRISTI TX 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP462 LAREDO TX 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP462 MATAGORDA TX 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP462 ROBSTOWN TX 3/23/96 3/23/01 952780111 10/5/95 12/27/95
KNNP463 SOUTHAVEN MS 157.7400 3/23/96 3/23/01 952780112 10/5/95 12/27/95
KNNP463 MOORE OK 3/23/96 3/23/01 952780112 10/5/95 12/27/95
KNNP463 NEWCASTLE OK 3/23/96 3/23/01 952780112 10/5/95 12/27/95
KNNP463 OKLAHOMA CITY OK 3/23/96 3/23/01 952780112 10/5/95 12/27/95
</TABLE>
PAGE 2
<PAGE> 155
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNNP463 TULSA OK 157.7400 3/23/96 3/23/01 952780112 10/5/95 12/27/95
KNNP463 EDINBURGH TX 3/23/96 3/23/01 952780112 10/5/95 12/27/95
KNNP464 ALGIERS LA 157.7400 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP464 AVONDALE LA 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP464 GRAY LA 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP464 NEW IBERIA LA 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP464 NEW ORLEANS LA 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP464 NEW ORLEANS LA 3/23/96 3/23/01 952780041 10/5/95 12/27/95
KNNP465 KANSAS CITY KS 157.7400 3/23/96 3/23/01 952780042 10/5/95 12/27/95
KNNP465 LEAVENWORTH KS 3/23/96 3/23/01 952780042 10/5/95 12/27/95
KNNP465 MANHATTAN KS 3/23/96 3/23/01 952790042 10/5/95 12/27/95
KNNP465 TOPEKA KS 3/23/96 3/23/01 952780042 10/5/95 12/27/95
KNNP465 AMELIA LA 3/23/96 3/23/01 952780042 10/5/95 12/27/95
KNNP465 POINTE LA HACHE LA 3/23/96 3/23/01 952780042 10/5/95 12/27/95
KNNP466 ABITA SPRINGS LA 157.7400 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP466 ABITA SPRINGS LA 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP466 ADDIS LA 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP466 BATON ROUGE LA 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP466 LAFAYETTE LA 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP466 PORT VINCENT LA 3/23/96 3/23/01 952780119 10/5/95 12/27/95
KNNP472 KANSAS CITY MO 157.7400 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP472 KANSAS CITY MO 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP472 KANSAS CITY MO 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP472 KANSAS CITY MO 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP472 LEES SUMMIT MO 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP472 WRIGHT CITY MO 3/23/96 3/23/01 952780114 10/5/95 12/27/95
KNNP493 BATON ROUGE LA 157.7400 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP493 GREENWELL SPRING LA 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP493 HAMMOND LA 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP493 IRENE LA 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP493 PORT ALLEN LA 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP493 PORT ALLEN LA 4/12/96 4/12/01 952780118 10/5/95 12/27/95
KNNP494 CLINT TX 157.7400 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP494 DOURO TX 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP494 ELPASO TX 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP494 ELPASO TX 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP494 LUFKIN TX 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP494 WACO TX 4/3/96 4/3/01 952780140 10/5/95 12/27/95
KNNP495 KANSAS CITY MO 157.7400 4/3/96 4/3/01 952780113 10/5/95 12/27/95
KNNP495 ODESSA MO 4/3/96 4/3/01 952780113 10/5/95 12/27/95
KNNP495 SAINT JOSEPH MO 4/3/96 4/3/01 952780113 10/5/95 12/27/95
KNNP495 JACKSON MS 4/3/96 4/3/01 952780113 10/5/95 12/27/95
KNNP495 NESBITT MS 4/3/96 4/3/01 952780113 10/5/95 12/27/95
KNNP495 OXFORD MS 4/3/96 4/3/01 952780113 10/5/95 12/27/95
</TABLE>
PAGE 3
<PAGE> 156
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNNP496 AUSTIN TX 157.7400 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP496 AUSTIN TX 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP496 AUSTIN TX 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP496 BEAUMONT TX 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP496 BRENHAM TX 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP496 CONROE TX 4/3/96 4/3/01 952780123 10/5/95 12/27/95
KNNP499 BRAZORIA TX 157.7400 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP499 CASTROVILLE TX 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP499 GALVESTON TX 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP499 LOUISE TX 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP499 OYSTER CREEK TX 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP499 POTEET TX 4/3/96 4/3/01 952780130 10/5/95 12/27/95
KNNP500 ALVIN TX 157.7400 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP500 ALVIN TX 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP500 DICKINSON TX 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP500 SAN ANTONIO TX 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP500 SAN ANTONIO TX 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP500 TEXAS CITY TX 4/3/96 4/3/01 952780129 10/5/95 12/27/95
KNNP514 HOUSTON TX 157.7400 4/3/96 413/01 952780128
KNNP514 PASADENA TX 4/3/96 4/3/01 952780128 10/5/95 12/27/95
KNNP514 ROSENBURG TX 4/3/96 4/3/01 952780128 10/5/95 12/27/95
KNNP514 SAN ANTONIO TX 4/3/96 4/3/01 952780128 10/5/95 12/27/95
KNNP514 SAN ANTONIO TX 4/3/96 4/3/01 952780128 10/5/95 12/27/95
KNNP514 SAN ANTONIO TX 4/3/96 4/3/01 952780128 10/5/95 12/27/95
KNNP515 BRIDGETON MO 157.7400 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP515 COTTLEVILLE MO 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP515 SAINT LOUIS MO 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP515 SAINT LOUIS MO 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP515 SAINT LOUIS MO 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP515 SEDALIA MO 4/3/96 4/3/01 952780115 10/5/95 12/27/95
KNNP542 JACKSONVILLE FL 157.7400 4/2/96 4/2/01 952840032 10/11/95 12/22/95
KNNP542 LAKE CITY FL 4/2/96 4/2/01 952840032 10/11/95 12/22/95
KNNP542 RALEIGH NC 4/2/96 4/2/01 952840032 10/11/95 12/22/95
KNNP542 MYRTLE BEACH SC 4/2/96 4/2/01 952840032 10/11/95 12/22/95
KNNP610 ABILENE TX 157.7400 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP610 BOYCE TX 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP610 CEDAR HILL TX 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP610 MALAKOFF TX 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP610 MIDLAND TX 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP610 TYLER TX 3/14/96 3/14/01 952780139 10/5/95 12/27/95
KNNP611 DENTON TX 157.7400 3/15/96 3/15/01 952780136 10/5/95 12/27/95
KNNP611 GREENVILLE TX 3/15/96 3/15/01 952780136 10/5/95 12/27/95
KNNP611 LEWISVILLE TX 3/15/96 3/15/01 952780136 10/5/95 12/27/95
KNNP611 LUBBOCK TX 3/15/96 3/15/01 952780136 10/5/95 12/27/95
KNNP611 PLANO TX 3/15/96 3/15/01 952780136 10/5/95 12/27/95
KNNP611 SHERMAN TX 3/15/96 3/15/01 952780136 10/5/95 12/27/95
</TABLE>
PAGE 4
<PAGE> 157
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNNP612 BALLWIN MO 157.7400 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP612 BRENTWOOD MO 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP612 HIGH RIDGE MO 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP612 LEMAY MO 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP612 SAINT LOUIS MO 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP612 WASHINGTON MO 3/15/96 3/15/01 952780116 10/5/95 12/27/95
KNNP638 AGUA CALIENTE CA 157.7400 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP638 ENCINITAS CA 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP638 GLAMIS CA 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP638 LA JOLLA CA 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP638 RAMONA CA 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP638 SAN MARCOS CA 4/3/96 4/3/01 950110059 11/13/95 12/4/95
KNNP676 AMARILLO TX 157.7400 4/8/96 4/8/01 952780135 10/5/95 12/27/95
KNNP676 WICHITA FALLS TX 4/8/96 4/8/01 952780135 10/5/95 12/27/95
KNNQ778 CHALMETTE LA 157.7400 4/3/96 4/3/01 952780120 10/5/95 1/5/96
KNNQ778 LA PLACE LA 4/3/96 4/3/01 952780120 10/5/95 1/5/96
KNNQ778 METAIRIE LA 4/3/96 4/3/01 952780120 10/5/95 1/5/96
KNNQ778 SLIDELL LA 4/3/96 4/3/01 952780120 10/5/95 1/5/96
KNNQ778 WESTLAKE LA 4/3/96 4/3/01 952780120 10/5/95 1/5/96
KNNR606 ARLINGTON TX 157.7400 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR606 ARLINGTON TX 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR606 FORT WORTH TX 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR606 FORT WORTH TX 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR606 MESQUITE TX 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR606 WEATHERFORD TX 4/9/96 4/9/01 952780138 10/5/95 12/27/95
KNNR608 DALLAS TX 157.7400 4/9/96 4/9/01 952780137 10/5/95 12/27/95
KNNR608 HAZLET TX 4/9/96 4/9/01 952780137 10/5/95 12/27/95
KNNR608 IRVING TX 4/9/96 4/9/01 952780137 10/5/95 12/27/95
KNNR608 IRVING TX 4/9/96 4/9/01 952780137 10/5/95 12/27/95
KNNR608 N RICHLAND HILLS TX 4/9/96 4/9/01 952780137
KNNR608 RICHARDSON TX 4/9/96 4/9/01 952780137 10/5/95 12/27/95
KNNS474 COLUMBUS TX 157.7400 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNS474 DEER PARK TX 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNS474 HOUSTON TX 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNS474 HOUSTON TX 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNS474 HOUSTON TX 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNS474 STAFFORD TX 4/18/96 4/18/01 952780127 10/5/95 12/27/95
KNNT567 CANAL WINCHESTER OH 157.7400 4/30/96 4/30/01 950110111 11/13/95 12/12/95
KNNT567 COLUMBUS OH 4/30/96 4/30/01 950110111 11/13/95 12/12/95
KNNT567 COLUMBUS OH 4/30/96 4/30/01 950110111 11/13/95 12/12/95
KNNT567 DAYTON OH 4/30/96 4/30/01 950110111 11/13/95 12/12/95
KNNT567 DAYTON OH 4/30/96 4/30/01 950110111 11/13/95 12/12/95
KNNT567 TIPP CITY OH 4/30/96 4/30/01 950110111 11/13/95 12/12/95
</TABLE>
PAGE 5
<PAGE> 158
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
KNNU341 BALA CYNWYD PA 157.7400 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNU341 COATESVILLE PA 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNU341 PHILADELPHIA PA 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNU341 STRASBURG PA 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNU341 UNIONTOWN PA 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNU341 YORK PA 5/7/96 5/7/01 950110124 1/11/95 3/30/95
KNNV312 FERNANDINA BEACH FL 157.7400 5/10/96 5/10/01 952900046 1/11/95
KNNV312 MONTICELLO FL 5/10/96 5/10/01 952900046 1/11/95
KNNV312 TALLAHASSEE FL 5/10/96 5/10/01 952900046 1/11/95
KNNV312 YULEE FL 5/10/96 5/10/01 952900046 1/11/95
KNNV312 SAINT MARYS GA 5/10/96 5/10/01 952900046 1/11/95
KNNV452 LAKE GEORGE NY 157.7400 5/9/96 5/9/01 941570120 6/6/94 2/14/95
KNNV452 LAKE PLACID NY 5/9/96 5/9/01 941570120 6/6/94 2/14/95
KNNV452 NEW SALEM NY 5/9/96 5/9/01 941570120 6/6/94 3/14/95
KNNV452 PATTERSONVILLE NY 5/9/96 5/9/01 941570120 6/6/94 2/14/95
KNVL931 SAINT CLOUD FL 931.2625 0 6/10/96
KNVL932 FERNDALE FL 931.2625 0 6/10/96
KNVL933 LAKELAND FL 931.2625 0 6/10/96
WNPV202 ATLANTA GA 462.8250 2/17/94 2/17/99 932560159 9/13/93 12/16/93
WNPV202 MARIETTA GA 2/17/94 2/17/99 932560159 9/13/93 12/16/93
WNUR611 NORCROSS GA 72.9600 2/22/93 2/22/98 0 12/18/92
WNUR611 NORCROSS GA 72.9400 2/22/93 2/22/98 0 12/18/92
WNVM402 CONYERS GA 462.8000 11/18/93 11/18/98 0
WNWM282 ATLANTA GA 157.7400 5/26/93 5/26/98 923580165 12/23/92 2/25/93
WNWM282 BUFORD GA 5/26/93 5/26/98 923580165 12/23/92 2/25/93
WNWM282 DOUGLASVILLE GA 5/26/93 5/26/98 923580165 12/23/92 2/25/93
WNWM282 TYRONE GA 5/26/93 5/26/98 923580165 12/23/92 2/25/93
WNWM282 WOODSTOCK GA 5/26/93 5/26/98 923580165 12/23/92 2/25/93
WNWM878 ATLANTA GA 157.7400 3/30/93 3/30/98 923630256 12/28/92 2/10/93
WNWM878 ATLANTA GA 3/30/93 3/30/98 923630256 12/28/92 2/10/93
WNWM878 CUMMING GA 3/30/93 3/30/98 923630256 12/28/92 2/10/93
WNWM878 GRIFFIN GA 3/30/93 3/30/98 923630256 12/28/92 2/10/93
WNWM878 WOODSTOCK GA 75.9000 3/30/93 3/30/98 923630256 12/28/92 2/10/93
WNYN576 WEST COLUMBIA SC 72.4600 11/13/95 11/13/00 0 9/12/95 9/28/95
WNYX879 WEST COLUMBIA SC 157.7400 11/7/95 11/7/00 0
WPAD876 DALTON GA 157.7400 6/2/93 6/2/98 0
</TABLE>
PAGE 6
<PAGE> 159
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPAE502 CONYERS GA 157.7400 4/8/93 4/8/98 923630194 8/17/93
WPAE502 EASTVILLE GA 4/8/93 4/8/98 923630194
WPAE502 LAGRANGE GA 4/8/93 4/8/98 923630194
WPAE502 NEWNAN GA 4/8/93 4/8/98 923630194
WPAG395 BIRMINGHAM AL 75.7400 8/12/92 8/12/97 0
WPAG395 BIRMINGHAM AL 72.7400 8/12/92 8/12/97 0
WPBE764 OPELIKA AL 157.7400 12/7/92 12/7/97 920800385 4/30/92
WPBE764 PHENIX CITY AL 72.7200 9/7/92 920800385 4/30/92
WPBE764 PHENIX CITY AL 75.4600 12/7/92 12/7/97 920800385 4/30/92
WPBE764 PHENIX CITY AL 157.7400 12/7/92 12/7/97 920800385 4/30/92
WPBE764 CLERMONT GA 12/7/92 12/7/97 0 4/30/92
WPBE764 KINGSTON GA 12/7/92 12/7/97 0 4/30/92
WPBE764 ROME GA 12/7/92 12/7/97 920800385
WPBN223 MACON GA 72.3400 7/18/94 7/18/99 0 12/18/92
WPBN223 MACON GA 75.8200 7/18/94 7/18/99 0 12/18/92
WPBR700 NORCROSS GA 72.5800 2/11/93 2/11/98 0 12/18/92
WPBU960 MONTGOMERY AL 157.7400 3/11/93 3/11/98 923500120 12/15/92 1/25/93
WPBU960 MONTGOMERY AL 3/11/93 3/11/98 923500120 12/15/92 1/25/93
WPBU960 ORRVILLE AL 3/11/93 3/11/98 923500120 12/15/92 1/25/93
WPBU964 ASHEVILLE NC 157.7400 3/11/93 3/11/98 923500116 12/15/92 1/27/93
WPBU964 BANNER ELK NC 3/11/93 3/11/98 923500116 12/15/92 1/27/93
WPBU964 GIBREATH NC 3/11/93 3/11/98 923500116 12/15/92 1/27/93
WPBU964 WAYNESVILLE NC 3/11/93 3/11/98 923500116 12/15/92 1/27/93
WPBU964 NEWPORT TN 3/11/93 3/11/98 923500116 12/15/92 1/27/93
WPBU981 MILLEDGEVILLE GA 157.7400 3/12/93 3/12/98 923460061 12/11/92 1/29/93
WPBY497 BIRMINGHAM AL 157.7400 3/30/93 3/30/98 923520129 12/17/92 2/17/93
WPBY497 BIRMINGHAM AL 3/30/93 3/30/98 923520129 12/17/92 2/17/93
WPBY497 REMLAP AL 3/30/93 3/30/98 923520129 12/17/92 2/17/93
WPBY497 TUSCALOOSA AL 3/30/93 3/30/98 923520129 12/17/92 2/17/93
WPBY822 LAUREL MD 157.7400 7/27/94 7/27/99 940730188 3/14/94 5/27/94
WPBY822 WARRENTON VA 7/27/94 7/27/99 940730188 3/14/94 5/27/94
WPBY822 WINCHESTER VA 7/27/94 7/27/99 940730188 3/14/94 5/27/94
WPBZ676 CALHOUN AL 157.7400 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPBZ676 GADSDEN AL 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPBZ676 GUNTERSVILLE AL 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPBZ676 HUNTSVILLE AL 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPBZ676 JASPER AL 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPBZ676 TUSCUMBIA AL 4/6/93 4/6/98 923500115 12/15/92 1/27/93
WPCB351 CHATTANOOGA TN 75.6600 4/16/93 4/16/98 0 3/3/93
</TABLE>
PAGE 7
<PAGE> 160
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPCB351 CHATTANOOGA TN 72.0200 4/16/93 4/16/98 0 3/3/93
WPCE638 TALLAHASSEE FL 72.1400 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 TALLAHASSEE FL 157.7400 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 TALLAHASSEE FL 75.6600 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 TALLAHASSEE FL 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 TALLAHASSEE FL 72.1400 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 TALLAHASSEE FL 157.7400 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 VALDOSTA GA 75.7800 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 VALDOSTA GA 157.7400 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCE638 VALDOSTA GA 72.2600 5/3/93 5/3/98 923630257 12/28/92 2/25/93
WPCF443 ABERDEEN MD 157.7400 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 BALTIMORE MD 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 JONESTOWN MD 72.1800 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 JONESTOWN MD 75.6600 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 JONESTOWN MD 157.7400 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 WALDORF MD 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 WESTMINSTER MD 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCF443 ARLINGTON VA 6/13/94 6/13/99 940620035 3/3/94 3/30/94
WPCI854 CHATTANOOGA TN 157.7400 6/8/93 6/8/98 923630176 12/28/92 2/11/93
WPCI854 CHATTANOOGA TN 75.6600 6/8/93 6/8/98 923630176 12/28/92 1/22/93
WPCW697 ATLANTA GA 157.7400 8/10/93 8/10/98 931030158 4/13/93 6/1/93
WPCW697 AUSTELL GA 8/10/93 8/10/98 931030158 4/13/93 6/1/93
WPCY929 COLUMBIA SC 157.7400 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCY929 EASTOVER SC 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCY929 MONETTA SC 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCY929 NEWBERRY SC 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCY929 ORANGEBURG SC 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCY929 SUMTER SC 11/9/95 11/9/00 952550128 9/12/95 9/28/95
WPCZ937 SIGNAL MOUNTAIN TN 72.1400 8/30/93 8/30/98 0 6/17/93
WPDB291 CHATSWORTH GA 157.7400 9/8/93 9/8/98 930690215 3/9/93 5/4/93
WPDB291 DALTON GA 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 ATHENS TN 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 CHATTANOOGA TN 72.0200 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 CHATTANOOGA TN 157.7400 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 CHATTANOOGA TN 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 CHATTANOOGA TN 75.6600 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDB291 CLEVELAND TN 157.7400 9/8/93 9/8/98 930680215 3/9/93 5/4/93
WPDM515 TRINITY AL 157.7400 10/18/93 10/18/98 931890101 7/8/93 8/17/93
WPDQ979 BIRMINGHAM AL 75.7400 11/1/93 11/1/98 0 8/16/93
WPDQ979 BIRMINGHAM AL 72.7400 11/1/93 11/1/98 0 8/16/93
WPDS489 GIRARD GA 157.7400 11/4/93 11/4/98 931470129 5/27/93 7/13/93
</TABLE>
PAGE 8
<PAGE> 161
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPDW218 CHESTER MD 157.7400 6/21/94 6/21/99 940620033 3/3/94 3/31/94
WPDW218 HAVRE DE GRACE MD 6/21/94 6/21/99 940620033 3/3/94 3/31/94
WPDW218 SILVER SPRING MD 6/21/94 6/21/99 940620033 3/3/94 3/31/94
WPDW218 SILVER SPRING MD 6/21/94 6/21/99 940620033 3/3/94 3/31/94
WPDW218 WOODBRIDGE VA 6/21/94 6/21/99 940620033 3/3/94 3/31/94
WPDW674 KNOXVILLE TN 157.7400 12/7/93 12/7/98 931690077 6/18/93 8/17/93
WPDW674 KNOXVILLE TN 12/7/93 I2/7/98 931690077 6/18/93 8/17/93
WPDW674 KNOXVILLE TN 12/7/93 I2/7/98 931690077 6/18/93 8/17/93
WPDW674 KNOXVILLE TN I2/7/93 I2/7/98 931690077 6/18/93 8/17/93
WPDW887 BRUNSWICK GA 157.7400 12/13/93 12/13/98 953630007 12/29/95 1/15/96
WPDW887 BRUNSWICK GA 12/13/93 12/13/98 953630007 12/29/95 1/11/96
WPDW887 GARDEN CITY GA 75.8600 1/26/96 1/26/01 953630007 12/29/95 1/11/96
WPDW887 SAVANNAH GA 157.7400 1/26/96 1/26/01 953630007 12/29/95 1/11/96
WPDW887 SAVANNAH GA 1/26/96 1/26/01 953630007 12/29/95 1/11/96
WPDW887 WAVERLY GA 1/26/96 1/26/01 953630007 12/29/95 1/11/96
WPDW887 BRUNSWICK GA 1/26/96 1/26/01 930680214 3/9/93 7/20/93
WPDW887 BRUNSWICK GA 1/26/96 1/26/01 930680214 3/9/93 7/20/93
WPDW887 SAVANNAH GA 12/13/93 12/13/98 930680214 3/9/93 7/20/93
WPDW887 SAVANNAH GA 12/13/93 12/13/98 930680214 3/9/93 7/20/93
WPDW887 WAVERLY GA 12/13/93 12/13/98 930680214 3/9/93 7/20/93
WPEG273 ABERDEEN MD 157.7400 7/20/94 7/20/99 940730187 3/14/94 5/18/94
WPEG273 BALTIMORE MD 7/20/94 7/20/99 940730187 3/14/94 5/18/94
WPEG273 ELKTON MD 7/20/94 7/20/99 940730187 3/14/94 5/18/94
WPEG273 SEVERN MD 7/20/94 7/20/99 940730187 3/14/94 5/18/94
WPEK333 ANNAPOLIS MD 157.7400 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK333 DISTRICT HEIGHTS MD 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK333 REISTERTOWN MD 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK333 WALDORF MD 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK333 BONAIRE VA 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK333 HILLSBORO VA 3/22/94 3/22/99 933080105 11/4/93 12/23/93
WPEK533 COLUMBUS GA 72.7200 3/16/94 3/16/99 0 1/21/94
WPEM939 LEESBURG GA 157.7400 3/24/94 3/24/99 933560076 12/22/93 2/1/94
WPEQ263 DUBLIN GA 157.7400 4/12/94 4/12/99 933160175 11/12/93 1/13/94
WPEQ263 WARNER ROBBINS GA 4/12/94 4/12/99 933160175 11/12/93 1/13/94
WPER220 AUGUSTA GA 462.8250 4/20/94 4/20/99 940250080 1/25/94 2/22/94
WPER220 AUGUSTA GA 4/20/94 4/20/99 940250080 1/25/94 2/22/94
WPER220 GULARD GA 4/20/94 4/20/99 940250080 1/25/94 2/22/94
WPER220 NORTH AUGUSTA SC 4/20/94 4/20/99 940250080 1/25/94 2/22/94
WPER222 PHENIX CITY AL 462.8250 4/20/94 4/20/99 940250081 1/25/94 2/22/94
WPER222 FORSYTH GA 4/20/94 4/20/99 940250081 1/25/94 2/22/94
WPER222 MACON GA 4/20/94 4/20/99 940250081 1/25/94 2/22/94
WPER222 MILLEDGEVILLE GA 4/20/94 4/20/99 940250081 1/25/94 2/22/94
</TABLE>
PAGE 9
<PAGE> 162
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPEV265 BUFORD GA 462.8250 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEV265 CUMMING GA 462.8000 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEV265 DOUGLASVILLE GA 462.8250 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEV265 SUNNYSIDE GA 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEV265 TYRONE GA 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEV265 WOODSTOCK GA 5/3/94 5/3/99 940250079 1/25/94 2/22/94
WPEY563 ATLANTA GA 462.8250 5/26/94 5/26/99 940250082 1/25/94 4/12/94
WPEY563 CARTERSVILLE GA 5/26/94 5/26/99 940250082 1/25/94 4/12/94
WPEY563 LAGRANGE GA 5/26/94 5/26/99 940250082 1/25/94 4/12/94
WPEY563 NORCROSS GA 5/26/94 5/26/99 940250082 1/25/94 4/12/94
WPEY564 ATLANTA GA 462.8250 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPEY564 CLERMONT GA 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPEY564 CONYERS GA 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPEY564 EASTVILLE GA 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPEY564 NEWNAN GA 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPEY564 ROME GA 5/26/94 5/26/99 940250083 1/25/94 4/12/94
WPFD887 PHILADELPHIA PA 72.8200 6/27/94 6/27/99 0 4/28/94
WPFQ206 LAUREL MD 75.6600 9/19/94 9/19/99 0 6/3/94
WPFW593 NORTH AUGUSTA SC 462.7500 11/1/94 11/1/99 941710191 6/20/94 7/13/94
WPFW593 TRENTON SC 11/l/94 11/1/99 941710191 6/20/94 7/13/94
WPFX651 DOVER DE 157.7400 10/28/94 10/28/99 941570115 6/6/94 7/18/94
WPFX651 DENTON MD 10/28/94 10/28/99 941570115 6/6/94 7/18/94
WPFX651 POCOMOKE CITY MD 10/28/94 10/28/99 941570115 6/6/94 7/18/94
WPFX651 SALISBURY MD 10/28/94 10/28/99 941570115 6/6/94 7/18/94
WPFX651 ATLANTIC CITY NJ 10/28/94 10/28/99 941570115 6/6/94 7/18/94
WPFX759 MEDFORD NJ 157.7400 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFX759 BENSALEM PA 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFX759 LAFAYETTE HILLS PA 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFX759 PHILADELPHIA PA 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFX759 PHILADELPHIA PA 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFX759 WILLOW GROVE PA 11/3/94 11/3/99 941570101 6/6/94 7/20/94
WPFY583 GREENSBORO GA 157.7400 11/3/94 11/3/99 940890115 3/30/94 7/18/94
WPFY583 VALDOSTA GA 11/3/94 11/3/99 940890115 3/30/94 7/18/94
WPFY723 GAITHERSBURG MD 157.7400 11/9/94 11/9/99 941030035 4/13/94 7/20/94
WPFY760 KNOXVILLE TN 157.7400 11/2/94 11/2/99 941230153 5/3/94 7/15/94
WPGC864 CHARLOTTE NC 157.7400 12/12/94 12/12/99 941570099 6/6/94 7/15/94
WPGC864 CHARLOTTE NC 12/12/94 12/12/99 941570099 6/6/94 7/15/94
WPGC864 CHARLOTTE NC 12/12/94 12/12/99 941570099 6/6/94 7/15/94
</TABLE>
PAGE 10
<PAGE> 163
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPGC864 HICKORY NC 157.7400 12/12/94 12/12/99 941570099 6/6/94 7/15/94
WPGC864 MOORESVILLE NC 12/12/94 12/12/99 941570099 6/6/94 7/15/94
WPGC895 MT LAUREL NJ 157.7400 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGC895 PENBRYN NJ 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGC895 FAIRLESS HILLS PA 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGC895 PHILADELPHIA PA 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGC895 VALLEY FORGE PA 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGC895 WALLINGFORD PA 12/15/94 12/15/99 941570138 6/6/94 7/29/94
WPGJ448 THOMSON GA 157.7400 1/26/95 1/26/00 941570123 6/6/94 10/14/94
WPGJ448 BEAUFORT SC 1/26/95 1/26/00 941570123 6/6/94 10/14/94
WPGJ448 CAMDEN SC 1/26/95 1/26/00 941570123 6/6/94 10/14/94
WPGJ448 MYRTLE BEACH SC 1/26/95 1/26/00 941570123 6/6/94 10/14/94
WPGK753 AUGUSTA ME 157.7400 2/13/95 2/13/00 941570119 6/6/94 9/1/94
WPGK753 FALMOUTH ME 2/13/95 2/13/00 941570119 6/6/94 9/1/94
WPGK753 HOLDEN ME 2/13/95 2/13/00 941570119 6/6/94 9/1/94
WPGK753 ROCKLAND ME 2/13/95 2/13/00 941570119 6/6/94 9/1/94
WPGK753 MOUNT WASHINGTON NH 2/13/95 2/13/00 941570119 6/6/94 9/1/94
WPGP474 THOMSON GA 157.7400 3/1/95 3/1/00 941300174 5/10/94 10/4/94
WPGP474 AIKEN SC 3/1/95 3/1/00 941300174 5/10/94 10/4/94
WPGP682 BENTON MI 157.7400 2/21/95 2/21/00 942640050 9/21/94 11/21/94
WPGP682 MATTAWAN MI 2/21/95 2/21/00 942640050 9/21/94 11/21/94
WPGP799 ANDERSON SC 157.7400 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGP799 GREENVILLE SC 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGP799 HOLLYWOOD SC 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGP799 HUGER SC 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGP799 MT PLEASANT SC 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGP799 SUMMERVILLE SC 2/17/95 2/17/00 941570124 6/6/94 11/14/94
WPGR481 HILLSDALE MI 157.7400 3/2/95 3/2/00 942640054 9/21/94 10/25/94
WPGR481 KALAMAZOO MI 3/2/95 3/2/00 942640054 9/21/94 10/25/94
WPGR481 SOMERSET CENTER MI 3/2/95 3/2/00 942640054 9/21/94 10/25/94
WPGR485 MARSHALL MI 157.7400 3/2/95 3/2/00 942640053 9/21/94 10/25/94
WPGR485 MUSKEGON MI 3/2/95 3/2/00 942640053 9/21/94 10/25/94
WPGR485 SAINT JOHNS MI 3/2/95 3/2/00 942640053 9/21/94 10/25/94
WPGR733 ALLEGAN MI 157.7400 2/28/95 2/28/00 942640049 9/21/94 12/7/94
WPGR733 BATTLE CREEK MI 2/28/95 2/28/00 942640049 9/21/94 12/7/94
WPGR733 HASTING MI 2/28/95 2/28/00 942640049 9/21/94 12/7/94
WPGR733 SOUTH MONTEREY MI 2/28/95 2/28/00 942640049 9/21/94 12/7/94
WPGR733 WESTWOOD MI 2/28/95 2/28/00 942640049 9/21/94 12/7/94
WPGR734 BENTON HARBOR MI 157.7400 2/28/95 2/28/00 942640056 9/21/94 12/7/94
WPGR734 CENTREVILLE MI 2/28/95 2/28/00 942640056 9/21/94 12/7/94
WPGR734 HOLLAND MI 2/28/95 2/28/00 942640056 9/21/94 12/7/94
</TABLE>
PAGE 11
<PAGE> 164
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPGR734 MUSKEGON MI 157.7400 2/28/95 2/28/00 942640056 9/21/94 12/7/94
WPGV459 ANN ARBOR MI 157.7400 4/6/95 4/6/00 942640059 9/21/94 10/26/94
WPGV459 BRIGHTON TOWNSHP MI 4/6/95 4/6/00 942640059 9/21/94 10/26/94
WPGV459 DEARBORN MI 4/6/95 4/6/00 942640059 9/21/94 10/26/94
WPGV459 SPRINGFIELD MI 4/6/95 4/6/00 942640059 9/21/94 10/26/94
WPGV459 UTICA MI 4/6/95 4/6/00 942640059 9/21/94 10/26/94
WPGW512 ADRIAN MI 157.7400 3/29/95 3/29/00 942640052 9/21/94 11/23/94
WPGW512 ANN ARBOR MI 3/29/95 3/29/00 942640052 9/21/94 11/23/94
WPGW512 HOWELL MI 3/29/95 3/29/00 942640052 9/21/94 11/23/94
WPGW512 LANSING MI 3/29/95 3/29/00 942640052 9/21/94 11/23/94
WPGW512 OWOSSO MI 3/29/95 3/29/00 942640052 9/21/94 11/23/94
WPGW512 YPSILANTI MI 3/29/95 3/29/00 0
WPGX897 ALBERMARLE NC 157.7400 4/12/95 4/12/00 941570125 6/6/94 12/31/94
WPGX997 CHARLOTTE NC 4/12/95 4/12/00 941570125 6/6/94 12/31/94
WPGX897 LEXINGTON NC 4/12/95 4/12/00 941570125 6/6/94 12/31/94
WPGX897 SHELBY NC 4/12/95 4/12/00 941570125 6/6/94 12/31/94
WPGX897 STATESVILLE NC 4/12/95 4/12/00 941570125 6/6/94 12/31/94
WPGX964 BATTLE CREEK MI 157.7400 5/16/95 5/16/00 0
WPGX964 EAST LANSING MI 5/16/95 5/16/00 942640047 9/21/94 11/2/94
WPGX964 JACKSON MI 5/16/95 5/16/00 942640047 9/21/94 11/2/94
WPGX964 MIDLAND MI 5/16/95 5/16/00 942640047 9/21/94 11/2/94
WPGX964 SAGINAW MI 5/16/95 5/16/00 942640047 9/21/94 11/2/94
WPGY362 CARROLLTON GA 157.7400 4/13/95 4/13/00 943200090 11/16/94 1/31/95
WPGY514 FARMINGTON CT 157.7400 4/12/95 4/12/00 942690050 9/26/94 2/2/95
WPGY514 HOLYOKE MA 4/12/95 4/12/00 942690050 9/26/94 2/2/95
WPGY514 PETERBOROUGH NH 4/12/95 4/12/00 942690050 9/26/94 2/2/95
WPGY514 HOPKINTON RI 4/12/95 4/12/00 942690050 9/26/94 2/2/95
WPGY514 WINDSOR VT 4/12/95 4/12/00 942690050 9/26/94 2/2/95
WPGY515 BARNSTABLE MA 157.7400 4/12/95 4/12/00 942690051 9/26/94 2/2/95
WPGY515 BOSTON MA 4/12/95 4/12/00 942690051 9/26/94 2/2/95
WPGY515 KINGSTON MA 4/12/95 4/12/00 942690051 9/26/94 2/2/95
WPGY515 PAXTON MA 4/12/95 4/12/00 942690051 9/26/94 2/2/95
WPGY515 JOHNSTON RI 4/12/95 4/12/00 942690051 9/26/94 2/2/95
WPGY585 FLINT MI 157.7400 4/8/95 4/8/00 942640060 9/21/94 11/2/94
WPGY585 IMLAY CITY MI 4/8/95 4/8/00 942640060 9/21/94 11/2/94
WPGY585 PORT HURON MI 4/8/95 4/8/00 942640060 9/21/94 11/2/94
WTGY585 SOUTHFIELD MI 4/8/95 4/8/00 942640060 9/21/94 11/2/94
WPGY585 WAYNE MI 4/8/95 4/8/00 942640060 9/21/94 11/2/94
WPGY990 WALTZ MI 157.7400 4/18/95 4/18/00 942640058 9/21/94 12/7/94
WPGY990 GIBSONBURG OH 4/18/95 4/18/00 942640058 9/21/94 12/7/94
WPGZ541 ANN ARBOR MI 157.7400 4/19/95 4/19/00 942640046 9/21/94 11/18/94
</TABLE>
PAGE 12
<PAGE> 165
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
WPGZ541 DEARBORN MI 157.7400 4/19/95 4/19/00 942640046 9/21/94 11/18/94
WPGZ541 DETROIT MI 4/19/95 4/19/00 942640046 9/21/94 11/18/94
WPGZ541 MONROE MI 4/19/95 4/19/00 942640046 9/21/94 11/18/94
WPGZ541 PORT HURON MI 4/19/95 4/19/00 942640046 9/21/94 11/18/94
WPHB758 BERLIN MD 157.7400 5/8/95 5/8/00 942690052 9/26/94 12/1/94
WPHB758 COLUMBIA MD 5/8/95 5/8/00 942690052 9/26/94 12/1/94
WPHD510 HOLLAND MI 157.7400 5/10/95 5/10/00 942640051 9/21/94 11/22/94
WPHD510 MUSKEGON MI 5/10/95 5/10/00 942640051 9/21/94 11/22/94
WPHD510 MUSKEGON MI 5/10/95 5/10/00 942640051 9/21/94 11/22/94
WPHD510 RAVENNA MI 5/10/95 5/10/00 942640051 9/21/94 11/22/94
WPHF534 CAMDEN NJ 157.7400 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHF534 TRENTON NJ 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHF534 BEACON NY 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHF534 MANORVILLE NY 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHF534 NEW YORK NY 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHF534 SELDEN NY 5/23/95 5/23/00 941570122 6/6/94 12/31/94
WPHG313 PlTTSBURGH PA 72.5000 5/25/95 5/25/00 0
WPHG313 PITTSBURGH PA 72.0400 5/25/95 5/25/00 0
WPHG313 PITTSBURGH PA 75.7800 5/25/95 5/25/00 0
WPHG314 KNOXVILLE TN 75.5000 5/25/95 5/25/00 0
WPHG314 KNOXVILLE TN 75.7800 5/25/95 5/25/00 0
WPHG314 KNOXVILLE TN 72.6800 5/25/95 5/25/00 0
WPHG314 KNOXVILLE TN 72.2000 5/25/95 5/25/00 0
WPHG681 ATHENS GA 157.7400 5/22/95 5/22/00 950030086 1/3/95 3/4/95
WPHG681 STATESBORO GA 5/22/95 5/22/00 950030086 1/3/95 3/4/95
WPHI876 AUGUSTA GA 461.0250 5/26/95 5/26/00 950030085 1/3/95
WPHI876 AUGUSTA GA 466.0250 5/26/95 5/26/00 950030085 1/3/95
WPHI876 NORTH AUGUSTA SC 5/26/95 5/26/00 950030085 1/3/95
WPHI876 NORTH AUGUSTA SC 462.7500 5/26/95 5/26/00 950030085 1/3/95
WPHJ860 CHELSEA MI 157.7400 6/5/95 6/5/00 942640048 9/21/94 12/2/94
WPHJ860 I0NIA MI 6/5/95 6/5/00 942640048 9/21/94 12/2/94
WPHJ860 I0NIA MI 6/5/95 6/5/00 942640048 9/21/94 12/2/94
WPHJ860 I0NIA MI 6/5/95 6/5/00 942640048 9/21/94 12/2/94
WPHJ860 PORTLAND MI 6/5/95 6/5/00 942640048 9/21/94 12/2/94
WPHJ947 DETROIT MI 157.7400 6/9/95 6/9/00 942640061 9/21/94
WPHJ947 FRENCHTOWN MI 6/9/95 6/9/00 942640061 9/21/94
WPHJ947 NOVI MI 6/9/95 6/9/00 942640061 9/21/94
WPHJ947 OAK PARK MI 6/9/95 6/9/00 942640061 9/21/94
WPHJ947 PONTIAC MI 6/9/95 6/9/00 942640061 9/21/94
WPHJ947 ST. CLAIR SHORES MI 6/9/95 6/9/00 942640061 9/21/94
WPHK466 CARPINTERIA CA 157.7400 6/16/95 6/16/00 950110150 1/11/95 3/30/95
</TABLE>
PAGE 13
<PAGE> 166
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHK466 FAWNSKIN CA 157.7400 6/16/95 6/16/00 950110150 1/11/95 3/30/95
WPHK466 MONTROSE CA 6/16/95 6/16/00 950110150 1/11/95 3/30/95
WPHK466 NEWHALL CA 6/16/95 6/16/00 950110150 1/11/95 3/30/95
WPHK466 SANTA PAULA CA 6/16/95 6/16/00 950110150 1/11/95 3/30/95
WPHK466 VENTURA CA 6/16/95 6/16/00 950110150 1/11/95 3/30/95
WPHK482 CEDAR RAPIDS IA 157.7400 6/16/95 6/16/00 950110131 1/11/95 3/30/95
WPHK482 COUNCIL BLUFFS IA 6/16/95 6/16/00 950110131 1/11/95 3/30/95
WPHK482 DAVENPORT IA 6/16/95 6/16/00 950110131 1/11/95 3/30/95
WPHK482 DES MOINES IA 6/19/95 6/16/00 950110131 1/11/95 3/30/95
WPHK482 POST FALLS ID 6/16/95 6/16/00 950110131 1/11/95 3/30/95
WPHK482 BELLEVILLE IL 6/16/95 6/16/00 950110131 1/11/95 3/30/95
WPHK483 APPLE VALLEY MN 157.7400 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK483 BURNSVILLE NN 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK483 CHANHASSEN MN 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK483 ELKO MN 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK483 HAMPTON MN 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK483 HASTINGS MN 6/16/95 6/16/00 950110130 1/11/95 3/30/95
WPHK494 ABINGTON IN 157.7400 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK494 BROWNSBURG IN 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK484 GREENFIELD IN 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK484 INDIANAPOLIS IN 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK484 INDIANAPOLIS IN 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK484 LEBANON IN 6/16/95 6/16/00 950110128 1/11/95 3/30/95
WPHK617 LEXINGTON KY 157.7400 6/21/95 6/21/00 950370040
WPHK621 CORAOPOLIS PA 157.7400 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK621 CRANBERRY PA 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK621 MONROEVILLE PA 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK621 PITTSBURGH PA 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK621 PITTSBURGH PA 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK621 PITTSBURGH PA 6/21/95 6/21/00 950370043 2/6/95 3/30/95
WPHK639 BONITA SPRINGS FL 157.7400 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK639 CORAL SPRINGS FL 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK639 NAPLES FL 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK639 POMPANO BEACH FL 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK639 POMPANO BEACH FL 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK639 SUNRISE FL 6/23/95 6/23/00 950110139 1/11/95 3/30/95
WPHK678 CLINTON PA 157.7400 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHK678 CORAOPOLIS PA 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHK678 KITTANNING PA 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHK678 NEW KENSINGTON PA 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHK678 PITTSBURGH PA 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHK678 WHITE TOWNSHIP PA 6/21/95 6/21/00 950370042 1/11/95 3/30/95
WPHM612 LAFAYETTE CA 157.7400 6/20/95 6/20/00 950110154 1/11/95 3/31/95
WPHM612 SAN PABLO CA 6/20/95 6/20/00 950110154 1/11/95 3/31/95
</TABLE>
PAGE 14
<PAGE> 167
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHM612 SAN RAFAEL CA 157.7400 6/20/95 6/20/00 950110154 1/11/95 3/31/95
WPHM612 STOCKTON CA 6/20/95 6/20/00 950110154 1/11/95 3/31/95
WPHM612 STOCKTON CA 6/20/95 6/20/00 950110154 1/11/95 3/31/95
WPHM612 STOCKTON CA 6/20/95 6/20/00 950110154 1/11/95 3/31/95
WPHN503 BLOOMINGTON IN 157.7400 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN503 COLUMBUS IN 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN503 LETTS IN 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN503 SEYMOUR IN 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN503 TERRE HAUTE IN 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN503 VINCENNES IN 6/15/95 6/15/00 950110133 1/11/95 3/29/95
WPHN624 MINNEAPOLIS MN 157.7400 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN624 MINNEAPOLIS MN 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN624 NEWPORT MN 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN624 SAINT PAUL MN 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN624 SAINT PAUL MN 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN624 WOODBURY MN 6/15/95 6/15/00 950110127 1/11/95 3/30/95
WPHN832 BELL POINT PA 157.7400 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHN832 CORAPOLIS PA 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHN832 CORAPOLIS PA 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHN832 GLENSHAW PA 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHN832 PITTSBURGH PA 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHN832 PITTSBURGH PA 6/14/95 6/14/00 950110122 1/11/95 3/29/95
WPHP238 BOULDER CO 157.7400 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP238 FORT COLLINS CO 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP238 FREDERICK CO 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP238 GREELEY CO 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP238 KEY WEST FL 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP238 RAMROD KEY FL 6/16/95 6/16/00 950110159 1/11/95 3/30/95
WPHP240 CONNELLSVILLE PA 157.7400 6/16/95 6/16/00 950370038 2/6/95 3/30/95
WPHP240 SALTSBURG PA 6/16/95 6/16/00 950370038 2/6/95 3/30/95
WPHP241 AURORA IL 157.7400 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP241 CHICAGO RIDGE IL 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP241 HAMMOND IL 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP241 HOMEWOOD IL 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP241 LOMBARD IL 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP241 ROMEOVILLE IL 6/20/95 6/20/00 950110167 1/11/95 3/30/95
WPHP258 FRANKLIN IN 157.7400 6/19/95 6/19/00 950110164 1/11/95 4/4/95
WPHP258 INDIANAPOLIS IN 6/19/95 6/19/00 950110164 1/11/95 4/4/95
WPHP258 MORRISTOWN IN 6/19/95 6/19/00 950110164 1/11/95 4/4/95
WPHP258 STILESVILLE IN 6/19/95 6/19/00 950110164 1/11/95 4/4/95
WPHP258 TERRE HAUTE IN 6/19/95 6/19/00 950110164 1/11/95 4/4/95
WPHP281 ASH GROVE IN 157.7400 6/20/95 6/20/00 950110129 1/11/95 3/31/95
WPHP281 FORT WAYNE IN 6/20/95 6/20/00 950110129 1/11/95 3/31/95
WPHP281 KOKOMO IN 6/20/95 6/20/00 950110129 1/11/95 3/31/95
</TABLE>
PAGE 15
<PAGE> 168
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHP282 CANNON FALLS MN 157.7400 6/19/95 6/19/00 950110125 1/11/95 3/31/95
WPHP282 LAKE CITY MN 6/19/95 6/19/00 950110125 1/11/95 3/31/95
WPHP282 NORTHFIELD MN 6/19/95 6/19/00 950110125 1/11/95 3/31/95
WPHP282 NORTHFIELD MN 6/19/95 6/19/00 950110125 1/11/95 3/31/95
WPHP282 NORTHFIELD MN 6/19/95 6/19/00 950110125 1/11/95 3/31/95
WPHP283 JOLIET IL 157.7400 6/19/95 6/19/00 950110134 1/11/95 3/31/95
WPHP283 BOURBONNAIS IL 6/19/95 6/19/00 950110134 1/11/95 3/31/95
WPHP283 CHICAGO HEIGHTS IL 6/19/95 6/19/00 950110134 1/11/95 3/31/95
WPHP283 MOKENA IL 6/19/95 6/19/00 950110134 1/11/95 3/31/95
WPHP283 PEORIA IL 6/19/95 6/19/00 950110134 1/11/95 3/31/95
WPHP284 LAKE VILLA IL 157.7400 6/20/95 6/20/00 950110165 1/11/95 3/31/95
WPHP284 MCHENRY IL 6/20/95 6/20/00 950110165 1/11/95 3/31/95
WPHP284 WARREN TWNSHIP IL 6/20/95 6/20/00 950110165 1/11/95 3/31/95
WPHP284 EVANSVILLE IN 6/20/95 6/20/00 950110165 1/11/95 3/31/95
WPHP284 NEW ALBANY IN 6/20/95 6/20/00 950110165 1/11/95 3/31/95
WPHP285 BLOOMINGTON IL 157.7400 6/19/95 6/19/00 950110168 1/11/95 3/31/95
WPHP285 DECATUR IL 6/19/95 6/19/00 950110168 1/11/95 3/31/95
WPHP285 JERSEYVILLE IL 6/19/95 6/19/00 950110168 1/11/95 3/31/95
WPHP285 QUINCY IL 6/19/95 6/19/00 950110168 1/11/95 3/31/95
WPHP285 EFFINGHAM IL 6/19/95 6/19/00 950110168 1/11/95 3/31/95
WPHP379 BETHEL PARK PA 157.7400 6/22/95 6/22/00 950110123 1/11/95 3/31/95
WPHP379 GLASSPORT PA 6/22/95 6/22/00 950110123 1/11/95 3/31/95
WPHP379 GREENSBURG PA 6/22/95 6/22/00 950110123 1/11/95 3/31/95
WPHP379 LATROBE PA 6/22/95 6/22/00 950110123 1/11/95 3/31/95
WPHP379 POTTSTOWN PA 6/22/95 6/22/00 950110123 1/11/95 3/31/95
WPHP531 MARIPOSA CA 157.7400 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP531 MODESTO CA 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP531 NILES CA 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP531 PACIFICA CA 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP531 SAN MATEO CA 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP531 WESTLEY CA 6/19/95 6/19/00 950110156 1/11/95 3/30/95
WPHP532 LOS GATOS CA 157.7400 6/19/95 6/19/00 950110157 1/11/95 4/11/95
WPHP532 MEADOW LAKES CA 6/19/95 6/19/00 950110157 1/11/95 4/11/95
WPHP532 SANTA CRUZ CA 6/19/95 6/19/00 950110158 1/11/95 4/11/95
WPHP532 SANTA CRUZ CA 6/19/95 6/19/00 950110158 1/11/95 4/11/95
WPHP532 SANTA CRUZ CA 6/19/95 6/19/00 950110157 1/11/95 4/11/95
WPHP532 SCOTTS VALLEY CA 6/19/95 6/19/00 950110157 1/11/95 4/11/95
WPHP534 ELKHART IN 157.7400 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP534 SOUTH BEND IN 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP534 MICHIGAN CITY IN 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP534 FAIRDALE KY 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP534 LEXINGTON KY 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP534 LOUISVILLE KY 6/19/95 6/19/00 950110126 1/11/95 3/30/95
WPHP542 EAU GALLIE FL 157.7400 6/22/95 6/22/00 950110144 1/11/95 3/30/95
</TABLE>
PAGE 16
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PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHP542 HAINES FL 157.7400 6/22/95 6/22/00 950110144 1/11/95 3/30/95
WPHP542 LUTZ FL 6/22/95 6/22/00 950110144 1/11/95 3/30/95
WPHP542 PALM HARBOR FL 6/22/95 6/22/00 950110144 1/11/95 3/30/95
WPHP542 TAMPA FL 6/22/95 6/22/00 950110144 1/11/95 3/30/95
WPHP542 ZEPHYRHILLS FL 6/22/95 6/22/00 950110144 1/11/95 3/30/95
WPHP557 GLASSPORT PA 157.7400 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP557 JOHNSTOWN PA 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP557 MEADVILLE PA 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP557 NEW CASTLE PA 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP557 OAKDALE PA 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP557 UNIONTOWN PA 6/20/95 6/20/00 950370039 2/6/95 3/30/95
WPHP618 CHARDON OH 157.7400 6/30/95 6/30/00 950110076 1/11/95 3/31/95
WPHP618 CLEVELAND OH 6/30/95 6/30/00 950110076 1/11/95 3/31/95
WPHP618 CLEVELAND OH 6/30/95 6/30/00 950110076 1/11/95 3/31/95
WPHP618 PORT CLINTON OH 6/30/95 6/30/00 950110076 1/11/95 3/31/95
WPHP618 WILLOUGHBY HILLS OH 6/30/95 6/30/00 950110076 1/11/95 3/31/95
WPHP621 MANKATO MN 157.7400 6/27/95 6/27/00 950110096 1/11/95 3/31/95
WPHP621 MARSHALL MN 6/27/95 6/27/00 950110096 1/11/95 3/31/95
WPHP625 FALLBROOK CA 157.7400 6/27/95 6/27/00 950110058 1/11/95 3/31/95
WPHP625 OCEANSIDE CA 6/27/95 6/27/00 950110058 1/11/95 3/31/95
WPHP625 SAN CLEMENTE CA 6/27/95 6/27/00 950110058 1/11/95 3/31/95
WPHP625 SAN MARCOS CA 6/27/95 6/27/00 950110058 1/11/95 3/31/95
WPHP625 VISTA CA 6/27/95 6/27/00 950110058 1/11/95 3/31/95
WPHP669 JUPITER FL 157.7400 6/27/95 6/27/00 950110066 1/11/95 3/31/95
WPHP669 PAHOKEE FL 6/27/95 6/27/00 950110066 1/11/95 3/31/95
WPHP669 STUART FL 6/27/95 6/27/00 950110066 1/11/95 3/31/95
WPHP669 VENICE FL 6/27/95 6/27/00 950110066 1/11/95 3/31/95
WPHP677 CHISHOLM MN 157.7400 6/27/95 6/27/00 950110100 1/11/95 3/31/95
WPHP677 DULUTH MN 6/27/95 6/27/00 950110100 1/11/95 3/31/95
WPHP677 HIBBING MN 6/27/95 6/27/00 950110100 1/11/95 3/31/95
WPHP677 MOORHEAD MN 6/27/95 6/27/00 950110100 1/11/95 3/31/95
WPHP677 SAINT CLOUD MN 6/27/95 6/27/00 950110100 1/11/95 3/31/95
WPHP681 COVINGTON KY 157.7400 6/27/95 6/27/00 950110095 1/11/95 3/31/95
WPHP681 BLUE EARTH MN 6/27/95 6/27/00 950110095 1/11/95 3/31/95
WPHP681 ROCHESTER MN 6/27/95 6/27/00 950110095 1/11/95 3/31/95
WPHP681 ROCHESTER MN 6/27/95 6/27/00 950110095 1/11/95 3/31/95
WPHP701 CANNON FALLS MN 157.7400 6/20/95 6/20/00 950110097 1/11/95 3/30/95
WPHP701 GAYLORD MN 6/20/95 6/20/00 950110097 1/11/95 3/30/95
WPHP701 LE SUEUR MN 6/20/95 6/20/00 950110097 1/11/95 3/30/95
WPHP701 RED WING MN 6/20/95 6/20/00 950110097 1/11/95 3/30/95
WPHP701 RED WING MN 6/20/95 6/20/00 950110097 1/11/95 3/30/95
WPHP701 RED WING MN 6/20/95 6/21/00 950110097 1/11/95 3/30/95
WPHP705 EL CENTRO CA 157.7400 6/20/95 6/20/00 950110148 1/11/95 3/30/95
</TABLE>
PAGE 17
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PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHP705 LA JOLLA CA 157.7400 6/20/95 6/20/00 950110148 1/11/95 3/30/95
WPHP705 SAN DIEGO CA 6/20/95 6/20/00 950110148 1/11/95 3/30/95
WPHP705 SAN DIEGO CA 6/20/95 6/20/00 950110148 1/11/95 3/30/95
WPHP705 SAN DIEGO CA 6/20/95 6/20/00 950110148 1/11/95 3/30/95
WPHP705 SANTEE CA 6/20/95 6/20/00 950110148 1/11/95 3/30/95
WPHP706 CHICO CA 157.7400 6/20/95 6/20/00 950110151 1/11/95 3/30/95
WPHP706 OROVILLE CA 6/20/95 6/20/00 950110151 1/11/95 3/30/95
WPHP706 RED BLUFF CA 6/20/95 6/20/00 950110151 1/11/95 3/30/95
WPHP708 FORT WALT BEACH FL 157.7400 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP708 NAVARRE FL 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP708 SOUTHPORT FL 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP708 TALLAHASSEE FL 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP708 TALLAHASSEE FL 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP708 TALLAHASSEE FL 6/20/95 6/20/00 950110147 1/11/95 3/30/95
WPHP710 GRASS VALLEY CA 157.7400 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP710 NEWCASTLE CA 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP710 SOUTH LAKE TAHOE CA 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP710 SUTTER CA 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP710 TAHOE CITY CA 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP710 UKIAH CA 6/20/95 6/20/00 950110161 1/11/95 3/30/95
WPHP711 ANDERSON IN 157.7400 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP711 ATTICA IN 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP711 FRANKFORT IN 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP711 LEBANON IN 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP711 MUNCIE IN 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP711 NOBLESVILLE IN 6/20/95 6/20/00 950110162 1/11/95 3/30/95
WPHP715 BENSALEM PA 157.7400 6/20/95 6/20/00 950110078 1/11/95 3/31/95
WPHP715 FELLISBURG PA 6/20/95 6/20/00 950110078 1/11/95 3/31/95
WPHP715 KING OF PRUSSIA PA 6/20/95 6/20/00 950110078 1/11/95 3/31/95
WPHP715 WASHINGTON PA 6/20/95 6/20/00 950110078 1/11/95 3/31/95
WPHP715 PHILADELPHIA PA 6/20/95 6/20/00 950110078 1/11/95 3/31/95
WPHP746 CINCINNATI OH 157.7400 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP746 CINCINNATI OH 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP746 CINCINNATI OH 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP746 MIDDLETOWN OH 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP746 MORROW OH 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP746 XENIA OH 6/22/95 6/22/00 950110091 1/11/95 3/30/95
WPHP755 JOHNSTOWN PA 157.7400 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPHP755 PERKASIE PA 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPHP755 PITTSBURGH PA 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPHP755 PITTSBURGH PA 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPHP755 READING PA 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPEP755 WILKINSBURG PA 6/23/95 6/23/00 950110079 1/11/95 3/30/95
WPHP756 ALLENTOWN PA 157.7400 6/23/95 6/23/00 950110080 1/11/95 3/30/95
</TABLE>
PAGE 18
<PAGE> 171
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHP756 EVANS CITY PA 157.7400 6/23/95 6/23/00 950110080 1/11/95 3/30/95
WPHP756 FREEDOM PA 6/23/95 6/23/00 950110080 1/11/95 3/30/95
WPHP756 GEORGETOWN PA 6/23/95 6/23/00 950110080 1/11/95 3/30/95
WPHP756 INDIANA PA 6/23/95 6/23/00 950110080 1/11/95 3/30/95
WPHP756 BRIDGEWATER PA 6/23/95 6/23/00 950110080 1/11/95 3/30/95
WPHP766 BUTLER PA 157.7400 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP766 HERMITAGE PA 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP766 NEW CASTLE PA 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP766 SCRANTON PA 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP766 WILKES BARRE PA 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP766 KITANNING PA 6/23/95 6/23/00 950110081 1/11/95 3/30/95
WPHP775 LOS ALTOS CA 157.7400 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP775 MERCED CA 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP775 MORGAN HILL CA 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP775 PALO ALTO CA 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP775 SAN JOSE CA 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP775 SANTA CLARA CA 6/23/95 6/23/00 950110109 1/11/95 3/30/95
WPHP988 AURORA CO 157.7400 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHP988 BOULDER CO 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHP988 DENVER CO 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHP988 DENVER CO 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHP988 GOLDEN CO 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHP988 VAIL CO 6/26/95 6/26/00 950110138 1/11/95 3/30/95
WPHQ212 HOULTON WI 157.7400 6/26/95 6/26/00 950110135 1/11/95 3/30/95
WPHQ212 MADISON WI 6/26/95 6/26/00 950110135 1/11/95 3/30/95
WPHQ212 MILWAUKEE WI 6/26/95 6/26/00 950110135 1/11/95 3/30/95
WPHQ212 YORKVILLE WI 6/26/95 6/26/00 950110135 1/11/95 3/30/95
WPHQ212 CHEYENNE WY 6/26/95 6/26/00 950110135 1/11/95 3/30/95
WPHQ214 BOWLING GREEN OH 157.7400 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ214 ELYRIA OH 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ214 FREMONT OH 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ214 NILES OH 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ214 RICHFIELD OH 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ214 TWINSBURG OH 6/30/95 6/30/00 950110137 1/11/95 3/30/95
WPHQ216 HOMESTEAD FL 157.7400 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ216 KEY LARGO FL 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ216 MARATHON FL 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ216 MIAMI FL 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ216 PERRINE FL 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ216 PLANTATI0N KEY FL 6/26/95 6/26/00 950110140 1/11/95 3/30/95
WPHQ821 BEDFORD HILLS NY 157.7400 6/26/95 6/26/00 950110087 1/11/95 3/30/95
WPHQ821 MANOPAC NY 6/26/95 6/26/00 950110087 1/11/95 3/30/95
WPHQ821 MIDDLETOWN NY 6/26/95 6/26/00 950110087 1/11/95 3/30/95
WPHQ821 PAWLING NY 6/26/95 6/26/00 950110087 1/11/95 3/30/95
WPHQ821 PORT EWEN NY 6/26/95 6/26/00 950110087 1/11/95 3/30/95
WPHQ821 PUTNAM VALLEY NY 6/26/95 6/26/00 950110087 1/11/95 3/30/95
</TABLE>
PAGE 19
<PAGE> 172
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHQ825 BUNNELL FL 157.7400 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ825 DAYTONA BEACH FL 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ825 NEW SMYRNA BEACH FL 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ825 OCALA FL 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ825 OCALA FL 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ825 ORMOND BEACH FL 6/28/95 6/28/00 950110085 1/11/95 3/30/95
WPHQ851 ABERDEEN WA 157.7400 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ851 CHEHALIS WA 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ851 ENUMCLAW WA 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ851 ORTING WA 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ851 TUMWATER WA 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ851 YAKIMA WA 6/28/95 6/28/00 950110082 1/11/95 3/30/95
WPHQ898 COTTONWOOD AZ 157.7400 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHQ898 FENNEMORE AZ 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHQ898 FLAGSTAFF AZ 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHQ898 PHOENIX AZ 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHQ898 SCOTTSDALE AZ 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHQ898 DULZURA CA 6/27/95 6/27/00 950110149 1/11/95 3/31/95
WPHR228 AMHERST OH 157.7400 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR228 AVON OH 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR229 LORAIN OH 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR228 NORTH OLMSTED OH 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR228 PARMA OH 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR228 YATES CORNER OH 7/5/95 7/5/00 950110094 1/11/95 3/30/95
WPHR371 BARSTOW CA 157.7400 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR371 PALMDALE CA 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR371 SAN FERNANDO CA 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR371 SANTA BARBARA CA 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR371 SANTA MARIA CA 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR371 VICTORVILLE CA 6/28/95 6/28/00 950110070 1/11/95 3/30/95
WPHR372 BOCA RATON FL 157.7400 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR372 BONITA SPRINGS FL 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR372 BOYNTON BEACH FL 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR372 CORK SCREW FL 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR372 LEHIGH ACRES FL 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR372 SOUTH PALM BEACH FL 6/29/95 6/29/00 950110067 1/11/95 3/30/95
WPHR373 DONNELLSON IL 157.7400 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPHR373 EDWARDSVILLE IL 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPHR373 FAIRVIEW HEIGHTS IL 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPHR373 GODFREY IL 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPHR373 HIGHLAND IL 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPER373 MOUNT OLIVE IL 6/26/95 6/26/00 950110069 1/11/95 3/30/95
WPHR374 BRADENTON FL 157.7400 6/26/95 6/26/00 950110065 1/11/95 3/30/95
WPHR374 FORT PIERCE FL 6/26/95 6/26/00 950110065 1/11/95 3/30/95
</TABLE>
PAGE 20
<PAGE> 173
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHR374 SARASOTA FL 157.7400 6/26/95 6/26/00 950110065 1/11/95 3/30/95
WPHR374 SARASOTA FL 6/26/95 6/26/00 950110065 1/11/95 3/30/95
WPHR374 SARASOTA FL 6/26/95 6/26/00 950110065 1/11/95 3/30/95
WPHR374 SEBRING FL 6/26/95 6/26/00 950110065 1/11/95 3/30/95
WPHR380 LAKELAND FL 157.7400 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR380 OLDSMAR FL 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR380 PALM BAY FL 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR380 PLANT CITY FL 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR380 TAMPA FL 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR380 WINTER HAVEN FL 6/26/95 6/26/00 950110063 1/11/95 3/30/95
WPHR381 COCOA FL 157.7400 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR381 DADE CITY FL 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR381 KISSIMMEE FL 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR381 LAKE BUENA VISTA FL 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR381 PORT RICHEY FL 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR381 PORT RICHEY FL 6/26/95 6/26/00 950110062 1/11/95 3/30/95
WPHR382 FERNDALE FL 157.7400 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR382 LECANTO FL 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR382 LEESBURG FL 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR382 LONGWOOD FL 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR382 LONGWOOD FL 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR382 ORANGE CITY FL 6/26/95 6/26/00 950110061 1/11/95 3/30/95
WPHR397 SAN BERNARDINO CA 157.7400 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR397 CRESTLINE CA 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR397 PASADENA CA 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR397 POMONA CA 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR397 RUNNING SPRINGS CA 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR397 SIMI VALLEY CA 6/26/95 6/26/00 950110071 1/11/95 3/30/95
WPHR401 INDIAN PEAK NY 157.7400 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR401 OSSINING NY 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR401 PORT JEFFERSON NY 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR401 VALHALLA NY 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR401 WESLEY HILLS NY 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR401 WHITE PLAINS NY 6/26/95 6/26/00 950110115 1/11/95 3/30/95
WPHR404 ALBUQUERQUE NM 157.7400 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR404 ALBUQUERQUE NM 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR404 LOS ALAMOS NM 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR404 SANTA FE NM 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR404 SANTE FE NM 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR404 LAUGHLIN NV 6/26/95 6/26/00 950110118 1/11/95 3/30/95
WPHR405 GARY IN 157.7400 6/27/95 6/27/00 950110055 1/11/95 3/30/95
WPHR405 HAMMOND IN 6/27/95 6/27/00 950110055 1/11/95 3/30/95
WPHR405 MERRILLVILLE IN 6/27/95 6/27/00 950110055 1/11/95 3/30/95
WPHR405 VALPARAISO IN 6/27/95 6/27/00 950110055 1/11/95 3/30/95
WPHR405 WARSAW IN 6/27/95 6/27/00 950110055 1/11/95 3/30/95
WPHR405 WHEELER IN 6/27/95 6/27/00 950110055 1/11/95 3/30/95
</TABLE>
PAGE 21
<PAGE> 174
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHR406 CAMBRIDGE MN 157.7400 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR406 ELK RIVER MN 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR406 MONTICELLO MN 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR406 SAINT CLOUD MN 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR406 SAINT CLOUD MN 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR406 SODERVILLE MN 6/27/95 6/27/00 950110119 1/11/95 3/30/95
WPHR621 AUSTINTOWN OH 157.7400 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR621 COPLEY OH 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR621 KENT OH 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR621 MEDINA OH 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR621 RAVENNA OH 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR621 WADSWORTH OH 7/7/95 7/7/00 950110093 1/11/95 3/30/95
WPHR647 GLEN OAKS NY 157.7400 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR647 HALF HOLLOW NY 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR647 ISLIP NY 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR647 NEW YORK NY 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR647 NEW YORK NY 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR647 PLAINVIEW NY 6/28/95 6/28/00 950110103 1/11/95 3/30/95
WPHR679 ATTICA MI 157.7400 6/29/95 6/29/00 942640045 9/21/94 11/2/94
WPHR679 NEW BALTIMORE MI 6/29/95 6/29/00 942640045 9/21/94 11/2/94
WPHR679 NOVI MI 6/29/95 6/29/00 942640045 9/21/94 ll/2/94
WPHR679 PORT HURON MI 6/29/95 6/29/00 942640045 9/21/94 11/2/94
WPHR679 TRENTON MI 6/29/95 6/29/00 942640045 9/21/94 11/2/94
WPHR696 ERIE PA 157.7400 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR696 ERIE PA 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR696 MEADVILLE PA 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR696 CAMAS WA 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR696 CASTLE ROCK WA 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR696 RICHLAND WA 6/30/95 6/30/00 950110121 1/11/95 3/30/95
WPHR699 ASHTABULA OH 157.7400 6/30/95 6/30/00 950110136 1/11/95 3/31/95
WPHR699 PAINESVILLE OH 6/30/95 6/30/00 950110136 1/11/95 3/31/95
WPHR699 THOMPSON OH 6/30/95 6/30/00 950110136 1/11/95 3/31/95
WPHR699 MEDFORD OR 6/30/95 6/30/00 950110136 1/11/95 3/31/95
WPHR699 ROSEBURG OR 6/30/95 6/30/00 950110136 1/11/95 3/31/95
WPHR701 COLUMBIA SC 75.9800 6/30/95 6/30/00 0
WPHR701 COLUMBIA SC 72.6800 6/30/95 6/30/00 0
WPHR701 COLUMBIA SC 72.8400 6/30/95 6/30/00 0
WPHR701 COLUMBIA SC 75.9600 6/30/95 6/30/00 0
WPHS453 CALISTOGA CA 157.7400 7/11/95 7/11/00 950110153 1/11/95 6/30/95
WPHS453 CAMERONPARK CA 7/11/95 7/11/00 950110153 1/11/95 6/30/95
WPHS453 POLLOCK PINES CA 7/11/95 7/11/00 950110153 1/11/95 6/30/95
WPHS453 RANCHO CORDOVA CA 7/11/95 7/11/00 950110153 1/11/95 6/30/95
WPHS453 SACRAMENTO CA 7/11/95 7/11/00 950110153 1/11/95 6/30/95
WPHS453 SACRAMENTO CA 7/11/95 7/11/00 950110153 1/11/95 6/30/95
</TABLE>
PAGE 22
<PAGE> 175
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHS951 COLUMBIA SC 157.7400 7/28/95 7/28/00 950950062 4/7/95 5/11/95
WPHS951 GASTON SC 7/28/95 7/28/00 950950062 5/11/95 5/11/95
WPHU364 LAKE CITY FL 157.7400 7/12/95 7/12/00 950110146 1/11/95 7/6/95
WPHU364 MIDDLEBURG FL 7/12/95 7/12/00 950110146 1/11/95 7/6/95
WPHU364 PALATKA FL 7/12/95 7/12/00 950110146 1/11/95 7/6/95
WPHU364 ST. AUGUSTINE FL 7/12/95 7/12/00 950110146 1/11/95 7/6/95
WPHU364 WACAHOTA FL 7/12/95 7/12/00 950110146 1/11/95 7/6/95
WPHU404 CHICAGO IL 157.7400 7/13/95 7/13/00 950110166 1/11/95 6/30/95
WPHU404 CHICAGO IL 7/13/95 7/13/00 950110166 1/11/95 6/30/95
WPHU404 ELGIN IL 7/13/95 7/13/00 950110166 1/11/95 6/30/95
WPHU404 MAYWOOD IL 7/13/95 7/13/00 950110166 1/11/95 6/30/95
WPHU404 SYCAMORE IL 7/13/95 7/13/00 950110166 1/11/95 6/30/95
WPHU420 CASTLE ROCK CO 157.7400 7/17/95 7/17/00 950110160 1/11/95 7/7/95
WPHU420 COLORADO SPRINGS CO 7/17/95 7/17/00 950110160 1/11/95 7/7/95
WPHU420 ASPEN CO 7/17/95 7/17/00 950110160 1/11/95 7/7/95
WPHU420 SEDALIA CO 7/17/95 7/17/00 950110160 1/11/95 7/7/95
WPHV256 COSTA MESA CA 157.7400 7/19/95 7/19/00 950110057 1/11/95 7/11/95
WPHV256 LAGUNA HILLS CA 7/19/95 7/19/00 950110057 1/11/95 7/11/95
WPHV256 NEWPORT BEACH CA 7/19/95 7/19/00 950110057 1/11/95 7/11/95
WPHV256 RANCHOS PALOS VE CA 7/19/95 7/19/00 950110057 1/11/95 7/11/95
WPHV257 BEAUMONT CA 157.7400 7/19/95 7/19/00 950110074 1/11/95 7/11/95
WPHV257 FULLERTON CA 7/19/95 7/19/00 950110074 1/11/95 7/11/95
WPHV257 LOS ANGELES CA 7/19/95 7/19/00 950110074 1/11/95 7/11/95
WPHV257 PALM SPRINGS CA 7/19/95 7/19/00 950110074 1/11/95 7/11/95
WPHV257 SUNNYMEAD CA 7/19/95 7/19/00 950110074 1/11/95 7/11/95
WPHV258 CANTON OH 157.7400 7/19/95 7/19/00 950110092 1/11/95 7/11/95
WPHV258 MANSFIELD OH 7/19/95 7/19/00 950110092 1/11/95 7/11/95
WPHV258 NEW PHILADELPHIA OH 7/19/95 7/19/00 950110092 1/11/95 7/11/95
WPHV258 SPRINGFIELD OH 7/19/95 7/19/00 950110092 1/11/95 7/11/95
WPHV259 HILLSDALE MI 157.7400 7/19/95 7/19/00 942640057 9/21/94 12/7/94
WPHV259 SOMERSET MI 7/19/95 7/19/00 942640057 9/21/94 12/7/94
WPHV259 HASTING MI 7/19/95 7/19/00 942640057 9/21/94 12/7/94
WPHV347 FORT LAUDERDALE FL 157.7400 7/21/95 7/21/00 950110158 1/11/95 7/6/95
WPHV347 KENDALL FL 7/21/95 7/21/00 950110158 1/11/95 7/6/95
WPHV347 MIAMI FL 7/21/95 7/21/00 950110158 1/11/95 7/6/95
WPHV347 MIAMI FL 7/21/95 7/21/00 950110158 1/11/95 7/6/95
WPHV347 MIRAMAR FL 7/21/95 7/21/00 950110158 1/11/95 7/6/95
WPHV358 AVON PARK FL 157.7400 7/21/95 7/21/00 950110143 1/11/95 7/13/95
WPHV358 SUN CITY FL 7/21/95 7/21/00 950110143 1/11/95 7/13/95
WPHV358 VERO BEACH FL 7/21/95 7/21/00 950110143 1/11/95 7/13/95
WPHV358 WABASSO FL 7/21/95 7/21/00 950110143 1/11/95 7/13/95
WPHV358 WAUCHULA FL 7/21/95 7/21/00 950110143 1/11/95 7/13/95
</TABLE>
PAGE 23
<PAGE> 176
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHV399 LIVERMORE CA 157.7400 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV399 OAKLAND CA 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV399 OAKLAND CA 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV399 OAKLAND CA 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV399 SAN FRANCISCO CA 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV399 SAN FRANCISCO CA 7/24/95 7/24/00 950110155 1/11/95 7/11/95
WPHV923 CARMEL CA 157.7400 7/21/95 7/21/00 950110110 1/11/95 7/17/95
WPHV923 FIREBAUGH CA 7/21/95 7/21/00 950110110 1/11/95 7/17/95
WPHV923 FRESNO CA 7/21/95 7/21/00 950110110 1/11/95 7/17/95
WPHV923 MIRAMONTE CA 7/21/95 7/21/00 950110110 1/11/95 7/17/95
WPHV923 SALINAS CA 7/21/95 7/21/00 950110110 1/11/95 7/17/95
WPHV924 GLENDALE CA 157.7400 7/21/95 7/21/00 950110072 1/11/95 7/17/95
WPHV924 OXNARD CA 7/21/95 7/21/00 950110072 1/11/95 7/17/95
WPHV924 PASADENA CA 7/21/95 7/21/00 950110072 1/11/95 7/17/95
WPHV924 THOUSAND OAKS CA 7/21/95 7/21/00 950110072 1/11/95 7/17/95
WPHV924 TWENTYNINE PALMS CA 7/21/95 7/21/00 950110072 1/11/95 7/17/95
WPHV925 HOLLYWOOD CA 157.7400 7/21/95 7/21/00 950110073 1/11/95 7/17/95
WPHV925 JOSHUA TREE CA 7/21/95 7/21/00 950110073 1/11/95 7/17/95
WPHV925 LOMA LINDA CA 7/21/95 7/21/00 950110073 1/11/95 7/17/95
WPHV925 LOS ANGELES CA 7/21/95 7/21/00 950110073 1/11/95 7/17/95
WPHV925 MALIBU CA 7/21/95 7/21/00 950110073 1/11/95 7/17/95
WPHV926 ANAHEIM CA 157.7400 7/21/95 7/21/00 950110075 1/11/95 7/17/95
WPHV926 CORONA CA 7/21/95 7/21/00 950110075 1/11/95 7/17/95
WPHV926 INDIO CA 7/21/95 7/21/00 950110075 1/11/95 7/17/95
WPHV926 SAN JACINTO CA 7/21/95 7/21/00 950110075 1/11/95 7/17/95
WPHV926 SIGNAL HILL CA 7/21/95 7/21/00 950110075 1/11/95 7/17/95
WPHV927 BILLINGS MT 157.7400 7/21/95 7/21/00 950110101 1/11/95 7/17/95
WPHV927 OMAHA NE 7/21/95 7/21/00 950110101 1/11/95 7/17/95
WPHV927 OMAHA NE 7/21/95 7/21/00 950110101 1/11/95 7/17/95
WPHV927 ALBUQUERQUE NM 7/21/95 7/21/00 950110101 1/11/95 7/17/95
WPHV927 LAS CRUCES NM 7/21/95 7/21/00 950110101 1/11/95 7/17/95
WPHV928 ARDEN HILLS MN 157.7400 7/21/95 7/21/00 950110099 1/11/95 7/17/95
WPHV928 BUFFALO MN 7/21/95 7/21/00 950110099 1/11/95 7/17/95
WPHV928 MAPLE PLAIN MN 7121/95 7/21/00 950110099 1/11/95 7/17/95
WPHV928 MINNEAPOLIS MN 7/21/95 7/21/00 950110099 1/11/95 7/17/95
WPHV928 MINNEAPOLIS MN 7/21/95 7/21/00 950110099 1/11/95 7/17/95
WPHV942 CORVALLIS OR 157.7400 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV942 EUGENE OR 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV942 PORTLAND OR 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV942 PORTLAND OR 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV942 SALEM OR 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV942 THE DALLES OR 7/24/95 7/24/00 950110077 1/11/95 7/11/95
WPHV943 FERNLEY NV 157.7400 7/24/95 7/24/00 950110117 1/11/95 7/17/95
</TABLE>
PAGE 24
<PAGE> 177
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHV943 RENO NV 157.7400 7/24/95 7/24/00 950110117 1/11/95 7/17/95
WPHV943 WINNEMUCCA NV 7/24/95 7/24/00 950110117 1/11/95 7/17/95
WPHV943 BROOKLYN NY 7/24/95 7/24/00 950110117 1/11/95 7/17/95
WPHV943 REGAL PARK NY 7/24/95 7/24/00 950110117 1/11/95 7/17/95
WPHV943 STATEN ISLAND NY 7/24/95 7/24/00 950110117 1/11/95 7/17/95
WPHV944 APACHE JUNCTI0N AZ 157.7400 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV944 PHOENIX AZ 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV944 S. MOUNTAIN PARK AZ 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV944 SIERRA VISTA AZ 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV944 TUCSON AZ 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV944 TUCSON AZ 7/24/95 7/24/00 950110060 1/11/95 7/17/95
WPHV945 BLOOMINGTON MN 157.7400 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV945 BLOOMINGTON MN 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV945 BLOOMINGTON MN 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV945 EDEN PRAIRIE MN 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV945 HUTCHINSON MN 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV945 HUTCHINSON MN 7/24/95 7/24/00 950110098 1/11/95 7/17/95
WPHV952 ADAMS NY 157.7400 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV952 FULTON NY 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV952 NEW HAVEN NY 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV952 OSWEGO NY 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV952 PLATTSBURG NY 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV952 BURLINGTON OH 7/24/95 7/24/00 950110113 1/11/95 3/30/95
WPHV957 BAKERSFIELD CA 157.7400 7/27/95 7/24/00 950110105 1/11/95 7/18/95
WPHV957 CHUALAR CA 7/27/95 7/27/00 950110105 1/11/95 7/18/95
WPHV957 COALINGA CA 7/27/95 7/27/00 950110105 1/11/95 7/18/95
WPHV957 JOLON CA 7/27/95 7/27/00 950110105 1/11/95 7/18/95
WPHV957 SAN LUIS OBISPO CA 7/27/95 7/27/00 950110105 1/11/95 7/18/95
WPHW213 CANTON OH 157.7400 8/2/95 8/2/00 950110112 1/11/95 7/17/95
WPHW213 HARRISBURG OH 8/2/95 8/2/00 950110112 1/11/95 7/17/95
WPHW213 MASSILLON OH 8/2/95 8/2/00 950110112 1/11/95 7/17/95
WPHW213 SALEM OH 8/2/95 8/2/00 950110112 1/11/95 7/17/95
WPHW787 DALE CITY CA 157.7400 7/27/95 7/27/00 950110108 1/11/95 7/19/95
WPHW787 SAN FRANCISCO CA 7/27/95 7/27/00 950110108 1/11/95 7/19/95
WPHW787 SAN LEANDRO CA 7/27/95 7/27/00 950110108 1/11/95 7/19/95
WPHW787 SAN RAMON CA 7/27/95 7/27/00 950110108 1/11/95 7/19/95
WPHW891 CLAYTON GA 157.7400 7/27/95 7/27/00 950950063 4/7/95 5/11/95
WPHW891 JASPER GA 7/27/95 7/27/00 950950063 4/7/95 5/11/95
WPHW891 TOCCOA GA 7/27/95 7/27/00 950950063 4/7/95 5/11/95
WPHW899 ALBANY NY 157.7400 7/28/95 7/28/00 950950064 6/6/94 7/29/94
WPHW899 EASTON NY 7/28/95 7/28/00 950950064 6/6/94 7/29/94
WPHW899 GLENS FALLS NY 7/28/95 7/28/00 950950064 6/6/94 7/29/94
WPHW899 SARATOGA SPRINGS NY 7/28/95 7/28/00 950950064 6/6/94 7/29/94
WPHW899 TROY NY 7/28/95 7/28/00 950950064 6/6/94 7/29/94
</TABLE>
PAGE 25
<PAGE> 178
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPHW899 NEW BALTIMORE NY 157.7400 7/28/95 7/28/00 950950064
WPHZ510 BOULDER CITY NV 157.7400 8/2/95 8/2/00 950110102 1/11/95 7/17/95
WPHZ510 HENDERSON NV 8/2/95 8/2/00 950110102 1/11/95 7/17/95
WPHZ510 LAS VEGAS NV 8/2/95 S/2/00 950110102 1/11/95 7/17/95
WPHZ510 LAS VEGAS NV 8/2/95 8/2/00 950110102 1/11/95 7/17/95
WPHZ510 RENO NV 8/2/95 8/2/00 950110102 1/11/95 7/17/95
WPHZ510 VIRGINIA CITY NV 8/2/95 8/2/00 950110102 1/11/95 7/17/95
WPIF525 SOMERS WI 157.7400 8/30/95 8/30/00 950110084
WPIF525 SOMERS WI 8/30/95 8/30/00 950110084
WPIF528 ANTIOCH CA 157.7400 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIF528 NOVATO CA 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIF528 PORT CHICAGO CA 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIF528 VALLEJO CA 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIF528 VALLEJO CA 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIF528 VALLEY SPRINGS CA 8/30/95 8/30/00 950110152 1/11/95 3/30/95
WPIG542 DIXON CA 157.7400 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG542 HEALDSBURG CA 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG542 SACRAMENTO CA 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG542 SACRAMENTO CA 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG542 SANTA ROSA CA 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG542 VACAVILLE CA 8/30/95 8/30/00 950110163 1/11/95 3/30/95
WPIG543 FAIRFIELD CA 157.7400 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG543 GLEN ELLEN CA 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG543 NAPA CA 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG543 PETALUMA CA 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG543 SEBASTOPOL CA 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG543 VACAVILLE CA 8/30/95 8/30/00 950110106 1/11/95 3/30/95
WPIG544 BERKELEY CA 157.7400 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG544 DANVILLE CA 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG544 OAKLAND CA 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG544 ORINDA CA 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG544 WALNUT CREEK CA 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG544 WALNUT CREEK CA 8/30/95 8/30/00 950110107 1/11/95 3/30/95
WPIG549 NEWARK NY 157.7400 8/30/95 8/30/00 950110090 1/11/95 8/24/95
WPIG549 ROCHESTER NY 8/30/95 8/30/00 950110090 1/11/95 8/24/95
WPIG549 SARATOGA SPRINGS NY 8/30/95 8/30/00 950110090 1/11/95 8/24/95
WPIG550 KENT WA 157.7400 8/30/95 8/30/00 950110120 1/11/95 8/24/95
WPIG550 PRESTON WA 8/30/95 8/30/00 950110120 1/11/95 8/24/95
WPIG550 TACOMA WA 8/30/95 8/30/00 950110120 1/11/95 8/24/95
WPIG550 TACOMA WA 8/30/95 8/30/00 950110120 1/11/95 8/24/95
WPIG550 WENATCHEE WA 8/30/95 8/30/00 950110120 1/11/95 8/24/95
WPIH796 BINGHAMTON NY 157.7400 7/7/95 9/7/00 950110116 1/11/95 8/30/95
WPIH796 COHOCTON NY 9/7/95 9/7/00 950110116 1/11/95 8/30/95
</TABLE>
PAGE 26
<PAGE> 179
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WPIH796 NEW BALTIMORE NY 157.7400 9/7/95 9/7/00 950110116 1/11/95 8/30/95
WPIH796 YORKSHIRE NY 9/7/95 9/7/00 950110116 1/11/95 8/30/95
WPIK552 BEAVER PA 157.7400 9/19/95 9/19/00 950370041 2/6/95 3/30/95
WPIK552 CANONSBURG PA 9/19/95 9/19/00 950370041 2/6/95 3/30/95
WPIK552 CANTON PA 9/19/95 9/19/00 950370041 2/6/95 3/30/95
WPIK552 GREENSBURG PA 9/19/95 9/19/00 950370041 2/6/95 3/30/95
WPIK552 ZELIENOPLE PA 9/19/95 9/19/00 950370041 2/6/95 3/30/95
WPIM420 FROSTPROOF FL 157.7400 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIM420 LARGO FL 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIM420 LARGO FL 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIM420 PEEBLEDALE FL 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIM420 RIVERVIEW FL 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIM420 ST. PETERSBURG FL 9/25/95 9/25/00 951980086 7/17/95 7/31/95
WPIN866 GREENEVILLE TN 157.7400 10/16/95 10/16/00 950680037 3/30/95
WPIN866 KNOXVILLE TN 10/16/95 10/16/00 950680037 3/30/95
WPIN866 MORRISTOWN TN 463.7120 10/16/95 10/16/00 950680037 3/30/95
WPIN866 MORRISTOWN TN 157.7400 10/16/95 10/16/00 950680037 3/30/95
WPIN866 NEWPORT TN 10/16/95 10/16/00 950680037 3/30/95
WPIN866 NEWPORT TN 10/16/95 10/16/00 950680037 3/30/95
WPIP252 LEXINGTON PARK MD 157.7400 10/4/95 10/4/00 951590114 6/13/95 9/27/95
WPIP252 CHESTER PA 10/4/95 10/4/00 951590114 6/13/95 9/27/95
WPIP252 ARLINGTON VA 10/4/95 10/4/00 0
WPIR614 FLEMING GA 157.7400 10/18/95 10/18/00 951920054 7/11/95 8/24/95
WPIR614 MACON GA 10/18/95 10/18/00 951920054 7/11/95 8/24/95
WPIR614 SPRINGFIELD GA 10/18/95 10/18/00 951920054 7/11/95 8/24/95
WPIR614 SWAINSBORO GA 10/18/95 10/18/00 951920054 7/11/95 8/24/95
WPIW414 GREENVILLE SC 157.7400 11/22/95 11/22/00 952120097 8/3/95 10/11/95
WPJG722 CHARLOTTE NC 72.4600 6/17/96 6/17/01 0
WPJG722 CHARLOTTE NC 72.6600 6/17/96 6/17/01 0
WPJG722 CHARLOTTE NC 75.7200 6/17/96 6/17/01 0
WPJG722 CHARLOTTE NC 75.9200 6/17/96 6/17/01 0
WPJG793 ALGONQUIN IL 157.7400 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJG793 EVANSTON IL 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJG793 LAKE FOREST IL 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJG793 LAKE ZURICH IL 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJG793 NORTHBROOK IL 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJG793 SCHAUMBURG IL 6/18/96 6/18/01 950110132 11/13/95 11/30/95
WPJK332 JACKSONVILLE FL 72.0600 7/3/96 7/3/01 0 6/27/96
WPJK332 JACKSONVILLE FL 72.2600 7/3/96 7/3/01 0 6/27/96
WPJK332 JACKSONVILLE FL 72.7200 7/3/96 7/3/01 0 6/27/96
WPJK332 JACKSONVILLE FL 72.9400 7/3/96 7/3/01 0 6/27/96
</TABLE>
PAGE 27
<PAGE> 180
PREFERRED NETWORKS, INC. FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
WPJK483 RALEIGH NC 72.7400 7/8/96 7/8/01 0 3/18/96
WPJK483 RALEIGH NC 72.8800 7/8/96 7/8/01 0 3/18/96
WPJK483 RALEIGH NC 75.8600 7/8/96 7/8/01 0 3/18/96
WPJK483 RALEIGH NC 75.9600 7/8/96 7/8/01 0 3/18/96
</TABLE>
PAGE 28
<PAGE> 181
PREFERRED NETWORKS, INC. ASSIGNED FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
KEJ890 BELLE MEADE NJ 152.6000 7/1/98 0 7/2/96
KNET827 IL 25.0000 1/13/93 1/13/98 0
KNET827 IL 50.0000 1/13/93 1/13/98 0
KNET827 IL 150.0000 1/13/93 1/13/98 0
KNET827 IL 174.0000 1/13/93 1/13/98 0
KNET827 IL 450.0000 1/13/93 1/13/98 0
KNET827 IL 470.0000 1/13/93 1/13/98 0
KNET827 IL 851.0000 1/13/93 1/13/98 0
KNET827 IL 866.0000 1/13/93 1/13/98 0
KNET827 IL 450.0000 1/13/93 1/13/98 0
KNET827 IL 470.0000 1/13/93 1/13/98 0
KNET827 IL 806.0000 1/13/93 1/13/98 0
KNET827 IL 821.0000 1/13/93 1/13/98 0
KNET827 IL 25.0000 1/13/93 1/13/98 0
KNET827 IL 50.0000 1/13/93 1/13/98 0
KNET827 IL 150.0000 1/13/93 1/13/98 0
KNET827 IL 174.0000 1/13/93 1/13/98 0
KNET827 IL 450.0000 1/13/93 1/13/98 0
KNET927 IL 470.0000 1/13/93 1/13/98 0
KNET827 IL 806.0000 1/13/93 1/13/98 0
KNET827 IL 821.0000 1/13/93 1/13/98 0
KNKB275 FORT LAUDERDALE FL 152.8400 4/5/95 7/1/98 0
KNKB275 WEST PALM BEACH FL 4/5/95 7/1/98 0
KNKB275 FORT LAUDERDALE FL 4/5/95 7/1/98 0
KNKB275 PERRINE FL 4/5/95 7/1/98 0
KNKB275 JUPITER FL 4/5/95 7/1/98 0
KNKB275 MIAMI FL 4/5/95 7/1/98 0
KNKB275 MIAMI FL 4/5/95 7/1/98 0
KNKB275 DEL REY FL 4/5/95 7/1/98 0
KNKB275 SUNRISE FL 4/5/95 7/1/98 0
KNKB275 HIALEAH FL 4/5/95 7/1/98 0
KNKB275 LOXAHATCHEE FL 4/5/95 7/1/98 0
KNKB275 KEY LARGO FL 4/5/95 7/1/98 0
KNKB392 JACKSONVILLE FL 158.1000 6/23/93 7/1/98 0
KNKB392 JACKSONVILLE BCH FL 6/23/93 7/1/98 0
KNKB392 JACKSONVILLE FL 6/23/93 7/1/98 0
KNKB956 TABERNACLE NJ 152.6000 4/1/99 0 7/2/96
KNKC476 WAYNESBORO GA 152.8400 8/2/89 7/1/98 0
KNKC476 THOMSON GA 8/2/89 7/1/98 0
KNKC476 NORTH AUGUSTA SC 8/2/89 7/1/98 0
KNKC864 UNION CITY NJ 152.6000 4/1/99 0 7/2/96
KNKC864 ATLANTIC CITY NJ 4/1/99 0 7/2/96
KNKC864 NEW YORK NY 4/1/99 0 7/2/96
KNKC864 NEW YORK NY 473.1875 4/1/99 0 7/2/96
KNKC864 BROOKLYN NY 152.6000 4/1/99 0 7/2/96
KNKC864 LONG ISLAND CITY NY 4/1/99 0 7/2/96
KNKC864 OCEANSIDE NY 959.8875 4/1/99 0 7/2/96
</TABLE>
PAGE 1
<PAGE> 182
PREFERRED NETWORKS, INC. ASSIGNED FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
KNKC864 TROY NY 152.6000 5/17/95 4/1/99 0
KNKC864 KINGSTON NY 5/17/95 4/1/99 0
KNKC864 GREENVILLE NY 5/17/95 4/1/99 0
KNKC864 NEWBURGH NY 5/17/95 4/1/99 0
KNKC864 NEW SALEM NY 5/17/95 4/1/99 0
KNKG726 LAKE BUENA VISTA FL 931.2625 5/26/93 4/1/99 0
KNKG726 ORLANDO FL 5/26/93 4/1/99 0
KNKG726 ORLANDO FL 5/26/93 4/1/99 0
KNKG726 ORLANDO FL 5/26/93 4/1/99 0
KNKG726 SANFORD FL 5/26/93 4/1/99 0
KNKG726 MELBOURNE FL 5/26/93 4/1/99 0
KNKG726 COCOA FL 5/26/93 4/1/99 0
KNKG726 TITUSVILLE FL 5/26/93 4/1/99 0
KNKG726 CHRISTMAS FL 5/26/93 4/1/99 0
KNKI670 SAINT AUGUSTINE FL 158.1000 8/2/89 7/1/98 0
KNKI793 STAMFORD CT 152.6000 4/1/99 0 7/2/96
KNKI793 STAMFORD CT 4/1/99 0 7/2/96
KNKI793 RIVERHEAD NJ 4/1/99 0 7/2/96
KNKI793 GLEN OAKS NY 4/1/99 0 7/2/96
KNKI793 SELDEN NY 4/1/99 0 7/2/96
KNKI793 GREENPORT NY 4/1/99 0 7/2/96
KNKI793 MANORVILLE NY 4/1/99 0 7/2/96
KNKI793 GLEN OAKS NY 4/1/99 0 7/2/96
KNKI793 WHITE PLAINS NY 4/1/99 0 7/2/96
KNKI793 BRONX NY 4/1/99 0 7/2/96
KPE342 ATLANTA GA 152.8400 8/2/89 7/1/98 0
KPE342 FAIRBURN GA 8/2/89 7/1/98 0
KPE342 DUNWOODY GA 8/2/89 7/1/98 0
KPE342 BUFORD GA 158.1000 8/2/89 7/1/98 0
KPE342 FAIRPLAY GA 8/2/89 7/1/98 0
KPE342 NEESE GA 8/2/89 7/1/98 0
KPE342 MARIETTA GA 8/2/89 7/1/98 0
KPE342 JERSEY GA 8/2/89 7/1/98 0
KPE342 ATLANTA GA 8/2/89 7/1/98 0
KPE342 CUMMING GA 8/2/89 7/1/98 0
KPE342 FAIRBURN GA 8/2/89 7/1/98 0
KPE342 ATLANTA GA 8/2/89 7/1/98 0
KPE342 ATLANTA GA 152.8400 8/2/89 7/1/98 0
WNDC982 AUGUSTA GA 466.0250 8/20/93 8/20/98 931890102 7/8/93 8/12/93
WNDC982 AUGUSTA GA 461.0250 8/20/93 8/20/98 931890102 7/8/93 8/12/93
WNDC982 AUGUSTA GA 157.7400 8/20/93 8/20/98 931890102 7/8/93 8/12/93
WNDC982 NORTH AUGUSTA SC 8/20/93 8/20/98 931890102 7/8/93 8/12/93
WNDC982 NORTH AUGUSTA SC 461.0250 8/20/93 8/20/98 931890102 7/8/93 8/12/93
WNDE582 MASSAPEQUA NY 157.7400 5/30/95 8/l/00 0
WNKT563 STONE MOUNTAIN GA 75.6600 5/6/94 5/6/99 932560160 9/13/93 12/16/93
WNKT563 STONE MOUNTAIN GA 5/6/94 5/6/99 932560160 9/13/93 12/16/93
</TABLE>
PAGE 2
<PAGE> 183
PREFERRED NETWORKS, INC. ASSIGNED FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WNKU838 ATLANTA GA 462.8250 6/1/94 6/1/99 932560158 9/13/93 12/16/93
WNKU838 CUMMING GA 6/1/94 6/1/99 932560158 9/13/93 12/16/93
WNKU838 FAIRPLAY GA 6/1/94 6/1/99 932560158 9/13/93 12/16/93
WNKU838 GRIFFIN GA 6/1/94 6/1/99 932560158 9/13/93 12/16/93
WNKU838 STONE MOUNTAIN GA 6/1/94 6/1/99 932560158 9/13/93 12/16/93
WNLA408 BATH NY 157.7400 0
WNLA408 SCIPIO CENTER NY 0
WNLA408 CORNING NY 0
WNLA408 INGLESIDE NY 72.7600 0
WNUR402 CARTERSVILLE GA 157.7400 9/3/93 9/3/98 931550084 6/4/93 6/24/93
WNUR402 ROME GA 9/3/93 9/3/98 931550084 6/4/93 6/24/93
WNUR402 WALESKA GA 9/3/93 9/3/98 931550084 6/4/93 6/24/93
WNUR611 NORCROSS GA 75.9200 2/22/93 2/22/98 0 12/18/92
WNUR611 NORCROSS GA 75.7800 2/22/93 2/22/98 0 12/18/92
WNUR611 NORCROSS GA 72.9800 2/22/93 2/22/98 0 12/18/92
WNVM402 ATLANTA GA 462.8000 11/18/93 11/18/98 0 8/17/93
WNVM402 ATLANTA GA 11/18/93 11/18/98 0 8/17/93
WNVM402 FAIRPLAY GA 11/18/93 11/18/98 0 8/17/93
WNVM402 MARIETTA GA 11/18/93 11/18/98 0 8/17/93
WNVM402 SUNNYSIDE GA 11/18/93 11/18/98 0 8/17/93
WNVN468 ARNCO MILLS GA 462.8000 10/28/93 10/28/98 0 8/17/93
WNVN468 CLERMONT GA 10/28/93 10/28/98 0 8/17/93
WNVN468 CUMMING GA 10/28/93 10/28/98 0 8/17/93
WNVN468 MACON GA 10/28/93 10/28/98 0 8/17/93
WNVN468 ROME GA 10/28/93 10/28/98 0 8/17/93
WNVN468 WALESKA GA 10/28/93 10/28/98 0 8/17/93
WNWA671 NEW BEDFORD MA 157.7400 0
WNWA671 JOHNSTON RI 0
WNWI664 WOOSTER OH 157.7400 6/17/96 5/21/01 903510017
WNXJ876 PHENIX CITY AL 157.7400 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 PHENIX CITY AL 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 FORSYTH GA 12/7/92 12/7/97 931060205 4/13/93 5/6/93
WNXJ876 LAGRANGE GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 MACON GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 SUNNYSIDE GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 THOMASTON GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 FORSYTH GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 MACON GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 LAGRANGE GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 SUNNYSIDE GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
WNXJ876 THOMASTON GA 7/30/93 7/30/98 931060205 4/13/93 5/6/93
</TABLE>
PAGE 3
<PAGE> 184
PREFERRED NETWORKS, INC. ASSIGNED FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WNZH214 MACON GA 157.7400 10/8/92 10/8/97 922440240
WPAD876 BRYANT AL 157.7400 6/2/93 6/2/98 0 3/31/93
WPAD876 BENTON TN 6/2/93 6/2/98 0 3/31/93
WPAD876 EVENSVILLE TN 6/2/93 6/2/98 0 3/31/93
WPAD876 LOOKOUT MTN TN 72.1400 6/2/93 6/2/98 0 3/31/93
WPAD876 LOOKOUT MTN TN 72.2200 6/2/93 6/2/98 0 3/31/93
WPAD876 LOOKOUT MTN TN 72.1200 6/2/93 6/2/98 0 3/31/93
WPAD876 LOOKOUT MTN TN 157.7400 6/2/93 6/2/98 0 3/31/93
WPAD876 SIGNAL MOUNTAIN TN 6/2/93 6/2/98 0
WPAI401 GREENSBORO NC 157.7400 8/14/92 8/14/97 913390128 4/9/96
WPAI401 GREENSBORO NC 75.6800 8/14/92 8/14/97 913390128 4/9/96
WPAI401 GREENSBORO NC 75.8400 8/14/92 8/14/97 913390128 4/9/96
WPAI401 HIGH POINT NC 157.7400 8/14/92 8/14/97 913390128 4/9/96
WPAI401 SALISBURY NC 8/14/92 8/14/97 913390128 4/9/96
WPAI401 WINSTON SALEM NC 8/14/92 8/14/97 913390128 4/9/96
WPAZ408 MOUNT VERNON IN 157.7400 11/13/92 11/13/97 922310142
WPBE764 FORSYTH GA 157.7400 12/7/92 12/7/97 920800385 4/30/92 7/2/92
WPEP777 AUGUSTA GA 72.3600 10/7/94 10/7/99 0 6/20/94 7/13/94
WPEP777 NORTH AUGUSTA SC 462.7500 10/7/94 10/7/99 0 6/20/94 7/13/94
WSM403 BIRMINGHAM AL 157.7400 8/30/93 8/30/98 0 5/26/93
</TABLE>
PAGE 4
<PAGE> 185
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
HUNTSVILLE AL 72.3800 0
HUNTSVILLE AL 72.4000 0
HUNTSVILLE AL 75.7200 0
HUNTSVILLE AL 75.7400 0
BENTONVILLE AR 157.7400 0
JACKSONVILLE AR 0
VAN BUREN AR 0
WEST MEMPHIS AR 0
JACKSONVILLE FL 0
SUN CITY FL 931.2625 0 2/7/96
SARASOTA FL 0 2/7/96
MACDILL AFB FL 0 2/7/96
WINTER HAVEN FL 0 2/7/96
PINELLAS PARK FL 0 2/7/96
PLANT CITY FL 0 2/7/96
NOKOMIS FL 0 2/7/96
PUNTA GORDA FL 0 2/7/96
TAMPA FL 0 2/7/96
HAINES CITY FL 0 2/7/96
ORLANDO FL 72.0400 0
ORLANDO FL 72.2400 0
ORLANDO FL 72.4000 0
ORLANDO FL 72.8000 0
TITUSVILLE FL 931.2625 0 6/10/96
SAINT AUGUSTINE FL 158.1000 0
NORCROSS GA 157.7400 0
NORCROSS GA 158.1000 0
ATLANTA GA 152.8400 0 7/23/96
ALBANY GA 72.0800 0
ALBANY GA 72.6400 0
ALBANY GA 75.6200 0
ALBANY GA 75.9200 0
MORRIS IL 157.7400 0 1/11/95
WICHITA KS 0
WICHITA KS 0
* FALMOUTH MA 0 8/1/96
* HINGHAM MA 0 8/1/96
HUNT VALLEY MD 0
* TOWSON MD 0
RALEIGH NC 72.6800 0
RALEIGH NC 72.8800 0
RALEIGH NC 75.4600 0
RALEIGH NC 75.7800 0
RALEIGH NC 72.6800 0
RALEIGH NC 75.4600 0
RALEIGH NC 75.7800 0
* PELHAM NH 157.7400 0 8/1/96
ALBUQUERQUE NM 0
ALBANY NY 0 1/11/95 3/30/95
WETHERSFIELD NY 0
BRISTOL NY 72.2800 0
BRISTOL NY 72.2600 0
DANSVILLE NY 0
DANSVILLE NY 72.2800 0
ASHLAND OH 157.7400 0
MILLERSBURG OH 0
</TABLE>
PAGE 1
<PAGE> 186
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
STRONGSVILLE OH 157.7400 0
AKRON OH 0
WINESBURG OH 0
* NORTH SCITUATE RI 0 8/1/96
NASHVILLE TN 72.3200 0 12/18/92
NASHVILLE TN 75.4600 0 12/18/92
* OLIVER SPRINGS TN 157.7400 0
* SIGNAL MOUNTAIN TN 0
AUSTIN TX 0
AUSTIN TX 0
BRYAN TX 0
CLEVELAND TX 0
GEORGETOWN TX 0
SILSBEE TX 0
FREDERICKSBURG VA 0
SPRINGFIELD VA 0
* CLERMONT GA 157.7400 940340163 2/3/94
CLINTON WA 157.7400 950110056 1/11/95 3/30/95
GRANITE FALLS WA 950110056 1/11/95 3/30/95
PORT TOWNSEND WA 950110056 1/11/95 3/30/95
QUILCENE WA 950110056 1/11/95 3/30/95
SEATTLE WA 950110056 1/11/95 3/30/95
SNOHOMISH WA 950110056 1/11/95 3/30/95
BELLEVUE WA 157.7400 950110083 11/13/95 12/1/95
BREMERTON WA 950110083 11/13/95 12/1/95
KIRKLAND WA 950110083 11/13/95 12/1/95
REDMOND WA 950110083 11/13/95 12/1/95
SEATTLE WA 950110083 11/13/95 12/1/95
SEATTLE WA 950110083 11/13/95 12/1/95
PENSACOLA FL 157.7400 950110086 1/11/95
ATTICA CENTER NY 157.7400 950110088 1/11/95 3/30/95
BUFFALO NY 950110088 1/11/95 3/30/95
LANCASTER NY 950110088 1/11/95 3/30/95
LITTLE FALLS NY 950110088 1/11/95 3/30/95
PERTH NY 950110088 1/11/95 3/30/95
SCHENECTADY NY 950110088 1/11/95 3/30/95
AUBURN NY 157.7400 950110089 1/11/95 3/30/95
BRUNSWICK NY 950110089 1/11/95 3/30/95
HOMER NY 950110089 1/11/95 3/30/95
SOUTH BRISTOL NY 950110089 1/11/95 3/30/95
ALBANY NY 950110089 1/11/95 3/30/95
BATAVIA NY 157.7400 950110114 1/11/95 7/18/95
EASTON NY 950110114 1/11/95 7/18/95
</TABLE>
PAGE 2
<PAGE> 187
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
FAIRPORT NY 157.7400 950110114 1/11/95 7/18/95
GRAND ISLAND NY 950110114 1/11/95 7/18/95
JOHNSTOWN NY 950110114 1/11/95 7/18/95
SYRACUSE NY 950110114 1/11/95 7/18/95
ALEXANDRIA LA 157.7400 952780117 10/5/95 1/5/96
HILLSBORO MO 952780117 10/5/95 1/5/96
OSAGE BEACH MO 952780117 10/5/95 1/5/96
SAINT CLAIR MO 952780117 10/5/95 1/5/96
SPRINGFIELD MO 952780117 10/5/95 1/5/96
HUNTSVILLE TX 157.7400 952780121 10/5/95 12/27/95
JASPER TX 952780121 10/5/95 12/27/95
JASPER TX 952780121 10/5/95 12/27/95
KIRBYVILLE TX 952780121 10/5/95 12/27/95
LIVINGSTON TX 952780121 10/5/95 12/27/95
WOODVILLE TX 952780121 10/5/95 12/27/95
COOK SPRINGS AL 157.7400 953630009 12/29/95 5/30/96
GAINESVILLE FL 953630009 12/29/95 5/30/96
WINNSBORO SC 953630009 12/29/95 5/30/96
LEESVILLE SC 157.7400 960330127 2/6/96 6/19/96
LITTLE MOUNTAIN SC 960330127 2/6/96 6/19/96
SALUDA SC 960330127 2/6/96 6/19/96
PROVO UT 157.7400 960400086 2/9/96
SALT LAKE CITY UT 960400086 2/9/96
COALVILLE UT 960400086 2/9/96
BLUFFDALE UT 960400086 2/9/96
OGDEN UT 960400086 2/9/96
TOOELE UT 960400086 2/9/96
LEEDS AL 157.7400 960790084 6/10/96
* ALABASTER AL 960790084 6/10/96
* MACON GA 960790084 6/10/96
CHARLOTTE NC 960790084 6/10/96
STERLING VA 960790084 6/10/96
CHICAGO IL 157.7400 961060194 4/15/96 7/29/96
LOGANSPORT IN 961060194 4/15/96 7/29/96
ROCHESTER IN 961060194 4/15/96 7/29/96
FRANKLIN IN 961060194 4/15/96 7/29/96
INDIANAPOLIS IN 961060194 4/15/96 7/29/96
* WARSAW IN 961060194 4/15/96 7/29/96
WAYNESBORO GA 462.7500 961070153 4/16/96 6/17/96
THOMSON GA 961070153 4/16/96 6/17/96
</TABLE>
PAGE 3
<PAGE> 188
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
RALEIGH NC 157.7400 961130010 4/22/96 7/8/96
TAMPA FL 157.7400 961140001 4/23/96
SEMINOLE FL 961140001 4/23/96
DUNEDIN FL 961140001 4/23/96
LAKELAND FL 961140001 4/23/96
CHERRY IL 157.7400 961290082 5/8/96 6/13/96
* CHICAGO IL 961290082 5/8/96 6/13/96
* LOVES PARK IL 961290082 5/8/96 6/13/96
* UNIVERSITY PARK IL 961290082 5/8/96 6/13/96
GARY IN 961290082 5/8/96 6/13/96
* MICHIGAN CITY IN 961290082 5/8/96 6/13/96
WESTMINSTER MD 157.7400 961290083 5/8/96 6/13/96
SILVER SPRING MD 961290083 5/8/96 6/13/96
VIRGINIA BEACH VA 961290083 5/8/96 6/13/96
NEWPORT NEWS VA 961290083 5/8/96 6/13/96
OAK HILL FL 157.7400 961290113 5/8/96 6/13/96
* KANKAKEE IL 961290113 5/8/96 6/13/96
DANBURY CT 157.7400 961380001 5/17/96 7/8/96
* VERONA NJ 961380001 5/17/96 7/8/96
* EAST BRUNSWICK NJ 961380001 5/17/96 7/8/96
* SAG HARBOR NY 961380001 5/17/96 7/8/96
* MONSEY NY 961380001 5/17/96 7/8/96
* HAPPAGUE NY 961380001 5/17/96 7/8/96
CHATSWORTH NJ 157.7400 961620049 6/10/96 7/24/96
CLAYTON NJ 961620049 6/10/96 7/24/96
HOPEWELL NJ 961620049 6/10/96 7/24/96
MILMAY NJ 961620049 6/10/96 7/24/96
PITTSGROVE NJ 961620049 6/10/96 7/24/96
VINELAND NJ 961620049 6/10/96 7/24/96
HUNT VALLEY MD 157.7400 961620050 6/10/96 7/24/96
* TOWSON MD 961620050 6/10/96 7/24/96
FREDERICKSBURG VA 961620050 6/10/96 7/24/96
SPRINGFIELD VA 961620050 6/10/96 7/24/96
COCOA FL 157.7400 961640001 6/12/96 7/24/96
SALISBURY MD 961640001 6/12/96 7/24/96
EDISON NJ 961640001 6/12/96 7/24/96
PALERMO NJ 961640001 6/12/96 7/24/96
MERIDEN CT 157.7400 961730003 6/21/96
</TABLE>
PAGE 4
<PAGE> 189
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
AVON CT 157.7400 961730003 6/21/96 7/30/96
IDA MI 961730003 6/21/96 7/30/96
BOWLING GREEN OH 961730003 6/21/96 7/30/96
SOUTH VIENNA OH 961730003 6/21/96 7/30/96
NEW SMYRNA BEACH FL 157.7400 961730004 6/21/96 7/30/96
DAYTONA BEACH FL 961730004 6/21/96 7/30/96
OCALA FL 961730004 6/21/96 7/30/96
OCALA FL 961730004 6/21/96 7/30/96
ORMOND BEACH FL 961730004 6/21/96 7/30/96
BUNNELL FL 961730004 6/21/96 7/30/96
SALT SPRINGS FL 157.7400 961730005 6/21/96 7/30/96
SAINT AUGUSTINE FL 961730005 6/21/96 7/30/96
SPRINGFIELD MA 961730005 6/21/96 7/30/96
PEABODY MA 961730005 6/21/96 7/30/96
ROCHESTER NY 961730005 6/21/96 7/30/96
PORTSMOUTH VA 961730005 6/21/96 7/30/96
AVON CT 157.7400 961760035 6/24/96 7/29/96
TORRINGTON CT 961760035 6/24/96 7/29/96
WATERBURY CT 961760035 6/24/96 7/29/96
* TAUNTON MA 157.7400 961770155 6/25/96 7/30/96
* WALTHAM MA 961770155 6/25/96 7/30/96
LEBANON OH 961770155 6/25/96 7/30/96
QUILCENE WA 157.7400 961780029 6/26/96 7/30/96
SEATTLE WA 961780029 6/26/96 7/30/96
SNOHOMISH WA 961780029 6/26/96 7/30/96
EVERETT WA 961780029 6/26/96 7/30/96
EVERETT WA 961780029 6/26/96 7/30/96
BROOKSVILLE FL 157.7400 961780138 6/26/96 7/29/96
DADE CITY FL 961780138 6/26/96 7/29/96
STARKE FL 961780138 6/26/96 7/29/96
CLAYTON MI 961780138 6/26/96 7/29/96
RICHMOND HILL GA 157.7400 961800004 6/28/96 7/29/96
BARNWELL SC 961800004 6/28/96 7/29/96
BARNWELL SC 462.7500 961800004 6/28/96 7/29/96
LA FOLLETTE TN 157.7400 961800004 6/28/96 7/29/96
MARYVILLE TN 961800004 6/28/96 7/29/96
FLORENCE AL 157.7400 961830007 7/1/96 7/29/96
CULMAN AL 961830007 7/1/96 7/29/96
GUNTERSVILLE AL 961830007 7/1/96 7/29/96
JEFF AL 961830007 7/1/96 7/29/96
MADISON AL 961830007 7/1/96 7/29/96
</TABLE>
PAGE 5
<PAGE> 190
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
GUNTERSVILLE AL 157.7400 961830007 7/1/96 7/29/96
GUNTERSVILLE AL 157.7400 961830008 7/1/96 7/29/96
BESSEMER AL 961830008 7/1/96 7/29/96
SYLACUGA AL 961830008 7/1/96 7/29/96
ALEXANDER CITY AL 961830008 7/1/96 7/29/96
WETUMPKA AL 961930008 7/1/96 7/29/96
FORT PAYNE AL 961830008 7/1/96 7/29/96
GAFFNEY SC 157.7400 961840011 7/2/96 7/29/96
GAFFNEY SC 961840011 7/2/96 7/29/96
SPARTANBURG SC 961840011 7/2/96 7/29/96
EASLEY SC 961840011 7/2/96 7/29/96
SPARTANBURG SC 961840011 7/2/96 7/29/96
SPARTANBURG SC 961840011 7/2/96 7/29/96
MACON GA 157.7400 961840012 7/2/96 7/29/96
CORDELE GA 961840012 7/2/96 7/29/96
LINCOLNTON GA 961840012 7/2/96 7/29/96
SANDERSVILLE GA 961840012 7/2/96 7/29/96
HIGGSTON GA 961840012 7/2/96 7/29/96
HILTON HEAD SC 961840012 7/2/96 7/29/96
HENDERSONVILLE SC 157.7400 961840013 7/2/96 7/29/96
CHARLESTON SC 961840013 7/2/96 7/29/96
CHARLESTON SC 961840013 7/2/96 7/29/96
FROGMORE SC 961840013 7/2/96 7/29/96
BLUFFTON SC 961840013 7/2/96 7/29/96
HILTON HEAD SC 961840013 7/2/96 7/29/96
MCINTOSH GA 157.7400 961850006 7/3/96 7/29/96
KINGS BAY GA 961850006 7/3/96 7/29/96
KINGSLAND GA 961850006 7/3/96 7/29/96
SAINT MARYS GA 961850006 7/3/96 7/29/96
WRENS GA 961850006 7/3/96 7/29/96
SMITHVILLE GA 961850006 7/3/96 7/29/96
* ALBANY GA 157.7400 961850007 7/3/96
GRAY GA 157.7400 961850008 7/3/96 7/29/96
VIENNA GA 961850008 7/3/96 7/29/96
SYLVESTER GA 961850008 7/3/96 7/29/96
CORDELE CRISP GA 961850008 7/3/96 7/29/96
TENNILLE GA 961850008 7/3/96 7/29/96
CEDARTOWN GA 157.7400 961850009 7/3/96 7/29/96
BREMEN GA 961850009 7/3/96 7/29/96
REIDSVILLE NC 961850009 7/3/96 7/29/96
BURLINGTON NC 961850009 7/3/96 7/29/96
</TABLE>
PAGE 6
<PAGE> 191
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
LEXINGTON NC 157.7400 961850009 7/3/96 7/29/96
HIGH POINT NC 961850009 7/3/96 7/29/96
ELLICOTT CITY MD 157.7400 961850010 7/3/96 7/29/96
GAMBRILLS MD 961850010 7/3/96 7/29/96
CHASE MD 961850010 7/3/96 7/29/96
JIM THORPE PA 961850010 7/3/96 7/29/96
SCRANTON PA 961850010 7/3/96 7/29/96
JOHNSTOWN PA 961850010 7/3/96 7/29/96
THOMASTON GA 157.7400 961870126 7/5/96 7/29/96
WARM SPRINGS GA 961870126 7/5/96 7/29/96
AMERICUS GA 961870126 7/5/96 7/29/96
CAMILLA GA 961870126 7/5/96 7/29/96
ARLINGTON GA 961870126 7/5/96 7/29/96
AMERICUS GA 961870126 7/5/96 7/29/96
REHOBOTH DE 157.7400 961870127 7/5/96 7/29/96
POTTSTOWN PA 961970127 7/5/96 7/29/96
READING PA 961870127 7/5/96 7/29/96
LANCASTER PA 961870127 7/5/96 7/29/96
PEN ARGYL PA 961870127 7/5/96 7/29/96
MANASSAS VA 961870127 7/5/96 7/29/96
HARVEST AL 157.7400 961870128 7/5/96 7/29/96
THOMASTON GA 961870128 7/5/96 7/29/96
JEFFERSON MD 961870128 7/5/96 7/29/96
BURLINGTON NC 961870128 7/5/96 7/29/96
LEXINGTON NC 961870128 7/5/96 7/29/96
WOODROW NC 961870128 7/5/96 7/29/96
AURORA CO 157.7400 961870163 7/5/96 7/29/96
DENVER CO 961870163 7/5/96 7/29/96
FORT COLLINS CO 961870163 7/5/96 7/29/96
FRANKTOWN CO 961870163 7/5/96 7/29/96
DENVER CO 961870163 7/5/96 7/29/96
AURORA CO 961870163 7/5/96 7/29/96
ARCADIA FL 157.7400 961870164 7/5/96
CHIEFLAND FL 961870164 7/5/96
BARBERVILLE FL 961870164 7/5/96
UMATILLA FL 961870164 7/5/96
WILDWOOD FL 961870164 7/5/96
WRENS GA 462.7500 961870165 7/5/96 7/26/96
WARR10R AL 157.7400 961870192 7/5/96 7/29/96
HERNDON VA 961870192 7/5/96 7/29/96
</TABLE>
PAGE 7
<PAGE> 192
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BESSEMER AL 157.7400 961870193 7/5/96 7/29/96
HUEYTOWN AL 961870193 7/5/96 7/29/96
SYLVESTER GA 961870193 7/5/96 7/29/96
POWDER SPRINGS GA 961870193 7/5/96 7/29/96
POWDER SPRINGS GA 462.8250 961870193 7/5/96 7/29/96
MABLETON GA 157.7400 961870193 7/5/96 7/29/96
MABLETON GA 462.8250 961870193 7/5/96 7/29/96
LOGANVILLE GA 157.7400 961870194 7/5/96 7/29/96
LOGANVILLE GA 462.8250 961870194 7/5/96 7/29/96
FORT VALLEY GA 157.7400 961870194 7/5/96 7/29/96
TOLEDO OH 157.7400 961870195 7/5/96 7/29/96
TOLEDO OH 961870195 7/5/96 7/29/96
* PHOENIX AZ 157.7400 961870196 7/5/96 7/29/96
TENNILLE GA 157.7400 961970873 7/16/96 7/31/96
SANDERSVILLE GA 961970873 7/16/96 7/31/96
HOPEWELL VA 961970873 7/16/96 7/31/96
FREDERICKSBURG VA 961970873 7/16/96 7/31/96
MARIPOSA CA 157.7400 961970874 7/16/96 7/31/96
SAN JOSE CA 961970874 7/16/96 7/31/96
WESTLEY CA 961970874 7/16/96 7/31/96
MODESTO CA 961970874 7/16/96 7/31/96
CARROLLTON GA 157.7400 961970875 7/16/96 7/30/96
CARROLLTON GA 961970975 7/16/96 7/30/96
CARROLLTON GA 961970875 7/16/96 7/30/96
DRAKETOWN GA 961970875 7/16/96 7/30/96
POMPANO BEACH FL 157.7400 962000172 7/18/96
NORFOLK VA 962000172 7/18/96
SUFFOLK VA 962000172 7/18/96
SUFFOLK VA 962000172 7/18/96
SUFFOLK VA 962000172 7/18/96
ELLENVILLE NY 157.7400 962010152 7/19/96 7/30/96
MONTICELLO NY 157.7400 962010153 7/19/96 7/30/96
SPOKANE WA 157.7400 962010159 7/19/96 7/30/96
PORT CHARLOTTE FL 157.7400 962010185 7/19/96
</TABLE>
PAGE 8
<PAGE> 193
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C>
JUPITER FL 157.7400 962010185 7/19/96
FORT MYERS FL 962010185 7/19/96
BRADENTON FL 962010185 7/19/96
BRADENTON FL 962010185 7/19/96
BEAR DE 157.7400 962040161 7/22/96
HAZLETTVILLE DE 962040161 7/22/96
NEW CASTLE DE 962040161 7/22/96
WALLS HUB DE 962040161 7/22/96
BRIDGEVILLE DE 962040161 7/22/96
WOODSIDE DE 962040161 7/22/96
ANGOLA DE 157.7400 962040162
FORT DRUM FL 962040162
UPPER DARBY PA 962040162
SPRINGFIELD PA 962040162
WEST ROCKHILL PA 962040162
POTTSTOWN PA 962040162
PUNTA GORDA FL 157.7400 962060001 7/24/96
BONITA SPRINGS FL 962060001 7/24/96
PRESTON MD 962060001 7/24/96
TRAPPE MD 962060001 7/24/96
EGG HARBOR NJ 962060001 7/24/96
MILLVILLE NJ 962060001 7/24/96
NORTHFIELD NJ 157.7400 962060002 7/24/96
MILMAY NJ 962060002 7/24/96
MORRISTOWN NJ 962060002 7/24/96
LAMBERTVILLE NJ 962060002 7/24/96
HAMMONTON NJ 962060002 7/24/96
CLAYTON NJ 962060002 7/24/96
WYE MILLS MD 157.7400 962060005 7/24/96
VINELAND NJ 962060005 7/24/96
VERNON NJ 962060005 7/24/96
VENTNOR NJ 962060005 7/24/96
PITTSGROVE NJ 962060005 7/24/96
PALERMO NJ 962060005 7/24/96
ASBURY PARK NJ 157.7400 962060012 7/24/96
BAYVILLE NJ 962060012 7/24/96
TINTON FALLS NJ 962060012 7/24/96
TOMS RIVER NJ 962060012 7/24/96
HAY MARKET NJ 962060012 7/24/96
LORTON VA 962060012 7/24/96
RICHMOND VA 157.7400 962060223 7/24/96
RICHMOND VA 962060223 7/24/96
PETERSBURG VA 962060223 7/24/96
</TABLE>
PAGE 9
<PAGE> 194
PREFERRED NETWORKS, INC. PENDING FCC LICENSES AS OF 8/5/96
<TABLE>
<CAPTION>
CALLSIGN CITY STATE FREQUENCY LIC DATE EXP DATE CONTNUMB PCIA DATE FCC DATE
-------- ---- ----- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
PETERSBURG VA 157.7400 962060223 7/24/96
PETERSBURG VA 962060223 7/24/96
DINWIDDIE VA 962060223 7/24/96
WEST PALM FL 157.7400 962070171 7/25/96 8/l/96
DELRAY BEACH FL 962070171 7/25/96 8/1/96
CULPEPER VA 962070171 7/25/96 8/1/96
CULPEPER VA 962070171 7/25/96 8/1/96
MANASSAS VA 962070171 7/25/96 8/1/96
SUFFOLK VA 962070171 7/25/96 8/1/96
* TAMPA FL 157.7400 962110155 7/29/96 8/1/96
BREMEN GA 157.7400 962120356 7/30/96 8/1/96
</TABLE>
PAGE 10
<PAGE> 195
SCHEDULE 5.17
SUBSIDIARIES AND CAPITALIZATION
1. PREFERRED NETWORKS SOUTHEAST, INC., a Delaware corporation
1000 shares of .10 par value common stock issued and outstanding in
the name of Preferred Networks, Inc., a Delaware corporation.
2. PREFERRED TECHNICAL SERVICES, INC., a Delaware corporation
1000 shares of the no par value common stock issued and outstanding in
the name of Preferred Networks, Inc., a Delaware corporation.
3 PNI SPECTRUM, LLC, a Georgia limited liability company
The percentage interests of the members are ninety nine percent (99%)
in the name of Preferred Networks, Inc., a Delaware corporation and
one percent (1%) in the name of Preferred Networks Southeast, Inc., a
Delaware corporation.
4. PNI SYSTEMS, LLC, a Georgia limited liability company
The percentage interests of the members are ninety nine percent (99%)
in the name of Preferred Networks, Inc., a Delaware corporation and
one percent (1%) in the name of Preferred Networks Southeast, Inc., a
Delaware corporation.
<PAGE> 196
SCHEDULE 5.18
TITLE TO PROPERTIES
Security Agreements dated June 7, 1996 between Associates Capital Services
Corporation and the Parent.
Security Agreement dated May 16, 1996 between Associates Capital Services
Corporation and the Parent.
Promissory Note and Credit Agreement dated January 26, 1996 between Glenayre
Electronics, Inc., and the Parent.
UCC-1 Financing Statement and UCC-2 Notice Filing for Real Estate Related
Collateral, granting a security in an NEC NEAX 2400 with Centigram Voice Mail
Telephone System located at 850 Center Way, Norcross, Georgia 30073, by and
between NEC America, Inc., as secured party, and Preferred Networks, Inc., as
debtor.
<PAGE> 1
EXHIBIT 11.1
PREFERRED NETWORKS, INC.
COMPUTATION OF PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Six Months Six Months
Ended Ended Ended
June 30, 1995 June 30, 1996 June 30, 1995
------------- --------------- ---------------
<S> <C> <C> <C>
Primary and fully diluted:
Weighted average common stock outstanding during
the period ..................................... 4,138,496 10,969,325 4,138,496
Series A Redeemable Convertible Preferred Stock
and Series B Redeemable Convertible Preferred
Stock dividends through January 31, 1996
converted into Common Stock upon consummation
of initial public offering(1)................... 855,492 258,723 855,492
Effect of Common Stock equivalents issued subsequent
to December 18, 1994 computed in accordance
with the treasury stock method as required
by the SEC(2)................................... 5,019,913 1,710,506 5,019,913
------------ ------------ -----------
Total ...................................... 10,013,901 12,938,554 10,013,901
============ ============ ===========
Net loss ............................................... $ (521,707) $ (2,978,688) $(1,028,497)
============ ============ ===========
Pro forma net loss per share of Common Stock ........... $ (.05) $ (.23) $ (.10)
============ ============ ===========
</TABLE>
- ---------------------------
(1) Pro forma net loss per share reflects securities and dividends converted
into Common Stock upon consummation of the initial public offering as if
such conversion had occurred at the beginning of the fiscal year. A
portion of Series A Redeemable Convertible Preferred Stock and all of Series
B Redeemable Convertible Preferred Stock is excluded here but reflected
below as cheap stock.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common Stock equivalents (including a portion of Series A Redeemable
Convertible Preferred Stock and all of Series B Redeemable Convertible
Preferred Stock) issued at prices equal to or below the initial public
offering price per share ("cheap stock") during the twelve month period
immediately preceding the initial filing date of the Company's Registration
Statement for its public offering have been included as outstanding for all
periods presented prior to the initial public offering.
<PAGE> 1
EXHIBIT 11.2
PREFERRED NETWORKS, INC.
COMPUTATION OF HISTORICAL NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1996 June 30, 1995
-------------- --------------
<S> <C> <C>
Primary and fully diluted:
Weighted average common stock outstanding during
the period ..................................... 14,417,732 4,138,496
Effect of Common Stock equivalents issued subsequent
to December 18, 1994 computed in accordance
with the treasury stock method as required
by the SEC(1)................................... -- 5,019,913
------------ ----------
Total ...................................... 14,417,732 9,158,409
============ ==========
Net loss ............................................... $ (1,477,928) $ (521,707)
Less: Accretion of Series A and Series B Redeemable
Convertible Preferred Stock ........................ -- (7,342)
Less: Series B Redeemable Convertible Preferred Stock
dividend requirements .............................. -- (49,014)
------------ ----------
Net loss attributable to Common Stock and Common
Stock equivalents .................................. $ (1,477,928) $ (578,063)
============ ==========
Historical net loss per share of Common Stock .......... $ (.10) $ (.06)
============ ==========
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
-------------- --------------
<S> <C> <C>
Primary and fully diluted:
Weighted average common stock outstanding during
the period ..................................... 10,969,325 4,138,496
Effect of Common Stock equivalents issued subsequent
to December 18, 1994 computed in accordance
with the treasury stock method as required
by the SEC(1)................................... 1,710,506 5,019,913
------------ -----------
Total ...................................... 12,679,831 9,158,409
============ ===========
Net loss ............................................... $ (2,978,688) $(1,028,497)
Less: Accretion of Series A and Series B Redeemable
Convertible Preferred Stock(2)...................... (202,235) (7,342)
Less: Series B Redeemable Convertible Preferred Stock
dividend requirements .............................. (353,651) (49,014)
------------ -----------
Net loss attributable to Common Stock and Common
Stock equivalents .................................. $ (3,534,574) $(1,084,853)
============ ===========
Historical net loss per share of Common Stock .......... $ (.28) $ (.12)
============ ===========
</TABLE>
- ---------------------------
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common Stock equivalents (including a portion of Series A
Redeemable Convertible Preferred Stock and all of Series B Redeemable
Convertible Preferred Stock) issued at prices equal to or below the initial
public offering price per share ("cheap stock") during the twelve month
period immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as
outstanding for all periods presented prior to the initial public
offering.
(2) Amount represents the portion of the accretion related to Series A
Redeemable Convertible Preferred Stock not treated as cheap stock.
<PAGE> 1
EXHIBIT 11.3
PREFERRED NETWORKS, INC.
COMPUTATION OF SUPPLEMENTAL PRO FORMA AND
SUPPLEMENTAL HISTORICAL NET LOSS PER SHARE
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
SUPPLEMENTAL SUPPLEMENTAL
PRO FORMA HISTORICAL
------------ ------------
<S> <C> <C>
Primary and fully diluted:
Weighted average common stock outstanding during the period . . . . . . . . . . 10,969,325 10,976,832
Series A Redeemable Convertible Preferred Stock converted into Common Stock
upon consummation of initial public offering(1) . . . . . . . . . . . . . . . 258,723 --
Effect of Common Stock equivalents issued subsequent to December 18, 1994
computed in accordance with the treasury stock method as required by the SEC(2) 1,710,506 1,710,506
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,938,554 12,687,338
=========== ===========
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,978,688) $(2,978,688)
Less: Accretion of Series A and Series B Redeemable Convertible Preferred Stock(3) . -- (202,235)
Less: Series B Redeemable Convertible Preferred Stock dividend requirements . . . . -- (353,651)
Plus: Reduction in interest expense from repayment of current and long-term notes
payable(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,000 112,000
----------- -----------
Net loss attributable for Common Stock and Common Stock equivalents . . . . . . . . . $(2,866,688) $(3,422,574)
=========== ===========
Supplemental net loss per share of Common Stock(4) . . . . . . . . . . . . . . . . . $ (.22) $ (.27)
=========== ===========
</TABLE>
- -----------------------------
(1) Pro forma net loss per share reflects securities and dividends converted
into Common Stock upon consummation of the initial public offering as if
such conversion had occurred at the beginning of the fiscal year. A
portion of the Series A Redeemable Convertible Preferred Stock and all of
the Series B Redeemable Convertible Preferred Stock is excluded here but
reflected below as cheap stock.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common Stock equivalents (including a portion of the Series A
Redeemable Convertible Preferred Stock and all of the Series B Redeemable
Convertible Preferred Stock) issued at prices equal to or below the initial
public offering price per share ("cheap stock") during the twelve month
period immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as
outstanding for all periods presented prior to the initial public offering.
(3) Represents the portion of the accretion related to Series A Redeemable
Convertible Preferred Stock not treated as cheap stock.
(4) Supplemental loss per share reflects the number of shares of Common Stock
issued upon consummation of the initial public offering used to repay $5.6
million in current and long-term notes payable as if such issuance had
occurred at the beginning of 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 14,962,352
<SECURITIES> 0
<RECEIVABLES> 735,172
<ALLOWANCES> 40,464
<INVENTORY> 260,504
<CURRENT-ASSETS> 0
<PP&E> 4,586,932
<DEPRECIATION> 1,133,816
<TOTAL-ASSETS> 19,606,954
<CURRENT-LIABILITIES> 1,300,896
<BONDS> 2,488,905
17,563,051
0
<COMMON> 563
<OTHER-SE> (1,746,461)
<TOTAL-LIABILITY-AND-EQUITY> 19,606,954
<SALES> 861,189
<TOTAL-REVENUES> 1,651,568
<CGS> 1,052,000
<TOTAL-COSTS> 1,393,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 32,903
<INTEREST-EXPENSE> 77,346
<INCOME-PRETAX> (521,707)
<INCOME-TAX> 0
<INCOME-CONTINUING> (521,707)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (521,707)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 28,941,156
<SECURITIES> 0
<RECEIVABLES> 1,006,283
<ALLOWANCES> 127,088
<INVENTORY> 1,419,911
<CURRENT-ASSETS> 31,585,865
<PP&E> 14,418,192
<DEPRECIATION> 2,213,003
<TOTAL-ASSETS> 46,664,774
<CURRENT-LIABILITIES> 2,224,678
<BONDS> 2,561,339
0
0
<COMMON> 1,443
<OTHER-SE> 41,877,314
<TOTAL-LIABILITY-AND-EQUITY> 46,664,774
<SALES> 1,049,797
<TOTAL-REVENUES> 2,494,647
<CGS> 1,307,720
<TOTAL-COSTS> 2,254,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 52,184
<INTEREST-EXPENSE> 13,237
<INCOME-PRETAX> (1,477,928)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,477,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,477,92)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 14,962,352
<SECURITIES> 0
<RECEIVABLES> 735,172
<ALLOWANCES> 40,464
<INVENTORY> 260,504
<CURRENT-ASSETS> 15,986,382
<PP&E> 4,586,932
<DEPRECIATION> 1,133,816
<TOTAL-ASSETS> 19,606,954
<CURRENT-LIABILITIES> 1,300,896
<BONDS> 2,488,905
17,563,051
0
<COMMON> 563
<OTHER-SE> (1,746,461)
<TOTAL-LIABILITY-AND-EQUITY> 19,606,954
<SALES> 1,522,435
<TOTAL-REVENUES> 2,983,563
<CGS> 1,884,366
<TOTAL-COSTS> 2,538,067
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 46,762
<INTEREST-EXPENSE> 155,054
<INCOME-PRETAX> (1,028,497)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,028,497)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,028,497)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 28,941,156
<SECURITIES> 0
<RECEIVABLES> 1,006,283
<ALLOWANCES> 127,088
<INVENTORY> 1,419,911
<CURRENT-ASSETS> 31,585,865
<PP&E> 14,418,192
<DEPRECIATION> 2,213,003
<TOTAL-ASSETS> 46,664,774
<CURRENT-LIABILITIES> 2,224,678
<BONDS> 2,561,339
0
0
<COMMON> 1,443
<OTHER-SE> 41,877,314
<TOTAL-LIABILITY-AND-EQUITY> 46,664,774
<SALES> 2,086,177
<TOTAL-REVENUES> 4,863,180
<CGS> 2,668,719
<TOTAL-COSTS> 4,356,799
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 101,087
<INTEREST-EXPENSE> 155,182
<INCOME-PRETAX> (2,978,688)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,978,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,978,688)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
