UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1999
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: 1-13002
AQUIS COMMUNICATIONS GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3281446
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1719A Route 10, Suite 300, Parsippany, NJ 07054
- ----------------------------------------- ------------------------------------
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-8000
(Former name, former address and former fiscal year,
if changed since last report)
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 for 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 |_|
As of September 30, 1999 there were 16,371,000 shares of the Registrant's Common
Stock outstanding.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
INDEX To Form 10-Q
Page
----
Part I Financial Information:
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998................................................ 3
Condensed Consolidated Statements of Operations for the
Three and Nine Month Periods Ended September 30, 1999 and 1998....... 4
Condensed Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1999 and 1998................. 5
Notes to Condensed Consolidated Financial Statements................. 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 12
Item 3 - Quantitative and Qualitative Disclosures
About Market Risks............................................ 17
Part II Other Information:
Item 2 - Changes in Securities........................................... 18
Item 4 - Submission of Matters to a Vote of Security Holders............. 18
Item 5 - Other Information............................................... 18
Item 6 - Exhibits and Reports on Form 8-K................................ 19
Signature .............................................................. 20
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share and per share data)
September 30, December 31,
ASSETS: 1999 1998
-------- --------
Current assets:
Cash $ 352 $ --
Accounts receivable, net of allowance
for doubtful accounts of $946 at
September 30, 1999 and $490 at
December 31, 1998 5,450 2,061
Inventory 1,850 2,076
Prepaid expenses and other 2,823 1,012
-------- --------
Total current assets 10,475 5,149
Fixed assets, net 10,029 10,107
Intangible assets, net 20,933 16,749
Deferred charges and other assets 1,910 330
-------- --------
Total assets $ 43,347 $ 32,335
-------- --------
LIABILITIES:
Current liabilities:
Accounts payable $ 6,780 $ 1,769
Accrued expenses 1,625 236
Deferred revenue 968 1,033
Customer deposits 570 577
Current maturities of capital lease 225 --
Notes payable to stockholders -- 520
-------- --------
Total current liabilities 10,168 4,135
Long term debt 25,315 --
Note payable -- 4,150
Payable to Bell Atlantic Corp.
and affiliates -- 18,535
Capital lease obligations, net of
current maturities 986 --
-------- --------
Total liabilities 36,469 26,820
-------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000
shares authorized, none issued -- --
Common stock, $0.01 par value, authorized -
75,000,000 shares, 16,371,000 and
8,892,000 shares issued and outstanding at
September 30, 1999 and December 31, 1998,
respectively 164 89
Additional paid in capital 13,084 5,962
Accumulated deficit (6,130) (296)
Note receivable from stockholder (240) (240)
-------- --------
Total stockholders' equity 6,878 5,515
-------- --------
Total liabilities and stockholders' equity $ 43,347 $ 32,335
======== ========
See notes to condensed consolidated financial statements. 3
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Predecessor Predecessor
Company Company
------------ ------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Paging services $ 8,461 $ 6,257 $ 22,572 $ 17,051
Equipment sales 256 668 623 2,653
------------ ------------ ------------ ------------
Total revenues 8,717 6,925 23,195 19,704
------------ ------------ ------------ ------------
Operating expenses:
Paging services 2,062 1,342 5,603 3,536
Cost of equipment sales 288 716 766 1,923
Technical operations 1,718 973 3,693 2,498
Sales and marketing 1,091 942 2,728 2,871
General and administrative 1,885 1,323 4,951 4,292
Depreciation and amortization 3,072 1,042 7,942 3,094
Provision for doubtful accounts 216 223 685 665
Costs of abandoned business combination 355 -- 355 --
------------ ------------ ------------ ------------
Total operating expenses 10,687 6,561 26,723 18,879
------------ ------------ ------------ ------------
Operating (loss) income (1,970) 364 (3,528) 825
Gain on disposal of paging equipment 29 -- 29 --
Interest expense, net (761) (131) (2,335) (131)
------------ ------------ ------------ ------------
(Loss) income before income taxes (2,702) 233 (5,834) 694
Provision for income taxes -- (96) -- (345)
------------ ------------ ------------ ------------
Net (loss) income $ (2,702) $ 137 $ (5,834) $ 349
============ ============ ============ ============
Net loss per common share:
- Basic and diluted $ (0.17) $ (0.43)
============ ============
Weighted average common shares outstanding 16,371,000 13,529,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements. 4
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
Company
-------------
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (5,834) $ 349
Adjustments to reconcile net (loss)
income to net cash provided by operating activities:
Amortization of original issue discount on notes -- 62
Value ascribed to common stock issued to officer -- 22
Depreciation and amortization 7,942 3,094
Deferred expenses 102 (632)
Provision for doubtful accounts 406 665
Costs of abandoned business combination(s) 355 --
Changes in assets and liabilities, net of
business acquired:
Accounts receivable (2,967) (861)
Due from affiliates and intercompany transfers -- (1,418)
Inventory (795) (823)
Prepaid expenses and other current assets (329) (318)
Accounts payable and accrued expenses 4,591 1,825
Deferred revenues and customer deposits (774) 113
-------- --------
Net cash provided by operating activities 2,697 2,078
-------- --------
Cash flows from investing activities:
Business acquisitions (18,940) --
Capital expenditures (1,171) (3,288)
Acquisition deposits (1,322) (500)
Deferred business acquisition costs (1,027) (369)
Sale of fixed assets 470 404
-------- --------
Net cash used in investing activities (21,990) (3,753)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 7
Proceeds from sale of notes to stockholders -- 750
Issuance of long term debt 25,315 --
Repayment of notes payable to stockholders (520) --
Repayment of notes payable (4,150) --
Repayment of capital lease obligations (1,608) --
Capital lease obligations incurred 1,314 --
Due to affiliates -- 1,075
Deferred financing and other costs (706) (110)
-------- --------
Net cash provided by financing activities 19,645 1,722
-------- --------
Increase in cash 352 47
Cash, beginning of period -- 31
-------- --------
Cash, end of period $ 352 $ 78
======== ========
</TABLE>
See notes to condensed consolidated financial statements. 5
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except for share information)
1. Basis of Presentation:
On March 31, 1999, a wholly owned subsidiary of Paging Partners
Corporation ("Paging Partners"), merged with Aquis Communications, Inc.
("ACI") in a transaction accounted for as a reverse acquisition with ACI
as the accounting acquirer (see Note 2). At such time, Paging Partners
changed its name to Aquis Communications Group, Inc. (the "Company"). On
June 15, 1999, a wholly-owned subsidiary of the Company entered into a
stock purchase agreement with SunStar Communications, Inc. in transaction
that was accounted for as a purchase (see Note 4).
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its subsidiaries, and reflect the
aforementioned merger with Paging Partners (see Note 2) and the
acquisition of SunStar Communications, Inc. (see Note 4), and the
acquisition of the net assets of Bell Atlantic Paging, Inc. ("BAPCO" or
the "Predecessor Company") (see Note 3) on December 31, 1998. These
statements should be read in conjunction with the historical financial
statements, and notes thereto, of ACI and BAPCO included in the Paging
Partners Proxy Statement dated March 11, 1999. All material intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments considered necessary by management to present
fairly the consolidated financial position as of September 30, 1999, and
the consolidated results of operations and the consolidated cash flows for
the three and nine month periods ended September 30, 1999 and 1998. The
historical financial statements prior to March 31, 1999, are those of ACI.
ACI had no operating activities prior to the acquisition of BAPCO on
December 31, 1998. The statements of operations and of cash flows for the
nine months ended September 30, 1998 have been derived from the financial
statements of the Predecessor Company for such period. The Predecessor
Company financial statements include allocations of certain Bell Atlantic
Corporation ("Bell Atlantic") revenues and expenses. Management believes
that these allocations are reasonable. However, the revenues and expenses
allocated are not necessarily indicative of the costs that would have been
incurred if the Predecessor Company had performed or procured these
functions as a separate entity. All adjustments reflected in the
accompanying unaudited condensed consolidated financial statements are of
a normal recurring nature.
The results of operations for the respective interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. Merger and Recapitalization:
On November 6, 1998, ACI entered into a merger agreement with Paging
Partners and its wholly-owned subsidiary whereby each share of ACI common
stock was exchanged for 88.92076 shares of Paging Partners' common stock
(the "Merger"). The Merger was consummated on March 31, 1999, and has been
accounted for as a recapitalization of Paging Partners with ACI as the
acquirer (reverse acquisition) under the purchase method of accounting in
accordance with Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations." The aggregate purchase price of $6,071, which
includes transaction costs, has been allocated to the net assets acquired
based upon their estimated fair market values. The purchase price was
determined by using the average quoted stock price of Paging Partners a
few days before and after the date of the Merger. Intangible assets of
approximately $4,400 (principally FCC licenses and customer lists) are
being amortized over three to ten years on a straight-line basis. The
assets and
Continued 6
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
liabilities recorded in connection with the purchase price allocation are
based on preliminary estimates of fair value; actual adjustments will be
based on final analyses of fair values that are currently in progress. No
material changes between preliminary and final purchase price allocations
are expected.
The following unaudited pro forma information presents a summary of the
combined results of operations of Paging Partners and the Predecessor
Company as if the Predecessor Company Acquisition (see Note 3) and the
Merger occurred on January 1, 1998.
Predecessor
Company Company
------------ ------------
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
------------ ------------
Revenue $ 25,469 $ 27,206
Net loss $ (6,179) $ (5,617)
Net loss per common share $ (0.38)
The pro forma results are based on various assumptions and are not
necessarily indicative of what would have occurred had these transactions
been consummated on January 1, 1998.
3. Predecessor Company Acquisition:
On December 31, 1998, ACI acquired the net assets of BAPCO and the paging
frequencies and the paging network infrastructure owned by various Bell
Atlantic operating telephone companies for approximately $29,200,
including transaction costs. The acquisition was accounted for as a
purchase in accordance with APB Opinion No. 16. The aggregate purchase
price was allocated to the net assets acquired based on their estimated
fair market values.
Subsequent to the acquisition and during the quarter ended June 30, 1999,
Bell Atlantic and ACI completed negotiations and settled certain
post-closing disputes. These negotiations pertained to the reimbursement
to BAPCO and assumption by ACI of certain liabilities in excess of amounts
originally acknowledged by ACI, and resulted in ACI's assumption of
certain additional current liabilities. On June 30, 1999, the Company paid
the settlement amount in full and, in addition, exercised its negotiated
right to prepay the outstanding balance of the purchase price at a
significantly discounted amount. Funding for retirement of this debt was
provided through the credit facility described in note 6. This settlement
did not have a material effect on the Company's financial position or the
results of its operations or cash flows.
Continued 7
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
4. Mergers and Acquisitions:
SunStar Communications, Inc.:
On June 15, 1999, a wholly-owned subsidiary of the Company, entered into a
Stock Purchase Agreement (the "Agreement") with SunStar Communications,
Inc. ("SunStar"), an Arizona corporation and SunStar One, LLC., an Arizona
limited liability company. SunStar sells secure internet services over an
intelligent private network, provides dial-up internet access services to
corporate and individual subscribers and can provide enhanced security
standards for user authentication. SunStar currently provides access
services to nearly 900 internet users. Pursuant to the Agreement, SunStar
Communications, Inc. became a wholly-owned subsidiary of the Company.
Total consideration paid was $275 cash and 1,150,000 shares of the
Company's common stock. The aggregate purchase price, including
transaction costs, has been allocated to the net assets acquired based on
their estimated fair market values. Intangible assets of approximately
$2,002 are being amortized on a straight-line basis over three to not more
than 10 years. Any adjustments, which are not expected to be material,
will be based on final analysis of fair values, which is currently in
progress. Neither the assets, revenues nor results of operations of
SunStar were material to those of the Company. However, taken as an
aggregate total, this purchase and the other pending acquisitions could be
material if a sufficient number of these transactions are completed.
Pursuant to the Agreement, the Company and SunStar One, LLC entered into a
Registration Rights Agreement under which the Company agreed to register
the shares, under the Securities Act of 1933, issued to SunStar One LLC by
December 31, 1999.
5. Business Developments:
ABC Paging:
On September 28, 1999, Aquis Wireless Communications, Inc. ("Wireless"),
formerly known as Aquis Communications, Inc., a wholly-owned subsidiary of
Aquis Communications Group, Inc., along with its parent, entered into an
Asset Purchase Agreement (the "Agreement") with ABC Cellular Corporation
and ABC Paging, Inc., both Florida corporations (collectively "ABC"). ABC
services about 38,000 paging units in South Florida. The closing is
subject to financing and FCC and other approvals, certain conditions that
must be met prior to closing, and provides for cash consideration of
$2,750, subject to certain adjustments. This transaction will be accounted
for as a purchase, and the consideration paid will be allocated first, to
the net tangible assets acquired based on their approximate fair market
values, then, any excess will be allocated to FCC licenses, subscriber
lists, goodwill and other intangible assets. ABC's assets, revenues and
results of operations are not material in relation to those of the
Company.
Francis Communications:
On June 10, 1999, Wireless, along with its parent, entered into an Asset
Purchase Agreement with Francis Communications Texas, Inc., a Texas
corporation, and Francis Communications I, Ltd., an El Paso based Texas
limited partnership. As of June 30, 1999, this partnership was expected to
provide paging services to approximately 24,000 paging units in the El
Paso, Las Cruces and Juarez, Mexico metropolitan areas. The transaction
includes conditions precedent to the closing, the fulfillment of which is
presently in dispute. The Company has indicated its willingness to close
this transaction if the parties could agree to an appropriate reduction of
the current purchase price of $4,000 cash and 100,000 shares of the
Company's common stock. The parties are currently re-evaluating and
re-negotiating the purchase price and have
Continued 8
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
agreed to refrain from making a final determination or initiating any
legal action pending an emergency meeting of the Company's Board of
Directors scheduled for November 16, 1999.
Intelispan, Inc.:
On November 8, 1999, the Company announced the termination of discussions
concerning the June 21, 1999 Memorandum of Understanding to merge with
Intelispan, Inc., a business based in Scottsdale, Arizona. Intelispan
provides secure virtual private global network access and public key
infrastructure ("PKI") services to its subscribers. Costs to identify,
evaluate, and negotiate the merger with Intelispan have been written off
in the current quarter in the amount of $355.
COMAV Corporation:
The Company and Wireless have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of October 1, 1999, with COMAV
Corporation, a northeastern facilities-based local exchange carrier and
reseller of long distance telephone services. The Merger Agreement was
approved by the shareholders of COMAV on November 9, 1999. This
transaction is subject, among other conditions, to the procurement of
financing to fund COMAV's operations. To date, the Company has funded
COMAV's operations to the extent of $155.
SourceOne Wireless, Inc. Management Agreement:
On August 2, 1999, the Company entered into an Asset Purchase Agreement
(the "Purchase Agreement") and Agreement Pending Purchase Closing (the
"Agreement") with SourceOne Wireless, Inc. and two of its affiliates
("SOWI"). SOWI and its affiliates filed voluntary petitions for relief
under Chapter 11 with the United States Bankruptcy Court in the Northern
District of Illinois between April 29 and July 2, 1999. SOWI provides
facilities-based one-way paging services to subscribers in certain
midwestern states that are specified in this Agreement. The Agreement
provides that ACI will manage the day-to-day operations of certain SOWI
businesses pending closing of the associated Purchase Agreement. This
closing is subject to various approvals, including that of the Bankruptcy
Court and the FCC. Recently concluded negotiations have resulted in a
reduced purchase price of $2,250 in cash and $1,500 in shares of the
Company's 7.5% cumulative preferred stock. In the event that the Purchase
Agreement cannot be closed, then ACI will return control of these
operations to SOWI and will receive a $375 break-up fee. ACI's management
fees are based on profits generated from operations, changes in subscriber
receivables and certain other factors related to working capital changes.
Net estimated realizable fees earned during the current period were $85.
Other:
The Company has made various refundable earnest money deposits totaling
$1,322 related to pending acquisitions at September 30, 1999, and has
included this sum in prepaid and other current assets. The aggregate
effect of the pending business combinations could have a material effect
on the Company's results of operations and financial condition.
6. Long-Term Debt:
On October 23, 1998, ACI entered into a five-year term loan agreement with
FINOVA Capital Corporation ("FINOVA") which provides a $30,000 credit
facility. The facility consists of an initial loan of $20,000, a $500 loan
for the Merger funded at the Merger date (the "Merger Loan"), an
additional loan in an amount up to $1,500 to be drawn down at the
Company's request (the "Subsequent Loan"), and an acquisition line
Continued 9
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
of credit, approximately $4,700 of which has not been utilized. The
initial, Merger and Subsequent Loans have been drawn in full. The FINOVA
loan has a term of five years at an interest rate based on Citibank,
N.A.'s corporate base rate plus 175 basis points. The Company may also
elect to have interest on a part of the FINOVA loan based on a London
Inter-Bank Official Overnight Rate plus 425 basis points. Repayments of
principal are scheduled to begin on July 1, 2000, and are required
quarterly. A final balloon payment is scheduled for December 31, 2003.
This term loan is secured by all of the Company's assets, presently owned
and acquired subsequently, and all issued and outstanding capital stock
and warrants, options and other rights to acquire capital stock of ACI.
This loan agreement also contains various covenants, including
restrictions on capital expenditures and compliance with certain financial
ratios.
In addition, the Company refinanced the capital lease obligations due to
Motorola, which were assumed as a result of the merger with Paging
Partners. Terms of the new obligation include a principal amount of
$1,300, a 60-month repayment schedule, an interest rate indexed to the
yield for five year Treasury Notes, and a security interest in the
underlying equipment.
In connection with the termination of the merger negotiations with
Intelispan, costs that were previously capitalized have now been charged
against current period earnings. The Company's lender has modified certain
financial covenants contained in the loan agreement to exclude up to $360
of costs written off in connection with the Intelispan termination when
computing "Net Income" as defined in the loan agreement. The revised
covenant calculation is applicable for all relevant periods affected by
these costs.
7. Income Taxes:
The Company incurred operating losses for both book and tax purposes
during the periods presented for 1999. A valuation allowance has been
provided in the full amount of the tax benefits that may arise from future
possible utilization of these net operating losses ("NOLs"). NOLs
available to offset future Federal taxable income total approximately
$13.6 million and will expire between 2009 and 2014.
8. Net Loss per Common Share:
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share", which requires a dual presentation of basic and
diluted earnings per share ("EPS"). Basic EPS is based on the weighted
average number of shares outstanding during the periods presented. Diluted
EPS reflects the potential dilution that could occur if options, warrants,
convertible securities or other contracts requiring the issuance of common
stock were converted into common stock during the periods presented. The
Company has not presented diluted EPS because the effect would be
anti-dilutive.
Continued 10
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
9. Supplemental Cash Flow Data:
Businesses Acquired:
During the current year, the Company has acquired two businesses as
described in notes 2 and 4. Consideration paid consisted primarily of
non-cash assets, as follows:
Fair value of assets acquired $ 11,217
Liabilities assumed (3,262)
Exchange of common stock (7,197)
Accrued transaction costs (183)
--------
Cash paid 575
Less: cash acquired 170
--------
Net cash paid $ 405
========
The Company has paid cash for interest during the nine months ended
September 30, 1999 in the amount of $1,874 and has also paid other fees to
obtain its funding and for letters of credit in the amount of $298.
Continued 11
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Organization and Basis of Presentation
On March 31, 1999 a wholly-owned subsidiary of Paging Partners Corporation
("Paging Partners") merged with Aquis Communications, Inc. ("ACI") in a
transaction accounted for as a reverse acquisition with ACI as the accounting
acquirer (see Note 2 to the condensed consolidated financial statements). At
such time, Paging Partners changed its name to Aquis Communications Group, Inc.
(the "Company"). ACI had no operating activities prior to the acquisition of the
Bell Atlantic paging business ("BAPCO" or the "Predecessor Company"), on
December 31, 1998. See Note 3 to the condensed consolidated financial
statements. The historical financial results of operations prior to March 31,
1999 are those of ACI. The financial statements for the nine-month period ended
September 30, 1998 have been derived from the financial statements of the
Predecessor Company for such period, and include certain reclassifications to
enable uniform accounting presentations for the periods presented. See the
columns denoted "ACI" and the "Predecessor Company" representing the successor
periods and predecessor periods, respectively, in the statements of operations
and of cash flows for the nine-month periods ended September 30, 1999 and 1998,
included in this report.
The results of operations of the Predecessor Company for the nine-month period
ended September 30, 1998 include certain revenues and expenses allocated by Bell
Atlantic Corporation and its affiliates ("Bell Atlantic"). The provision for
income taxes was allocated to the Predecessor Company as if it were a separate
taxpayer. Also, certain employee benefit costs were allocated based on staffing
levels. Accordingly, the results of operations and financial position of the
Predecessor Company may not be the same as would have occurred had the
Predecessor Company been an independent entity and operated by ACI management.
This discussion should be read in conjunction with the condensed consolidated
financial statements of the Company and the notes thereto.
General
The Company markets one-way paging service and equipment to customers directly
and through resellers. The Company also offers its customers both customer owned
and maintained equipment or lease options for equipment. In addition, with the
acquisition of SunStar Communications, Inc. (see footnote 4 to the condensed
consolidated financial statements), the Company began offering both secure and
general dial-up internet access services effective July 1, 1999.
During the three and nine months ended September 30, 1999, the Company generated
approximately 93% and 94%, respectively, of its revenue from fixed periodic fees
for paging services that are not generally dependent on usage. To a smaller
extent, revenue is also earned from certain usage-based services provided
primarily to resellers and from sales of pagers. Consequently, the ability to
recover initial operating, selling and marketing costs and to achieve
profitability is dependent on the average duration of each customer's
subscription period. For as long as a subscriber continues to utilize the
service, operating results benefit from the recurring fixed fee payments without
the requirement of any incremental selling expenses. Conversely, customer
disconnections adversely affect operating results. Each month a percentage of
existing customers have their service terminated for reasons including failure
to pay, dissatisfaction with service or coverage limitations, and switching to
competing service providers. The average of the monthly disconnection rates (not
weighted and excluding the effects from the Paging Partners subscriber base) for
the nine month periods ended September 30, 1999 and 1998, were 3.3% and 2.8%,
respectively. Including the stabilizing effects of the Paging Partners reseller
base added April 1, the churn rate was 2.6% for the nine months in 1999.
Continued 12
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Revenues
Paging service revenues for the nine-month periods ended September 30, 1999 and
1998 were $22,572 and $17,051, respectively, an increase of approximately
$5,521, or more than 32%. Similarly, services revenues of $8,461 in the three
months ended September 30, 1999 increased by $2,204, or about 35%, over revenues
of $6,257 during the three months of the year-earlier period. The increases in
service revenues for both periods was attributable to the increase in the number
of subscribers, resulting primarily from growth via the March 31, 1999 Paging
Partners merger. Partially offsetting these increases were decreases in revenues
from equipment sales of $412 and $2,030 during the three and nine month periods,
respectively. The decreases were due to lower per-unit sale prices attributable
to certain promotions initiated by the Company in 1999, and fewer units sold due
to a smaller average sales force in the current year and a reduction in billings
to terminated customers for unreturned units.
Cost of Paging Services
Cost of service consists principally of fees paid to third party carriers, and,
to a lesser extent, to message dispatch companies. Third party carriers are
utilized when a customer requires service outside of ACI's service area, and are
most commonly used to provide nationwide coverage. Increases in costs of such
services were incurred in the amounts of $720 and $2,067 during the three and
nine month periods, respectively. The increases are attributable to customer
growth, and an increase in customer demand for services such as wide-area,
nationwide, alphanumeric, and message dispatch services.
Cost of Equipment Sales
The cost decrease of $457 during the current three-month period was primarily
due to a decrease in the number of units sold and, to a lesser extent, lower
vendor prices. During the nine-month periods a decrease was also realized, in
the amount of $1,186, which is attributable to the same factors. The decrease in
comparative gross profit margins during the nine month periods is primarily the
result of the Predecessor Company's practice of billing terminated customers for
unreturned units on an unreserved basis, rather than writing such units off, net
of units actually recovered.
Technical Operations
Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $1,718 and $3,693 in the three and nine-month periods
ended September 30, 1999, respectively, as compared to $973 and $2,498 in the
year-earlier periods. The elimination of the 1998 Bell Atlantic network
allocations was offset by external unsubsidized third party rates and costs for
transmitter and terminal site rents, telephone company access charges, and
personnel costs in the current year periods. In addition, incremental costs were
required to operate and maintain the Company's expanded network resulting from
the merger with Paging Partners on March 31, 1999.
Sales and Marketing
Selling and marketing include the cost to acquire and retain subscribers,
operating costs associated with the sales and marketing organizations, and other
advertising and marketing expenses. These costs decreased approximately 5%
during the nine-month periods ended September 30, 1999 in comparison to the
corresponding period ended in 1998. These decreases resulted from a reduction in
salary, benefit and commission expense in 1999 as a result of a smaller average
sales force and related lower commissionable sales volume and travel costs.
These cost savings
Continued 13
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
were partially offset by an increase in print advertising expenses. For the
three-month periods ended September 30, 1999 and 1998, costs increased almost
16% as a result of the openings of additional sales offices in more desirable
locations, a small corresponding increase in sales and support staff and related
sales office and selling costs.
General and Administrative
General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. As a percentage of
revenue, these costs were held steady over the comparative nine-month periods at
21.3% and 21.8% for 1999 and 1998, respectively. For the three-month periods,
costs increased from 19.1% of revenues in 1998 to 21.6% in 1999. However,
comparison of these expenses is not necessarily meaningful because the
Predecessor Company amounts were based on cost allocations, rather than actual
direct costs, to Bell Atlantic. Comparison of the nine-month periods ended
September 30, 1999 and 1998 include a 2% increase in employment costs and
increased facility and insurance costs partially offset by a significant
decrease in billing costs.
Depreciation and Amortization
Depreciation and amortization in both current periods increased over those
recorded during corresponding periods in 1998. Bell Atlantic, the Predecessor
Company, recorded the cost of the use of the network and communications
operating assets through intercompany charges from the affiliated operating
telephone companies that owned the assets during 1998. In substance, the
Predecessor Company leased these assets while the Company, as owner and
operator, allocates their costs to operations through depreciation and
amortization charges. The increases in depreciation and amortization are also
attributable to the higher values allocated to the assets upon their acquisition
from the Bell Atlantic companies and through the merger with Paging Partners.
Pursuant to both acquisitions, tangible and intangible assets were valued at
their then-current fair market values, which was in excess of the historical
costs recorded previously.
Abandoned Business Combination
On November 8, 1999, the Company announced the termination of discussions
concerning the June 21, 1999 Memorandum of Understanding to merge with
Intelispan, Inc. Current period earnings have been charged for previously
capitalized related costs.
Interest Expense
Interest expense in the current three and nine-month periods of $761 and $2,336,
respectively, includes interest on ACI's five year term loan with FINOVA Capital
Corporation ("FINOVA"), and additional fees and first-quarter charges of $298
related to letters of credit used in connection with the Company's mergers and
acquisitions. Operations of the Predecessor Company were financed by its parent
company, and as a result, the prior period results reflect only those financing
charges related to the Company's development and acquisition activities
conducted during 1998.
Provision for Income Taxes
The provision for income taxes decreased in the current periods as a result of
ACI's operating loss for book and tax purposes. During the prior period, the
income and expenses of the Predecessor Company were included in the consolidated
Federal and certain combined state income tax returns of its parent and the
prior year provisions for
Continued 14
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
income taxes have been calculated on a separate return basis herein. See also
footnote 7 to the condensed consolidated financial statements.
Liquidity and Capital Resources
The Company is currently financing its operations primarily through cash
generated by operating activities, although operations have historically
required substantial capital investment for the procurement of subscriber units.
During 1998, this investment was funded by BAPCO's ultimate parent, Bell
Atlantic.
The Company's sales plans include increased emphasis on COAM (customer owned and
maintained) service, rather than leased paging service. However, there can be no
assurance that the communications marketplace will allow the Company to continue
to avoid substantial future investments in paging units and the related capital
spending requirements while continuing to meet its growth targets.
The Company has been financing its business acquisitions through the issuance of
its common stock and through a credit facility with FINOVA designed for this
purpose. The loan agreement with FINOVA provides 1) a $20,000 term loan which
was used for the acquisition of BAPCO, 2) a $500 loan funded at the BAPCO
closing date, 3) an additional loan, not to exceed $1,500 (the "Subsequent
Loan"), which was used primarily to pay all remaining outstanding debt to Bell
Atlantic and affiliates related to this acquisition, and 4) an acquisition line
of credit of $8,000. Approximately $4,700 of this facility remains unutilized.
If the Company continues to make acquisitions, additional sources of financing
will be required.
Net cash provided by operating activities for the current and prior periods was
$2,697 and $2,078, respectively. The increased operating cash flow in the
current period was primarily the result of improved operating results from a
larger subscriber base and related economies of scale.
Net cash used in investing activities for the current period consisted primarily
of $18,535 paid by ACI for the acquisition of the Predecessor Company and
additional net cash payments totaling $405 for the acquisitions of Paging
Partners and SunStar Communications. See Notes 2, 3 and 4 to the condensed
consolidated financial statements. In addition, net cash paid in the amount of
$1,171 in the current period and $3,288 in the prior period were for the
purchase of capital assets, principally rental pagers and data processing
equipment. Finally, as of September 30, 1999, the Company had invested $2,629 in
targeted business combinations, including $280 invested in 1998. During the
current nine months, $1,027 was invested in the identification, investigation
and evaluation of various potential target companies, the acquisitions of which
were pending at that date, as well as deposits of $1,322 toward those
acquisitions.
Net cash of $19,645 was provided by financing activities in the current period
and consisted primarily of $25,315 of financing received from FINOVA. This
funding was used to complete the BAPCO acquisition. In addition, the Motorola
capital lease obligation assumed in connection with the Paging Partners merger
was refinanced under the terms of a separate five-year capital lease provided by
FINOVA.
During periods prior to 1999, Bell Atlantic used a centralized cash management
system to finance its operations and the operations of its subsidiaries. During
1998, cash deposits from BAPCO's business were transferred to Bell Atlantic on a
daily basis and Bell Atlantic funded the BAPCO disbursement bank accounts as
required.
The Company uses its working capital to finance ongoing service operations, to
fund marketing and sales activities, and to meet equipment requirements and
retention costs for subscriber growth and maintenance. The Company
Continued 15
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
plans to continue these efforts, as well as to invest in strategic
value-oriented business acquisitions. The Company expects that available cash,
cash provided by operations and its existing available credit facilities will be
sufficient for these purposes for the foreseeable future.
Year 2000
Until recently, many computer programs were written using two digits as a
memory-saving measure rather than four digits to define the applicable year in
the twentieth century. Such software may recognize a date using "00" as the year
1900 rather than the year 2000. During 1998, BAPCO had begun the process of
defining, assessing and converting various internal computer programs and
systems to ensure that these Information Technologies will be Year 2000 (Y2K)
compliant. At December 31, 1998, ACI assumed all responsibility for Bell
Atlantic's previously initiated Y2K efforts.
The Company has divided its Y2K efforts into two primary areas: its
administrative and network systems, and third party vendors.
The administrative and network systems consist of software and hardware systems
that were a combination of internally developed software and third party
software and hardware. ACI's approach has been to:
1. Create an inventory of items to be assessed, then to prioritize these by
their criticality to operations;
2. Assess their readiness through testing;
3. Plan and implement corrective actions; and
4. Develop contingency plans.
As of March 31, 1999, the Company had substantially completed the inventory and
prioritization of items. The Company substantially completed testing of back
office systems in the second quarter and has engaged third party consultants to
further evaluate remediation requirements for external networks, transmission
and switching systems. The Company expects that critical hardware and software
systems will either be replaced or be Y2K ready by December 31, 1999.
Contingency plans have been developed, to mitigate, to the extent possible, the
effects of any significant Year 2000 problem that is not corrected. These plans
are monitored and adjusted as developing circumstances may require.
To address the second phase of its Y2K preparations, the Company has initiated
communications with third party vendors to determine that the vendors'
operations and the products and services they provide are Y2K compliant. In the
event that these third parties are not Y2K compliant, the Company will seek
alternative sources of supplies or services. However, such failures remain a
possibility and could have an adverse impact on the Company's results of
operations or financial condition.
The total costs associated with required modifications to become Y2K compliant
are estimated to be $200 to $250. The total amount expended or committed on Y2K
remediation, including expenditures by the Predecessor Company, through the
current date approximated $200, which related to the cost to repair software and
related hardware problems.
The above expectations are subject to uncertainties. For example, if the Company
is unsuccessful in identifying or fixing all Y2K problems in its critical
operations, or if the Company is affected by the inability of suppliers or major
customers to continue operations due to such a problem, the Company's results of
operations, liquidity, and financial condition could be materially impacted.
Continued 16
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Seasonality
Pager usage is slightly higher during the spring and summer months, which is
reflected in higher incremental usage fees. Retail sales were subject to
seasonal fluctuations that affect retail sales generally. Otherwise, the results
were generally not significantly affected by seasonal factors.
Forward-looking Statements
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. In addition, no assurance can be given that the
Company's operations will generate positive cash flows.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements made by the Company's management
that are based on current expectations, estimates and projections about the
industries in which the Company operates and management's beliefs and
assumptions. In addition, other written or oral statements which constitute
forward-looking statements may be made by or on behalf of the Company. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," or various of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Subsequent to the acquisition of BAPCO, ACI began to operate the paging
business, and its views and objectives of how to operate the business may differ
from those of BAPCO management.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
As of September 30, 1999, the Company had more than $25,300 of floating-rate
debt outstanding. The Company's management believes the interest rate risk
represented by this debt is not material in relation to the market
capitalization of the Company.
The Company has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of June 30, 1999, the
Company had no other significant material exposure to market risk.
Continued 17
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
PART II OTHER INFORMATION
(Dollars in thousands)
Item 2 - Changes in Securities.
Consideration paid for the acquisition of SunStar Communications, Inc. included
1,150,000 (one million one hundred fifty thousand) shares of common stock issued
to certain stockholders of SunStar. This issuance was made pursuant to the
exemption from registration under Section 4 (2) of the Securities Act on the
basis that it did not involve an offering to the public. The Company expects to
include these shares in a shelf registration in accordance with the Registration
Rights Agreement signed as part of this acquisition.
Item 4 - Submission of Matters to a Vote of Security Holders.
(a) A Special Meeting of Shareholders (the "Meeting") was held on July
29, 1999.
(b) Not applicable
(c) The proposals voted upon, and the votes cast, were as follows:
1. To approve an increase in the number of authorized shares of
the Company's common stock from 29,000,000 to 75,000,000.
FOR AGAINST ABSTAIN
--- ------- -------
13,090,046 349,284 9,400
2. To ratify the selection of PricewaterhouseCoopers, LLC as
independent public accountants and auditors for the 1999
fiscal year.
FOR AGAINST ABSTAIN
--- ------- -------
13,447,730 1,000 -0-
Item 5 - Other Information.
Reference is made to the Issuer's Report on Form 8-K filed with the Commission
on April 15, 1999. A hearing before a Listing Qualification Panel designated by
Nasdaq was held on April 29, 1999 with respect to the Issuer's request for
continued listing on the Nasdaq SmallCap Market. In a written notice dated July
21, 1999, the Issuer was notified of the Panel's decision to continue the
listing of the Company's securities on the Nasdaq SmallCap Market. This
notification was subject to review by the Nasdaq Listing and Hearing Review
Council within 45 days of its issuance. The Council has not qualified its
decision to permit continued listing of the Company's shares.
Continued 18
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
PART II OTHER INFORMATION, Continued
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits Included Within:
(10.1) Asset Purchase Agreement dated September 28, 1999 by and
among Aquis Wireless Communications, Inc., Aquis
Communications Group, Inc., ABC Cellular Corporation and
ABC Paging, Inc.
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no items to report on Form 8-K during this period.
Continued 19
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
Signature Title Date
- --------- ----- ----
/s/ D. Brian Plunkett Chief Financial and Accounting November 15, 1999
- ----------------------- Officer
D. Brian Plunkett
Continued 20
Exhibit 10.1
ASSET PURCHASE AGREEMENT
By and Among
AQUIS WIRELESS COMMUNICATIONS, INC.,
AQUIS COMMUNICATIONS GROUP, INC.
ABC CELLULAR CORPORATION
and
ABC PAGING, INC.
DATED AS OF SEPTEMBER 28, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of this 28th day of
September, 1999, by and among Aquis Wireless Communications, Inc., a Delaware
corporation ("Purchaser"), Aquis Communications Group, Inc., a Delaware
corporation and the sole stockholder of Purchaser ("Group"), ABC Cellular
Corporation, a Florida corporation ("ABC Cellular") and ABC Paging, Inc., a
Florida corporation ("ABC Paging" and, together with ABC Cellular, "Sellers").
R E C I T A L S:
WHEREAS, Sellers currently own and operate a radio paging business and a
cellular telecommunications services business; and
WHEREAS, Purchaser desires to acquire from Sellers, and Sellers desire to
sell to Purchaser, substantially all of the assets and operations of Sellers'
radio paging business as a going concern, together with certain related assets
of Sellers' retail telecommunications business; and
WHEREAS, in connection with its acquisition of such assets and operations,
Purchaser is willing to assume certain obligations and liabilities of Sellers
relating thereto; and
WHEREAS, the parties are entering into this Agreement in order to set
forth certain terms and conditions applicable to such acquisition.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements of the parties hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions of Defined Terms.
(a) Capitalized Terms. Capitalized terms used in this Agreement
shall, unless expressly stated otherwise, have the meanings specified in this
Section 1.
(b) Defined Terms.
(i) "Accountants" means PricewaterhouseCoopers, independent
accountants to Purchaser, or such other accounting firm as Purchaser may retain
as its independent auditors from time to time.
(ii) "Accounts Receivable" means monies or other consideration
reflected on the books of Sellers as of the Closing Date that are due and owing
to Sellers and related to the Business.
(iii) "Action" has the meaning set forth in Section 5(o)(i) of
this Agreement.
(iv) "Active Unit" means a paging unit in the hands of a
subscriber of the Business (i.e., a direct customer of Sellers) on the Closing
Date, for which: (a) there are no Accounts Receivable which have been
outstanding in excess of ninety (90) days; (b) at least one
<PAGE>
full payment for such unit has been made prior to the Closing Date; and (c) no
oral or written notice of termination has been given to Sellers as of the
Closing Date.
(v) "Agreement" means this Asset Purchase Agreement.
(vi) "Assets" means all properties and assets of Sellers other
than the Excluded Assets.
(vii) "Assignment and Assumption Agreement" has the meaning
set forth in Section 14(a)(i) of this Agreement.
(viii) "Assumed Contracts" means all Contracts of Sellers
being assumed by Purchaser pursuant to this Agreement.
(ix) "Assumed Liabilities" has the meaning set forth in
Section 2(c) of this Agreement.
(x) "Average Gross Revenue" means Sellers' average monthly
gross revenue from paging subscribers, computed in accordance with GAAP on an
accrual basis.
(xi) "Balance Sheet" means Sellers' combined audited balance
sheet at December 31, 1998 of the Business.
(xii) "Balance Sheet Date" means December 31, 1998, the date
of the Balance Sheet.
(xiii) "Billing Software License" means the license of Sellers
to use the billing software used to bill accounts in connection with the
Business and all rights related thereto.
(xiv) "Bulk Acts" means bulk transfer laws and/or bulk sales
tax acts (including all notice provisions thereunder) applicable to the
transactions contemplated hereby.
(xv) "Business" means the radio paging business conducted by
Sellers in the Miami, Florida and the surrounding areas, together with all of
the assets in the paging categories reflected on Sellers' Balance Sheet. Sellers
acknowledge that all representations, warranties, covenants and agreements
contained herein shall relate to the Business as heretofore defined.
(xvi) "Closing" means the closing of the transactions
contemplated by this Agreement.
(xvii) "Closing Date" means the date of the Closing.
(xviii) "Contracts" has the meaning set forth in Section 5(dd)
of this Agreement.
(xix) "Customer Deposits" means monies deposited by customers
of the Business and held by Sellers as security in connection with the provision
by Sellers of paging and related services to such customers.
2
<PAGE>
(xx) "Customer List" means the list of customers of the
Business and related information annexed hereto as Schedule Z(a)(vii).
(xxi) "Deferred Revenue" means revenues billed or received by
Sellers for services not yet provided.
(xxii) "Deposit" means the sum of $100,000 in cash, which
amount is being deposited with the Escrow Agent pursuant to the Deposit Escrow
Agreement upon the execution of this Agreement.
(xxiii) "Deposit Escrow Agreement" means the Deposit Escrow
Agreement, of even date herewith, by and among the Escrow Agent, Sellers and
Purchaser annexed hereto as Exhibit A.
(xxiv) "Dispute Notice" has the meaning set forth in Section
4(a)(iv) of this Agreement.
(xxv) "Equipment" means all paging transmission equipment,
paging units, terminals and related items used in connection with the Business.
(xxvi) "Escrow Agent" means Phillips Nizer Benjamin Krim &
Ballon LLP.
(xxvii) "Excluded Assets" means those assets of Sellers
specified in Section 2(b) of this Agreement which are not being acquired by
Purchaser pursuant to this Agreement.
(xxviii) "FCC" means the United States Federal Communications
Commission.
(xxix) "FCC Licenses" means radio paging licenses issued to
Sellers by the FCC.
(xxx) "Fill-in Transmitters" has the meaning set forth in
Section 5(q)(i) of this Agreement.
(xxxi) "Final Order" means an order of the FCC approving the
assignment of the FCC Licenses to Purchaser which is no longer subject to
reconsideration, appeal or review, whether judicial or administrative.
(xxxii) "Financial Statements" has the meaning set forth in
Section 5(g)(i) of this Agreement.
(xxxiii) "FINOVA Consent" means the consent of FINOVA Capital
Corporation, Senior leader to Purchaser, to the transactions contemplated by the
Agreement.
(xxxiv) "GAAP" means generally accepted accounting principles.
(xxxv) "Group" means Aquis Communications Group, Inc., a
Delaware corporation and the sole parent of Purchaser.
3
<PAGE>
(xxxvi) "Hazardous Materials" means any hazardous material,
hazardous substance, regulated substance, pollutant or contaminant, hazardous
waste, or hazardous chemical, as those terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any other comparable "Superfund" or "Superlien" law, the Resource Conservation
and Recovery Act of 1976, as amended, the Hazardous Materials Transportation
Act, any regulations promulgated under the foregoing, or by the U.S.
Environmental Protection Agency or any applicable state or local environmental
agency.
(xxxvii) "Indemnity Escrow Agreement" means the Indemnity
Escrow Agreement, in the form annexed hereto as Exhibit B, to be entered into by
the Escrow Agent, Sellers and Purchaser at the Closing.
(xxxviii) "Intellectual Property" has the meaning set forth in
Section 5(i) of this Agreement.
(xxxix) "Inventory" means the pager products in connection
with a physical inventory performed immediately prior to the Closing.
(xl) "Leases" has the meaning set forth in Section 5(m)(ii) of
this Agreement.
(xli) "License Transfer" has the meaning set forth in Section
5(q)(iii) of this Agreement.
(xlii) "Liens" means, with respect to any Asset, all security
interests, mortgages, pledges, liens, claims, encumbrances and any other rights
of third parties in, to or with respect to such Asset.
(xliii) "Lockboxes" means all accounts into which payments by
customers and resellers of Sellers' paging business are deposited, including,
but not limited to an account at the United States Postal Service maintained
by/or on behalf of Brandsmart, Inc..
(xliv) "Material Contracts" has the meaning set forth in
Section 5(n) of this Agreement.
(xlv) "Personal Property Leases" has the meaning set forth in
Section 5(m)(ii) of this Agreement.
(xlvi) "Petroleum Materials" has the meaning set forth in
Section 5(cc) of this Agreement.
(xlvii) "Premises" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xlviii) "Purchase Price" has the meaning set forth in Section
4(a) of this Agreement.
(xlix) "Purchaser" means Aquis Wireless Communications, Inc.,
a Delaware corporation.
4
<PAGE>
(l) "Real Property" has the meaning set forth in Section 5(cc)
of this Agreement.
(li) "Renewal Statement" has the meaning set forth in Section
4(a)(iii) of this Agreement.
(lii) "Retained Liabilities" means all liabilities and
obligations of Sellers of any kind or nature whatsoever, whether known or
unknown, actual or contingent, matured or unmatured, liquidated or unliquidated,
arising from or in connection with occurrences on or prior to the Closing Date
other than the Assumed Liabilities.
(liii) "Sellers" means ABC Cellular Corporation, a Florida
corporation, and ABC Paging, Inc., a Florida corporation.
(liv) "Sellers' Broker Agreement" has the meaning set forth in
Section 15 of this Agreement.
(lv) "Sellers' Knowledge" in a representation or warranty of
Sellers means the actual knowledge of Randy Simon, but does not include, except
as specifically provided elsewhere in this Agreement, constructive knowledge.
Notwithstanding the foregoing, such phrase requires that such individual: (i)
undertake a reasonable examination of his and Sellers' files and the Assets
relating to the Business to ascertain whether such files or Asset examinations
reveal facts relevant to the representation or warranty in question; and (ii)
make a reasonable inquiry of the other employees or agents of Sellers whom he
reasonably believes may have knowledge relating to the facts relevant to such
representation or warranty.
(lvi) "Site Leases" means the seventeen (17) leases listed on
Schedule 5(m) hereto under which either Seller is Lessee for real property on
which Sellers have constructed, own and/or operate paging transmission and
related equipment and one lease listed on Schedule 5(m) hereto under which
Sellers are Lessee for real property on which Sellers have constructed, own
and/or operate paging receiving equipment.
(lvii) "Spare Parts" means spare parts and maintenance manuals
for the Equipment.
(lviii) "Telephone Number Inventory" means the telephone
numbers that have been assigned to or associated with individual paging units
used by Sellers' customers as part of the Business, together with the telephone
numbers available for assignment to or association with individual paging units
as part of the Business and the telephone number, "1 (800) PAGE NOW," all as set
forth on Schedule 5(F) hereto.
(lix) "Trade Name License" has the meaning set forth in
Section 2(a)(x) of this Agreement.
(lx) "Transmitter Facilities" has the meaning set forth in
Section 5(q)(i) of this Agreement.
(lxi) "Trade Names" means all trade names, including, but not
limited to, the names, "ABC," "ABC Wireless Services, Inc.," "ABC Paging", "Page
Now(R)" and "ABC
5
<PAGE>
Cellular," trademarks, service marks and other identifying names used by Sellers
in connection with the Business, together with all goodwill related thereto, but
specifically excluding the names, "ABC Telephone Systems,(TM)" "ABC
Communications Inc.".
(lxii) "Valid Accounts Receivable" means Accounts Receivable
due with respect to Active Units.
(lxiii) "Year 2000 Compliant" has the meaning set forth in
Section 5(e)(i) of this Agreement.
2. Acquisition of Assets; Assumption of Liabilities.
(a) Sale and Purchase of Assets. In exchange for the consideration
specified in Section 4 of this Agreement, and on the terms, subject to the
conditions and based upon the representations, warranties and agreements of the
parties hereinafter set forth, Purchaser hereby agrees to purchase from Sellers,
and Sellers hereby agree to grant, sell, convey, assign, deliver and set over
unto Purchaser all of the Assets, other than the Excluded Assets. The Assets
shall include, without limitation, the following:
(i) all of Sellers' FCC Licenses and all files relating
thereto including, but not limited to, all correspondence with the FCC, as set
forth on Schedule 2(a)(i);
(ii) all machinery, including, but not limited to, the
machinery listed on Schedule 2(a)(ii);
(iii) all Equipment and Spare Parts, any and all rights of
Sellers under warranties covering such Equipment and Spare Parts, and all
contracts for maintenance or servicing of such Equipment;
(iv) all furniture, fixtures, computers and other office
equipment and supplies located on any Premises, including, without limitation,
the computer hardware listed on Schedule 2(a)(iv) owned by Sellers and used in
the Business which are not Excluded Assets.
(v) The Telephone Number Inventory and office telephone and
other utility services of the Business;
(vi) all Accounts Receivable;
(vii) the Customer Lists, which Sellers represent and warrant
constitute all of the customer information relating to the Business, and all
other books and records relating to the Business, other than information, books
and records relating to the Excluded Assets;
(viii) all the Leases, Site Leases and Personal Property
Leases;
(ix) the Inventory;
(x) all Trade Names other than "ABC#(R)," as to which Sellers
shall grant Purchaser a nonexclusive, royalty-free license, substantially in the
form of Exhibit C hereto (the "Trade Name License") to use such name;
(xi) the Intellectual Property;
6
<PAGE>
(xii) the Assumed Contracts;
(xiii) the Billing Software License;
(xiv) all goodwill of Sellers relating to the Business;
(xv) all Lockboxes; and
(xvi) all other assets, properties and rights of Sellers used
in or pertaining to the Business, other than the Excluded Assets.
All of the Assets will be acquired by Purchaser free and clear of all
Liens, except as otherwise set forth in this Agreement.
(b) Excluded Assets. Notwithstanding the foregoing, Sellers shall
not sell, and Purchaser shall not acquire from Sellers, any of the Excluded
Assets, consisting of the following:
(i) The corporate seals, certificates of incorporation, minute
books, stock books, tax returns, books of account, and other organizational
documents and records of Sellers;
(ii) Sellers' bank accounts and cash on hand;
(iii) The rights which accrue or will accrue to Sellers under
this Agreement;
(iv) Those Assets of Sellers other than Trade Names which are
used exclusively in connection with Sellers' cellular telephone business; and
(v) all other Assets of Sellers listed on Schedule 2(b) hereto
(collectively, the "Excluded Assets")
(c) Assumption of Certain Liabilities. As part of the consideration
to be paid by Purchaser in exchange for the Assets, at the Closing Purchaser
shall assume the following obligations and liabilities of Sellers (collectively,
"Assumed Liabilities"):
(i) all of Sellers' obligations under the Leases and the Site
Leases;
(ii) all of Sellers' obligations with respect to the Customer
Deposits set forth on Schedule 2(c)(iii) hereto;
(iii) all of Sellers' obligations with respect to the Deferred
Revenue as set forth on Schedule 2(c)(iv) hereto; and
(iv) the postage meter rental agreement, software maintenance
agreement, and other contractual obligations of Sellers, if any, all as set
forth on Schedule 2(c)(v) hereto; and
(v) those liabilities of Sellers listed on Schedule 2(c)
hereto.
Except to the extent expressly assumed by Purchaser hereunder, Purchaser
shall not assume or otherwise be responsible for or bound by any of the Retained
Liabilities including, but
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not limited to, any obligation to retain any employee of the Business or any
obligation or liability arising out of Sellers' employment or termination of any
employee prior to the Closing Date.
3. Closing. The Closing shall take place at the offices of Phillips Nizer
Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New York, 10103-0084, or
such other place as the parties may agree, within ten (10) business days
following the date upon which all of the conditions precedent to the Closing
stated in Sections 7 and 8 of this Agreement have been satisfied in full but no
later than December 31, 1999 unless as of such date the FCC shall not have
approved the transactions contemplated hereby, in which event no later than
March 31, 2000. The purchase and sale of the Assets pursuant to this Agreement
shall for all purposes be deemed effective as of the Closing Date.
4. Purchase Price and Payment/Adjustments.
(a) Purchase Price. The purchase price (the "Purchase Price") to be
paid by Purchaser in exchange for the Assets shall consist of the following:
(i) The sum of $2,750,000 in cash, subject to any required
adjustments as set forth in Section 4(c) hereof, to be paid as follows:
(1) The Deposit ($100,000), by certified or bank
cashier's check payable to the Escrow Agent delivered to the Escrow Agent, or by
wire transfer to an account designated by the Escrow Agent in accordance with
written instructions from the Escrow Agent, upon the execution of this
Agreement, such amount to be held by the Escrow Agent pursuant to the terms and
conditions set forth in the Deposit Escrow Agreement; and
(2) The balance ($2,650,000, subject to adjustment as
provided in paragraph (vi) hereinbelow and Sections 4(c) and 24 hereof)
delivered to Sellers at the Closing by certified or bank check payable to
Sellers or by wire transfer on the Closing Date to an account designated by
Sellers pursuant to Sellers' written instructions (which shall be delivered to
Purchaser no later than two (2) business days prior to Closing), $150,000 of
which shall be deposited with the Escrow Agent pursuant to paragraph (e)
hereinbelow;
(ii) The assumption by Purchaser as of the day after the
Closing Date of the Assumed Liabilities;
(iii) With respect to those of Sellers' paging units in
service which are subject to existing annual paging services contracts with
customers for which no payment has been received for paging services (which, for
purposes hereof, are acknowledged to number approximately 6,600 as of the date
hereof), Purchaser shall pay to Sellers the sum of Thirty-Four Dollars ($34.00)
in cash for each of such contracts which is renewed and paid by the customer as
additional consideration for the purchase of Sellers' paging assets hereunder.
Subject to paragraph (iv) hereof, all amounts payable by Purchaser pursuant to
this paragraph (iii) shall be determined and paid quarterly as follows: on or
before the fifteenth (15th) business day following the last day of each calendar
quarter, Purchaser shall prepare and deliver to Sellers a statement (a "Renewal
Statement") in each case as of the last day of such calendar quarter, listing
each existing annual paging services contract which has been renewed during such
calendar quarter and all information related thereto and setting forth
Purchaser's calculation of all amounts due Sellers
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in respect thereof, together with payment, by check or by wire transfer, of such
amounts; provided, that Purchaser agrees to use its best efforts to secure the
renewal of such annual paging services contracts as and when they expire.
(iv) In the event that Sellers shall disagree with any Renewal
Statement received from Purchaser pursuant to paragraph (iii) hereinabove, they
shall so notify Purchaser in writing (a "Dispute Notice") within fifteen (15)
calendar days following their receipt of such Renewal Statement, in each case
specifying the amounts in dispute and the basis therefor, and the parties shall
endeavor in good faith through mutual discussions to reach an agreement as to
the amounts to be paid in respect of such Renewal Statement. In the event that
the parties are unable to reach such agreement within thirty (30) days following
Purchaser's receipt of a Dispute Notice from Sellers, then the parties shall
submit any matters remaining in dispute to an independent accounting firm
selected by Purchaser and reasonably acceptable to Sellers for review and final
determination, and payment of all additional amounts (if any) determined by such
firm to be due in respect of such Renewal Statement shall be made within five
business days following the date of such final determination.
(v) For purposes of making determinations pursuant to
paragraphs (iii) and (iv) hereinabove, Purchaser agrees to afford Sellers
reasonable access to all books and records of Purchaser relating to annual
paging services contracts assumed by Purchaser at the Closing hereunder and all
renewals thereof.
(vi) In the event that the number of pager products which are
included in Inventory hereunder exceeds 500 units (or $25,000 in value, based
upon Sellers' cost), Purchaser shall purchase the excess units from Sellers at
Sellers' wholesale cost, which amount shall be added to the balance of the
Purchase Price to be paid pursuant to paragraph (i)(2) hereinabove.
(b) Allocation of Purchase Price. It is hereby agreed and
acknowledged that the Purchase Price allocation for each component of the Assets
shall be made on the basis of Sellers' net book value thereof with any excess of
the Purchase Price over such net book value being allocated up to $100,000 to
the Noncompetition, Confidentiality and Nondisclosure Agreement being delivered
by Sellers pursuant to Section 14(a)(vi) hereof and the remainder to
intangibles, as set forth on Schedule 4(b) hereto.
(c) Purchase Price Adjustments.
(i) In the event that, on the Closing Date, the total number
of paging units serviced by Sellers (exclusive of units subject to annual paging
services contracts) shall be less than 38,400 or, subject to Section 7(l)
hereof, the Business shall have annual adjusted earnings before income taxes,
depreciation and amortization for a six month trailing period ending no more
than forty-five (45) days prior to the Closing hereunder, (as annualized based
upon the segment information for the Business plus such pro forma adjustments as
have been agreed to by Sellers and Purchaser ("EBITDA")), of less than $500,000
(the "EBITDA Deficiency"), then the Purchase Price shall be adjusted downward by
an amount equal to the greater of: (x) the difference of 38,400 minus the total
number of paging units serviced by Sellers on the Closing Date multiplied by
Seventy-one Dollars ($71.00), and (y) the amount of the EBITDA Deficiency
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times 5.5, and such amount shall be deducted from the payment due pursuant to
Section 4(a)(i)(2) hereof.
(ii) In the event that the total dollar value of the Deferred
Revenue plus Customer Deposits assumed by Purchaser on the Closing Date
hereunder shall exceed the total dollar value of the Valid Accounts Receivable
of Sellers on the Closing Date by more than 10%, there shall be a
dollar-for-dollar reduction in the Purchase Price and from the payment due
pursuant to Section 4(a)(i)(2) in the amount of such excess over 110% of the
total dollar value of the Deferred Revenue plus Customer Deposits.
(d) Application of Deposit. As set forth in the Deposit Escrow
Agreement, in the event that the transactions contemplated hereby are not
consummated for any reason other than as provided in Section 13 of this
Agreement, then the Deposit shall be paid by the Escrow Agent to Sellers and
retained by Sellers in order to compensate Sellers for their costs and expenses
incurred in negotiating this Agreement. In the event that the transactions
contemplated hereby are closed, the parties agree to direct the Escrow Agent at
Closing to terminate the Deposit Escrow Agreement and deliver the Deposit to
Sellers at Closing, and the full amount of the Deposit shall be credited towards
payment of the cash portion of the Purchase Price.
(e) Indemnity Escrow. At the Closing, the Escrow Agent, Sellers and
Purchaser shall enter into the Indemnity Escrow Agreement, pursuant to which
Sellers shall deposit $150,000 of the balance of the Purchase Price to be paid
pursuant to Section 4(a)(i)(2) hereof in escrow, which amount shall thereafter
be held in escrow by the Escrow Agent following the Closing and applied or
released as and when provided in the Indemnity Escrow Agreement.
5. Representations and Warranties of Sellers.
As an inducement for Purchaser to enter into this Agreement and
perform its obligations hereunder, Sellers hereby jointly and severally
represent and warrant to Purchaser as set forth below. Each of such
representations and warranties are correct and complete as of the date hereof
and shall be correct and complete as of the Closing, with the same effect as if
said representations and warranties had been made on and as of the Closing Date.
(a) Power and Authority. Each Seller has full, lawful power to own
all of its Assets and to carry on the activities of the Business as presently
conducted and to own, hold and operate the properties that it owns and holds.
The execution and delivery of this Agreement and the other agreements,
certificates and documents to be executed and delivered pursuant hereto by each
Seller have been duly and validly authorized by such Seller and no further
corporate action on the part of either Seller is required in connection
therewith, and this Agreement and all of such other agreements, certificates and
documents constitute the valid and binding obligations of Sellers, enforceable
against each Seller in accordance with their respective terms.
(b) Noncontravention. Neither the execution and delivery of this
Agreement by each Seller, nor the performance by such Seller of its obligations
hereunder, nor the consummation of the transactions contemplated hereby will (i)
conflict with or result in a violation or breach of, or default or termination
under, any terms or provisions of such Seller's certificate of incorporation,
by-laws or other organizational documents or any other agreement or instrument
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to which such Seller is a party or by which such Seller, the Business or any of
the Assets is bound, or (ii) result in the imposition of any Lien upon any of
the Assets.
(c) Governmental Approvals. Except for the approval of the FCC no
consent, approval or authorization of or declaration or filing with any
governmental authority is required in connection with the execution or delivery
of this Agreement by Sellers or the consummation by Sellers of the transactions
contemplated hereby.
(d) Formation, Good Standing and Qualifications. Each Seller is a
corporation duly formed, validly existing and in good standing under the laws of
the State of Florida. None of Sellers or the Business is licensed or qualified
to do business in any states other than Florida and neither the character of the
Assets and Sellers' properties nor the nature of the Business would necessitate
such licensing or qualification to do business in any other state. Schedule 5(d)
hereto contains correct and complete copies of the certificate of incorporation
of each Seller, in each case as in full force and effect on the date hereof.
(e) Equipment and Telecommunications Transmission Services.
(i) Schedule 5(e)(i) hereto contains a true and complete list
of all of the Equipment and Spare Parts (and their location) used in or
pertaining to the Business, including all of the terminals, transmitters, link
receivers and antennas used by Sellers to provide paging services in support of
the Business. Sellers have good, valid and marketable title to all of such
Equipment and Spare Parts, free and clear of all Liens (other than liens
reflected in Schedule 5(h)(ii), which shall be released at Closing). To Sellers'
best knowledge, best efforts have been made by Motorola, Inc. to ensure that all
of the Equipment and Spare Parts are Year 2000 compliant. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to Sellers' information
technology, that the information technology is designed to be used prior to,
during, and after the calendar Year 2000 A.D., and that the information
technology used during each such time period will accurately receive, provide
and process date and time data (including, but not limited to, calculating,
comparing and sequencing from, into and between the twentieth and twenty-first
centuries, including the years 1999 and 2000, and leap-year calculations) and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of date or time data, to the extent that other information
technology used in combination with such information technology properly
exchanges date and time data with it.
(ii) Schedule 5(e)(ii) hereto contains a list of all of the
telecommunications transmission services provided in support of the Business,
including services to: (A) connect paging terminals to transmitters; (B) connect
transmitters to monitoring locations for the performance of status monitoring,
control and trouble-shooting functions; and (C) program numbers into the paging
terminals and perform remote monitoring, adjustments, and trouble-shooting with
respect to the paging terminals.
(f) Telephone Number Inventory. Schedule 5(f) hereto contains true
and complete list of the Telephone Number Inventory:
(i) All telephone numbers included in the Telephone Number
Inventory have been activated in the paging control terminals included in the
Equipment.
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(g) Financial Statements. Within forty-five (45) days after the date
hereof, Sellers shall cause their independent accountants to prepare and deliver
to Purchaser audited segment financial statements (including notes thereto)of
the Business, including an audited balance sheet and statements of income and
retained earnings, for the fiscal year ended December 31, 1998 and unaudited
interim segment financial statements of the Business for the nine (9) months
ending September 30, 1999. Sellers further agree: (i) in the event that Group is
required to file such information with the Securities and Exchange Commission
(the "Commission") in order to satisfy its reporting and disclosure obligations
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder
(the "Exchange Act"), to cause their independent accountants to prepare and
deliver to Purchaser audited segment financial statements (including notes
thereto) of the Business, including audited balance sheets and statements of
income and retained earnings, for the fiscal year(s) ended December 31, 1996
and/or December 31, 1997; or (ii) in the event that the Closing hereunder shall
not occur on or prior to February 22, 2000 and Group is required to file such
information with the Commission under the Exchange Act, to cause their
accountants to prepare and deliver to Purchaser audited segment financial
statements (including notes thereto)of the Business, including an audited
balance sheet and statements of income and retained earnings, for the fiscal
years ending December 31, 1997 and 1999(all of such financial statements which
are delivered to Purchaser pursuant hereto being sometimes referred to herein
collectively as, the "Financial Statements"). The Financial Statements have been
prepared in accordance with GAAP, consistently applied, and fairly and
accurately present the results of operations of the Business for the periods
covered thereby and the financial condition of the Business as of the dates
indicated thereon, and comply with the books and records of the Business. Since
the Balance Sheet Date, the Business has operated in the ordinary course of
business and will, through the Closing Date, continue to operate only in the
ordinary course of business on the same basis as it has heretofore. Since the
Balance Sheet Date, there has been no materially adverse change in the financial
condition of the Business, and neither Seller knows of any such pending change.
(h) Assets.
(i) Except as set forth on Schedule 5(h)(i)hereto, to Sellers'
Knowledge, the physical Assets are in good operating condition, reasonable wear
and tear excepted, and are free from any defects which could have a material
adverse effect on the Assets or the operations of the Business, are in
conformity with the manufacturers' specifications (including the ability to
perform the functions for which they were designed), and are in compliance with
FCC regulations. Except for the Excluded Assets, the Assets constitute all of
the properties, assets and rights that have been used in the conduct of the
Business and which are necessary to the operation of the Business. There are no
assets of either Seller not included in the Assets which are material to the
operation of the Business and the absence of which would have a material adverse
effect on Purchaser's ability to conduct the Business in the same manner that it
has been previously conducted. Except as disclosed on Schedule 5(h)(i), the
Assets are now and will be on the Closing Date located at Sellers' places of
business and will not be removed therefrom unless Sellers shall have received
Purchaser's written consent to such action, which consent is in Purchaser's sole
and absolute discretion.
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(ii) Except as set forth on Schedule 5(h)(ii),Sellers have
good and marketable title to all the Assets, free and clear of any Liens.
(i) Business Names and Business Addresses. Schedule 5(i) sets forth
all Trade Names used by Sellers over the past five (5) years and all of the
business address(es) of Sellers for the past five (5) years. Schedule 5(i) also
sets forth any copyrights, patents, and other intellectual property owned by
Sellers or used by Sellers in connection with the Business (collectively with
the Trade Names, the "Intellectual Property"). Sellers are not aware of any
other party using the Intellectual Property. Sellers have not received any
notice of adverse claims, invalidity or infringement of any rights of others
with respect to the Intellectual Property and none of the Intellectual Property
is the subject of any pending or threatened claim, litigation or lien. To
Sellers' Knowledge, Sellers' use of the Intellectual Property did not and does
not infringe upon, or otherwise violate, the rights of any third party.
(j) Liabilities. Except for leases, contracts and other contractual
obligations not required to be reflected under GAAP, there are no liabilities,
obligations or claims of any nature of or against either of Sellers or the
Business (whether threatened, accrued, contingent, absolute, unliquidated,
asserted or otherwise, whether due or to become due) which were not disclosed or
reflected fully on the Balance Sheet, and there are no such liabilities,
obligations or claims of or against either Seller or the Business, other than
those disclosed or reflected in the Financial Statements.
(k) Taxes.
(i) All taxes, including, without limitation, income,
accumulated earnings, property, sales, use, franchise, added value, employees'
income, withholding and social security taxes, imposed by the United States, or
by any state, municipality, subdivision or instrumentality of the United States
or of any foreign country, or by any other taxing authority, which are due or
payable by either of Sellers or the Business, and all such taxes and any
interest and penalties thereon have been paid in full, and all tax returns and
reports required to be filed in connection therewith have been accurately
prepared and duly and timely filed and all deposits required by law to be made
by either of Sellers or the Business with respect to employees' withholding
taxes have been duly made or will be made as of the required filing date, as
same may be extended.
(ii) Neither Seller has been delinquent in the payment of any
foreign or domestic tax, assessment or governmental charge, fee or deposit and
there is no tax deficiency or claim outstanding, proposed or assessed against
either of Sellers or the Business.
(iii) Except as set forth on Schedule 5(k)(iii) hereto, no
audit has been conducted of any tax returns relating to the Business during the
last ten (10) years.
(iv) After the Closing, Purchaser will incur no liability or
expense by virtue of taxes relating to the Business for the period between the
Balance Sheet Date and the Closing Date.
(l) Inventory. All of Sellers' inventories, including the Inventory,
consist of items of a quality usable, marketable and saleable in the normal
course of the Business.
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(m) Real Property.
(i) Neither Seller owns fee title to any real property.
(ii) Schedule 5(m)(ii) contains a complete and correct list
and description of all of Sellers' Site Leases and other leases (whether oral or
written) with respect to real property (collectively, the "Leases"), including a
description of all buildings, structures, improvements, transmitters, terminals
and other equipment located at each of the premises underlying such Leases
(collectively, the "Premises"), and all licensing arrangements and leases of
personal property relating to the Business ("Personal Property Leases"), to
which either Seller is a party (either as lessor, lessee, licensor or licensee).
Except as set forth on Schedule 5(m) hereto, all of such Leases, Personal
Property Leases, and licensing agreements are valid and in full force and effect
in accordance with their respective terms and there are no existing defaults or
events of default or events which with notice or lapse of time or both would
constitute defaults or which would interfere with the enjoyment by Sellers or
any assignee of the benefits of such instrument or their use and enjoyment of
the real or personal property. Except as set forth on Schedule 5(m)(ii), no
consents are required in order to transfer any of the Leases, Personal Property
Leases or licenses to Purchaser, nor have Sellers received any notice of intent
not to renew from any lessor or licensor thereunder.
(iii) Except as set forth on Schedule 5(m)(iii), to Sellers'
knowledge all activities and operations conducted by Sellers on the Premises,
and all structures, improvements and fixtures installed by Sellers on the
Premises, conform to any and all applicable federal, state and local laws,
ordinances and regulations, including, without limitation, zoning and building
ordinances and health, environmental and safety laws, ordinances and
regulations, and the Premises are zoned for the various purposes for which the
Premises are currently being used.
(iv) Except as set forth on Schedule 5(m)(iv), to Sellers'
Knowledge, there is no condition resulting from the activities of the Business
which would adversely affect or impair the use of any of the Premises for the
purposes for which Sellers are currently using the same or which could result in
the imposition of liability on Purchaser.
(v) To Sellers' Knowledge, there are no existing, pending or
threatened condemnations, or violations of other governmental regulations giving
rise to pending or threatened governmental or administrative actions that will
materially adversely affect or impair the use of any of the Premises for the
purposes for which Sellers are currently using the same.
(n) Material Contracts. Schedule 5(n) contains a list of all
material contracts and documents to which either of Sellers is a party, true and
complete copies of which have been delivered to Purchaser, or in the case of
contracts with subscribers of the Business, made available to Purchaser. All of
such subscribers are parties to written contracts with Sellers; all of such
contracts are substantially in the form of the contract included in Schedule
5(n). Except only as to contracts and documents listed on Schedule 5(n), neither
Seller, with respect to the Business, is a party to any written or oral (i)
contract not made in the ordinary course of business; (ii) employment contract
which is not terminable without cost or other liability to Sellers on notice of
thirty (30) days or less, (iii) contract with any labor union, (iv) bonus,
deferred compensation, pension, profit-sharing, retirement, stock purchase,
hospitalization, insurance or similar plan
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providing employee benefits, (v) lease with respect to any property, real or
personal, whether as lessor or lessee, (vi) continuing contract for the future
purchase of materials, supplies or equipment in excess of the requirements of
the Business now booked or for normal operating inventories, (vii) contract
involving the expenditure of more than one thousand dollars ($1,000), (viii)
contract continuing over a period of more than one year from its date, (ix)
contract interfering with Sellers' exclusive and unrestricted use of any Trade
Names or other Intellectual Property, or other contract, agreement or
understanding, (x) inter-carrier agreement, agreement with a reseller or
agreement with an agent, (xi) interconnection agreement with any local exchange
carrier or interexchange carrier, or (xii) any agreement relating to circuits
used to control the transmitters used in the Business (collectively, "Material
Contracts") and the Business is not subject to any restriction that materially
adversely affects the Assets, or the Business or its financial condition or
prospects. All of the Material Contracts are in full force and effect and, to
Sellers' knowledge, there is no default or circumstance which, with notice
and/or passing of time, would constitute a default existing under any of the
Material Contracts, nor has either of Sellers or the Business received any
notice by any other party thereto of an intent not to renew any Material
Contract.
(o) Compliance With Laws; Litigation.
(i) Except as set forth in Schedule 5(o)(i), to Sellers'
Knowledge, each of Sellers and the Business have complied in all material
respects with all laws, regulations and orders affecting the Business and its
operations (including, without limitation, the rules of the FCC relating to
regulatory fees, universal service fund obligations, telecommunications relay
service, antenna support structure lighting and marking, tower registration,
timely construction of facilities and the provision of service to subsidiaries,
and the timely filing of applications and reports). Neither Seller has received
notice or otherwise been advised that either Seller or the Business is not in
conformity with any such laws. Except as set forth on Schedule 5(o) hereto,
there are no actions, suits or proceedings, either at law or in equity, pending
or, to Sellers' Knowledge, threatened against either Seller or the Business
(collectively, an "Action"). No Action involves the possibility of any judgment
or liability against either Seller or the Business not fully covered by
insurance, which may result in a materially adverse change in the financial
condition of the Business, or which would prevent or hinder the consummation of
the transactions contemplated by this Agreement.
(ii) Except as set forth on Schedule 5(o)(ii), there are no
lawsuits or other private or governmental investigations, inquiries, proceedings
or claims pending or threatened against either Seller or the Business, or any of
their respective properties or the Assets, or which could affect the
consummation of the transactions contemplated hereby; and to Sellers' Knowledge
there is no valid basis for any such lawsuit, proceeding or claim. Except as set
forth on Schedule 5(o)(ii), there are no judgments, decrees or orders binding
upon either Sellers or the Business, the effect of which would be to prohibit
any business practice of the Business, the disposition of the Assets by Sellers,
the conduct of the Business by Sellers or Purchaser or the consummation of the
transactions contemplated hereby. Except as set forth on Schedule 5(o)(ii) there
are no violations, citations, fines, injunctions or penalties heretofore
asserted against or imposed on either Seller, the Business, or any of their
respective properties or Assets, or with respect to the conduct of the Business
under any federal, state or local law or of which either
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Seller has received notice or which otherwise bind any of the material
properties of Sellers, the Assets or the Business, and none has been threatened.
(iii) Except as set forth in Schedule 5(o)(iii), there exists
no default under any mortgage, indenture, contract or agreement, which default
may result in a materially adverse change in the Assets, or the financial
condition or business or operations of the Business.
(p) Accounts Receivable. All Accounts Receivable arise from bona
fide transactions made in the ordinary course of business and represent services
rendered or Inventory sold in the ordinary course of business. All such Accounts
Receivable are fairly presented, and are the result of arms-length transactions
with third parties. The collectibility of the Accounts Receivable will not be
impaired by any statute of limitations, right of set-off, counterclaim or
defense. Set forth on Schedule 5(p) are computer printouts containing detailed
listings of Accounts Receivable as of the dates specified therein (which shall
be updated through the Closing Date) and which reflect the periods of time that
such accounts have been outstanding as of the dates of such listings.
(q) Licenses; Service Area.
(i) Schedule 5(q)(i) sets forth all of the FCC Licenses held
by Sellers or relating to the Business and copies of all associated pending
license applications, any filings made with the FCC to memorialize the site of
any "fill-in transmitter," as defined and provided for under the rules of the
FCC, but which may not be shown on the FCC Licenses, and any authority provided
under the FCC rules for fill-in transmitters that have not been memorialized by
any filing with the FCC, but which are listed on Schedule 5(q)(i) ("Fill-in
Transmitters"). The FCC Licenses are in full force and effect, are validly held
by Sellers, and are free and clear of Liens, conditions or other restrictions of
any nature as would limit the operation of Sellers' antenna and transmitter
sites covered by the FCC Licenses, including sites for any Fill-in Transmitter,
(all such sites are collectively referred to as the "Transmitter Facilities").
Except for the FCC Licenses, there are no permits, licenses or other
authorizations currently held by Sellers, or required by law to be held by
Sellers, with respect to ownership of the Assets or operation of Business,
except where the failure to hold such a permit, license or other authorization
would not reasonably be expected to materially affect ownership or operation of
the Assets or conduct of the Business. The sites set forth in the FCC Licenses
and any associated sites for Fill-in Transmitters listed therewith in Schedule
5(q)(i) constitute all of the sites necessary for the conduct of the Business
and have been timely constructed and placed into operation with service to
subscribers by Sellers in accordance with the rules of the FCC. There are no
applications, petitions to deny, complaints or proceedings pending before the
FCC or relating to the operations of or the provision of service from the
Transmitter Facilities that could preclude Sellers from entering into this
transaction or consummating the transactions contemplated hereby or that could
affect the validity of the FCC Licenses.
(ii) The service areas in which the Business operates are
described on Schedule 5(q)(ii).
(r) Benefit Plans. Except as disclosed in Schedule 5(r), the
Business does not have any pension, retirement, profit sharing or bonus plan, or
other employee welfare or benefit
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plan. Neither of Sellers nor the Business participates in, or has any obligation
to contribute to, or any withdrawal liability with respect to, any
"multiemployer plan" as such term is defined in Section 4001 of ERISA and
Sellers have not received notice of the reorganization of any such plan.
(s) Employees. Set forth in Schedule 5(s) is a list of all employees
of Sellers and the compensation of each. Neither Seller is a party to any union
or collective bargaining agreement or other agreements or arrangements of any
kind with any other employee organization or association with respect to any of
its employees. To Sellers' Knowledge, there is no condition or circumstance
which will or may cause the Business to suffer any strike, union representation
contest, labor trouble or work stoppage, and the Business has not suffered any
strike, union representation contest, labor trouble or work stoppage within the
past five (5) years. The consummation of the transactions contemplated hereby
will not result in the imposition on Sellers or Purchaser of any obligations,
including any notice obligations, under the WARN Act.
(t) Insurance. Set forth on Schedule 5(t) is a list of all insurance
policies relating to the Business to which either Seller is a party, including
the expiration dates of said policies. Complete copies of said policies have
been delivered to Purchaser. Such policies provide for coverage which is
adequate and reasonable by industry standards both in scope and in amounts to
insure the Business as presently conducted by Sellers. Prior to the Closing,
Sellers will use their reasonable commercial efforts to continue in full force
and effect after the Closing, at Purchaser's expense, the policies which
Purchaser requests to be kept. Other than as set forth on Schedule 5(t), there
have been no claims asserted under any of such policies, and Sellers have not
received any notice of non-renewal or limitation of coverage with respect to any
of such policies, nor are they aware of any existing circumstance which would
form the basis for nonrenewal of any of such policies or limitation of the
coverage afforded thereunder.
(u) Account Information. Schedule 5(u) contains (i) a current list
of resellers with whom Sellers have contracts or agreements and accounts
receivable of the Business, (ii) a current list of Sellers' service rates for
all resellers and all types of service and accounts, (iii) a list of direct
accounts and resellers which sets forth the number of accounts and resellers by
type and the average monthly billing for each reseller and type of account, and
(iv) a summary of the number and type of accounts on each frequency used by the
Business. Sellers are not aware of any circumstances currently existing which
could result in the loss of any current reseller or direct account of the
Business as a consequence of the transfer of ownership of the Business.
(v) Consents and Approvals. Except as set forth on Schedules
5(m)(ii) and 5(v), no consent, approval or waiver of or by any third party,
except those which have been obtained and which have been delivered to
Purchaser, is necessary in order to permit the transfer and assignment of the
Business and the Assets to Purchaser, free and clear of any Liens or other
restrictions, and the failure by Sellers to secure any consent or waiver will
not result in any adverse affect upon the Assets or upon Purchaser or its
ability to operate the Business following the Closing.
(w) Changes in the Business. Except as set forth on Schedule 5(w),
since the Balance Sheet Date, neither of Sellers or the Business has:
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(i) Made any material changes in the Business or operations of
the Business or the manner of conducting such Business or operations;
(ii) Suffered any damage, destruction or loss materially
adversely affecting the Assets, the Business or its operations;
(iii) Sold, assigned or transferred any trade secret, customer
list or account or suffered any materially adverse change with respect to any of
the foregoing;
(iv) Suffered any material adverse change in its condition,
financial or otherwise;
(v) Sold, leased, disposed of, mortgaged, pledged or suffered
(without being released or relieved therefrom), any lien or encumbrance or
waived any substantial rights relating to any property or assets, tangible or
intangible, relating to the Business, other than in the ordinary course of
business; or
(vi) Entered into any transaction or material contract or
agreement other than in the ordinary course of business.
(x) Documents Relating to Business. Sellers have furnished, or in
the case of Sellers' subscribers, made available, to Purchaser every material
agreement, instrument, letter, pleading, consent, waiver, notice, note and every
material document of whatever nature relating to the Business and, to Sellers'
Knowledge, there is no other material document or instrument of any kind that
Sellers have failed to furnish that would or might affect the truth, accuracy or
completeness of the representations and warranties contained herein. No
representation or warranty by Sellers in this Agreement, any Exhibit or Schedule
thereto or related agreement contains or will contain any untrue statement of a
material fact nor omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
(y) Books and Records. To Sellers' Knowledge, the books and records
of the Business are complete and accurate in all material respects. The
financial books and records of the Business have been maintained consistently in
accordance with sound business practices and are accurate and complete in all
material respects.
(z) Payments.
(i) Except as set forth on Schedule 5(z), to Sellers
knowledge, neither Seller, or any employee, agent, or other person acting on
behalf of Sellers or the Business, has, directly or indirectly, within the past
five (5) years given or agreed to give any gift or similar benefit (other than
legal price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office or other
person who is or may be in a position to help or hinder the Business which: (A)
might subject Sellers, Purchaser or the Business to any damage or penalty in any
civil, criminal or governmental litigation or proceeding or, (B)which if not
given in the past, might have had a materially adverse effect on the assets,
business or operations of the Business as
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reflected in the Financial Statements or (C) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Business.
(ii) Neither Seller has obtained, directly or indirectly, any
property as a result of activities, or used any property to conduct activities,
which activities may constitute or result in a violation of any federal, state
or local law, rule or regulation, the penalty for which could be forfeiture of
such property.
(aa) Schedules. Each of the Schedules described in this Agreement is
dated the date of this Agreement (unless the Schedule indicates specifically
that it is prepared as of a different date), identified specifically as a
schedule to a particular Section and is hereby certified by Sellers as being
true and complete. Any information disclosed in any Schedule described in this
Agreement shall be deemed disclosed for purposes of all other such Schedules to
which such information is relevant.
(bb) Active Units. The number of Active Units as of March 31, 1999
was 38,358.
(cc) Environmental Matters. With respect to any real property leased
by Sellers pursuant to a Lease (any such real property is referred to herein as
"Real Property"), to Sellers' Knowledge, there has been no use, generation,
manufacture, production, storage, release, discharge or disposal of any
Hazardous Material (as defined below) on, under or about the Real Property or
transportation by Sellers or their employees, agents or representatives of any
Hazardous Materials to or from the Real Property, except for petroleum-based
solvents and products ("Petroleum Materials") that are used in connection with
the servicing of equipment in the normal course of the Business, which Petroleum
Materials are stored or handled on the Premises in full compliance of all
applicable laws.
(dd) Contracts. Schedule 5(dd), hereto lists (i) all agreements,
arrangements, commitments, contracts, leases, licenses, instruments and other
obligations of Sellers which relate to the Business (collectively, "Contracts");
and (ii) all Assumed Contracts. Except as set forth on each Schedule 5(dd), each
of the Assumed Contracts is valid, binding and enforceable in accordance with
its terms and is in full force and effect, and there are no existing violations
or defaults by either Seller or, to Sellers' Knowledge, any other party thereto
and, to Sellers' Knowledge, no event, act or omission has occurred which (with
or without notice or the passage of time or both) would result in a material
violation or default under any such Assumed Contract. Except as reflected in the
Schedules, all amounts due and payable under each such contract have been paid.
(ee) Billing Software. Sellers are the sole licensees under the
Billing Software License, which is in full force and effect. Sellers have paid
all amounts due under the Billing Software License other than maintenance
payments of $2,000 per month to become due with respect thereto. The computer
hardware set forth in Schedule 2(a)(iv) and the Billing Software License
collectively comprise the billing system utilized by Sellers to perform billing
services. The Billing Software License, as configured and delivered to Purchaser
at the Closing, shall perform and function and be in the same condition as was
the case during the three billing cycles immediately preceding the date hereof.
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6. Representations and Warranties of Purchaser and Group.
As an inducement for Sellers to enter into this Agreement and
perform its obligations hereunder, each of Purchaser and Group represents and
warrants to Sellers as set forth below. Each of such representations and
warranties are correct and complete as of the date hereof and shall be correct
and complete as of the Closing, with the same effect as if said representations
and warranties had been made at and as of the Closing Date:
(a) Organization and Good Standing. Each of Purchaser and Group is a
corporation duly organized, validly existing and in good standing under of the
laws of the State of Delaware.
(b) Forestallments. Neither Purchaser nor Group is a party to or
subject to any contract or agreement or any judgment, order, writ, injunction or
decree of any court or governmental body which will prevent its performance of
its obligations under this Agreement.
(c) Authorization. At Closing, the execution and delivery of this
Agreement and the other agreements, certificates and documents contemplated
hereby or referred to herein shall have been duly authorized by their respective
Boards of Directors as required under the laws of the State of Delaware, and no
other corporate action shall be required for the approval of this Agreement or
such other agreements, certificates and documents to be executed and delivered
by Purchaser or Group, all of which shall be valid and binding upon Purchaser or
Group, to the extent each is a party thereto, in accordance with their
respective terms.
(d) Noncontravention. Neither the execution and delivery of this
Agreement by Purchaser and Group, nor the performance by Purchaser and Group of
their respective obligations hereunder, nor the consummation of the transactions
contemplated hereby will conflict with or result in a violation or breach of, or
default, or termination under, any terms or provisions of either Purchaser's or
Group's corporate charter or bylaws or of any terms or provisions of any other
agreement or instrument to which Purchaser or Group is a party or by which
Purchaser or Group is bound.
(e) Consents and Approvals. Except for the FINOVA Consent, approvals
of the FCC and requisite filings with the Securities and Exchange Commission, no
consent, approval, authorization, waiver, declaration or filing of, by or with
any governmental authority or by any third party is necessary in connection with
the execution or delivery of this Agreement by Purchaser and Group or the
consummation by Purchaser or Group of the transactions contemplated hereby.
(f) FCC Qualification. Purchaser is legally qualified to hold the
FCC Licenses.
7. Conditions Precedent to Purchaser's Obligation to Close.
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, on or prior
to the Closing Date, of each of the following conditions:
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(a) Representations and Warranties. The representations and
warranties made by Sellers contained herein, including the Schedules attached
hereto, shall be true and correct at and as of the time of the Closing, with the
same effect as though such representations and warranties were made at and as of
such time, except in respects not materially adverse to Sellers or the Business,
and each Seller shall deliver to Purchaser a certificate dated the Closing Date
so stating. As used herein, the phrase "in respects not materially adverse to
Sellers" shall mean in respects not materially adverse to the overall financial
condition, business or prospects of the Business.
(b) Performance and Compliance. Sellers, on or before the Closing
Date, shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with by them at or before
the Closing.
(c) Closing Deliveries. Each Seller shall have delivered to
Purchaser all items required to be delivered by it pursuant to Section 14(a) of
this Agreement.
(d) Opinion Letters. Purchaser shall have been furnished with
opinions, dated the Closing Date, of Bruce Lazar, counsel to Sellers, and of
Shulman, Rogers, Gondal, Pordy & Ecker PA, special FCC counsel to Sellers, in
substantially the forms attached hereto as Exhibit "D-1" and Exhibit "D-2"
respectively.
(e) Governmental Action. No order, ruling or regulation (general or
specific) of any governmental authority shall have been issued or promulgated,
and no judicial or administrative action shall have been taken and shall have
not been rescinded, canceled or reversed, which action has the purpose or would
have the effect of prohibiting the transactions herein contemplated or the
effect of interfering with or materially affecting the right or ability of any
party to this Agreement to consummate any of the transactions contemplated
hereby.
(f) Consents and Approvals. All consents, approvals and waivers of
third parties, including those set forth on Schedule 5(v) and any consents,
approvals and waivers required under any contracts, licenses, leases, or other
agreements material to the Business, the FINOVA Consent, and consents, permits
and approvals of all regulatory agencies or other authorities having
jurisdiction over the transactions contemplated by this Agreement, including a
Final Order from the FCC, shall have been procured and delivered to Purchaser,
and all other requirements prescribed by law shall have been satisfied.
(g) Prohibitive Proceedings. No suit, action or other proceeding
shall be pending or directly threatened by any federal or state governmental
agency having jurisdiction or authority over either Seller, the Business,
Purchaser or Group in which it is sought to restrain or prohibit consummation of
the transactions contemplated by this Agreement.
(h) Accountant's Review. Purchaser's Accountants shall have reviewed
the Financial Statements, and Purchaser shall not have been advised by the
Accountants on or prior to thirty (30) days after receipt of Sellers' Financial
Statements that, based upon a review (but not an audit) of the affairs of the
Business for the period from the Balance Sheet Date through the Closing Date,
there has come to their attention facts or circumstances causing them to
reasonably believe that Sellers' representations and warranties relating to the
Assets, the Financial Statements, and the financial condition of the Business
are not materially true and correct as of
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the Closing Date. Any such advice shall be in writing and shall specify in
detail the particulars as to what facts or circumstances have caused the
Accountants to believe that any such representations or warranties are not
materially true and correct, that any such condition has not been fulfilled.
Sellers shall be given a reasonable opportunity (not to exceed 15 business days
after delivery to it of such advice) to explain or remedy any alleged
misrepresentation or breach of warranty or to produce any such missing books or
records. If the Closing thereafter occurs, it shall be deemed to have occurred
as of the originally scheduled Closing Date. In preparing such advice, the
Accountants may rely upon written statements of Sellers and need not audit the
financial condition of Sellers.
(i) Amounts Payable. All amounts payable by Sellers to the Business
and all amounts payable by the Business to Sellers shall have been reconciled,
netted and paid in full.
(j) Zoning. There shall not have been commenced, threatened or
received any proceeding, or notice thereof, which results or could result in the
citation of either Seller or of the Business for violation of zoning ordinances
in connection with the use of the Sellers' principal offices or requiring the
cessation of such use.
(k) UCC Termination Statements. Purchaser shall have received
originally executed UCC-3 termination statements releasing all Liens with
respect to the Assets and the Business.
(l) EBITDA. The Business shall have annual adjusted EBITDA for a
trailing six month period ending not more than forty-five (45) days immediately
prior to the Closing hereunder, as annualized, based upon the segment
information for the Business plus such pro forma adjustments as have been
mutually agreed to by Purchaser and Sellers, of not less than $500,000;
provided, that if there is an EBITDA Deficiency, then Purchaser shall have the
option, in its discretion, to elect to waive this condition and purchase the
Business and the Transferred Assets for a Purchase Price adjusted as provided in
Section 4(c)(i) of this Agreement.
(m) Board Approval. This Agreement and the transactions contemplated
hereby shall have been approved by Purchaser's Board of Directors, such approval
to be obtained within 60 days of the date of execution of this Agreement.
(n) Minimum Gross Revenue. Sellers' Average Gross Revenue in respect
of the Business for the three-month period ended September 30, 1999 shall be not
less than Sellers' Average Gross Revenue for the three-month period ended March
31, 1999.
(o) FCC Licenses. All of the FCC Licenses shall be in full force and
effect on the Closing Date.
(p) Due Diligence Review. Purchaser, Group and their counsel shall
have completed their due diligence investigations of Sellers' financial
condition and operations, the Business and the Assets, all to their reasonable
satisfaction; provided, that such review shall be completed within sixty (60)
days following the date hereof.
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8. Conditions Precedent to Sellers' Obligation to Close.
The obligations of Sellers to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties made by Purchaser and/or Group contained herein shall be true and
correct at and as of the time of the Closing, with the same effect as though
such representations and warranties were made at and as of such time, except in
respects not materially adverse to Purchaser or Group, and each of Purchaser and
Group shall deliver to Sellers a certificate, dated the Closing Date, so
stating. As used herein, the phrase "in respects not materially adverse to
Purchaser" shall mean in respects not materially adverse to the overall
financial condition, business or prospects of Purchaser or Group.
(b) Performance and Compliance. Purchaser, on or before the Closing,
shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with by it at or before
the Closing.
(c) Closing Deliveries. Purchaser shall have delivered to Sellers
all items required to be delivered by Purchaser pursuant to Section 14(b) of
this Agreement.
(d) Opinion Letter. Sellers shall have been furnished with an
opinion, dated the Closing Date, of Phillips Nizer Benjamin Krim &Ballon LLP,
counsel to Purchaser, in substantially the form of Exhibit "E" attached hereto.
(e) Governmental Action. No order, ruling or regulation (general or
specific) of any governmental authority shall have been issued or promulgated,
and no judicial or administrative action shall have been taken and shall have
not been rescinded, canceled or reversed, which action has the purpose or would
have the effect of prohibiting the transactions herein contemplated or the
effect of interfering with or materially affecting the right or ability of any
party to this Agreement to consummate any of the transactions contemplated
hereby.
(f) Consents and Approvals. All consents, approvals and waivers of
third parties, including the FINOVA Consent, and consents, permits and approvals
of all regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement, including a Final Order from the
FCC, shall have been procured and delivered to Sellers, and all other
requirements prescribed by law shall have been satisfied.
(g) Prohibitive Proceedings. No suit, action or other proceeding
shall be pending or directly threatened by any federal or state governmental
agency having jurisdiction or authority over either Seller, the Business,
Purchaser or Group in which it is sought to restrain or prohibit consummation of
the transactions contemplated by this Agreement.
(h) Minimum Adjusted Purchase Price. The Purchase Price, as adjusted
as provided in this Agreement, shall be not less than $2,350,000.
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9. Access; FCC Approvals.
(a) Access.
(i) Prior to the Closing, Sellers will give to Purchaser and
Purchaser's counsel, the Accountants or other representatives of Purchaser
reasonable access (during normal business hours) to all properties, documents,
contracts, books, records and other data of the Business; provided, however,
that all information received by Purchaser, Purchaser's counsel, the Accountants
or any other such representatives of Purchaser shall be held wholly confidential
by each of them and that, in taking advantage of such access, none of them shall
unduly interfere with the operation of the Business; and, provided further, that
if the transactions contemplated hereby shall not be consummated, all data of
every kind and nature and all copies of documents taken by any of said persons
shall upon request be returned to Sellers and not otherwise used by Purchaser;
except that that information which is publicly available or was previously known
by Purchaser or later acquired from third parties having no obligation of
confidentiality to Sellers need not be held confidential.
(ii) From and after the Closing, Sellers will give Purchaser,
Purchaser's counsel, the Accountants or Purchaser's other representatives
reasonable access (during normal business hours) to all books and records of
Sellers with respect to the period ending on the Closing Date.
(b) FCC Approvals. Promptly upon execution of this Agreement,
Sellers shall commence the proceedings necessary to obtain FCC approval of the
transfer of the FCC Licenses to Purchaser, including filing with the FCC within
thirty (30) days hereof the applications requesting FCC consent to the proposed
assignment of the FCC Licenses to Purchaser. Sellers agree to take all actions
necessary to facilitate the granting of such approval and to keep Purchaser
informed as to the course of such proceedings, and Purchaser agrees to cooperate
with Sellers in providing any information or assistance reasonably required to
expedite such approval proceedings. Each party shall bear its own costs
associated with obtaining FCC approval of the transfer of the FCC Licenses to
Purchaser, including reasonable attorneys' fees, provided, that Purchaser and
Group, on the one hand, and Sellers, on the other hand, agree to share equally
the filing fees required for such approvals.
10. Affirmative Covenants of Sellers.
Except as otherwise consented to by Purchaser in its sole
discretion, Sellers jointly and severally covenant that, throughout the period
commencing on the date hereof and ending on the Closing Date, they will:
(a) Conduct of Business. Conduct the Business only in the ordinary
course, consistent with prior practice;
(b) Maintenance of Property. Maintain and keep the Assets and other
material properties, machinery and equipment of the Business in as good repair
and condition in all material respects as at present, except for depreciation
due to ordinary wear and tear;
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(c) Insurance. Maintain in full force and effect insurance in
amounts at least as great as, and comparable in scope of coverage to, that
currently maintained by the Business, as described on Schedule 5(t) hereto;
(d) Performance of Obligations. Consistent with past business
practices, perform all material obligations under material contracts, leases and
documents relating to or affecting the material assets, properties and
operations of the Business;
(e) Maintenance and Preservation of Business. Consistent with their
past practices, use their best efforts to maintain and preserve the Assets and
the Business in their current states and conditions;
(f) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon them by all Federal and state laws and all
rules, regulations and orders imposed by Federal or state governmental
authorities, including, without limitation, all notices and filings with the FCC
and all documents required to be filed in connection with the FCC Licenses and
the operation of the Transmitter Facilities and the Equipment including, without
limitation, all renewal applications in connection with the FCC Licenses, all in
a timely manner and in the ordinary course, as provided by the rules promulgated
by the FCC from time to time; and prior to the timely filing of a renewal
application for any FCC License, cause all Transmitter Facilities and Equipment
covered by such FCC License to be in compliance with the FCC rules pertaining to
human exposure to radio frequency emissions;
(g) Notice of Certain Events. By written notice to Purchaser, notify
Purchaser of the commencement of any litigation against either Seller or the
Business claiming damages in an amount exceeding $5,000 in each instance or of
the existence of adverse business conditions threatening the continued, normal
business operations of the Business;
(h) Licenses. Use their best efforts to assure that all the FCC
Licenses will be in full force and effect on the Closing Date;
(i) Satisfaction of Closing Conditions Use their best efforts to
assure, as soon as is reasonably practicable, the satisfaction of all conditions
to the Closing as specified in Section 7 of this Agreement.
(j) Good Standing. Maintain each of their existences as corporations
validly existing and in good standing under the laws of the State of Florida.
11. Negative Covenants of Sellers.
Sellers jointly and severally covenant that, throughout the period
commencing on the date hereof and ending on the Closing Date, unless Purchaser,
in its sole discretion, shall have otherwise consented in writing, they will
not:
(a) Material Contracts. Enter into or institute any Material
Contract or any material employment contract or other agreement not in the
ordinary course of the Business or, except as required by applicable law or
regulation, renew, amend or modify any such contract or agreement now in
existence.
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(b) Inconsistent Agreements. Enter into any agreement, understanding
or commitment, written or oral, with any other person which is in any material
respect inconsistent with the obligations of Sellers under this Agreement.
12. Affirmative Covenants of Purchaser.
Except as otherwise consented to by Sellers, each of Purchaser and
Group covenants that, throughout the period commencing on the date hereof and
ending on the Closing Date, it will:
(a) Good Standing. Maintain its existence as a corporation validly
existing in good standing under the laws of the state of Delaware;
(b) Satisfaction of Closing Conditions. Use its best efforts to
assure, as soon as is reasonably practicable, the satisfaction of all conditions
to the Closing as specified in Sections 7(h), (m) and 8 of this Agreement;
(c) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all Federal and state laws and all
rules, regulations and orders imposed by Federal or state governmental
authorities, except in respects not materially adverse to its financial
condition or business.
13. Termination.
(a) Grounds for Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of Sellers and Purchaser; or
(ii) by the nonbreaching party hereto, if :
(A) the other party shall have:
(1) materially misstated any representation or been in
breach of any warranty contained herein and such misrepresentation or warranty
has not been cured within ten (10) days after receipt of written notice from the
non breaching party, or
(2) been in material breach of any covenant, undertaking
or restriction contained herein and such breach has not been cured within ten
(10) days after receipt of written notice from the nonbreaching party, or
(B) failed to satisfy a condition to Closing applicable to it hereunder
by the Closing Date (or such earlier date as specified herein) and
such failure has not been waived in writing by the nonbreaching
party;
(iii) by either Sellers or Purchaser if the Closing shall not
occur on or prior to December 31, 1999; provided, however, that if a Final Order
from the FCC has not been obtained by December 31, 1999 but the application for
FCC approval is still pending or if approval by the FCC has been obtained but,
such approval shall not yet have become a Final
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Order, and a Final Order is reasonably likely to be granted by March 31, 2000,
then the time period for FCC approval shall be extended for so long as such
Final Order is reasonably likely, but not beyond March 31, 2000; or
(iv) by Sellers or Purchaser, if the FINOVA Consent has not
been obtained as provided in Section 16 hereof.
(v) by either Sellers or Purchaser if Purchaser shall fail to
obtain approval by its Board of Directors of this Agreement and the transactions
contemplated hereby within thirty (30) days following the date of execution
hereof.
(b) Consequences of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of this Section 13, Sellers shall
be entitled to retain the Deposit and Purchaser shall instruct the Escrow Agent
to release and pay the full amount thereof to Sellers; provided, however, that
in the event that such termination shall result from: (i) Sellers' material
breach of their obligations hereunder; (ii) Sellers' termination of this
Agreement pursuant to Section 8(h) hereof; (iii) Purchaser's failure to obtain
approval by its Board of Directors of this Agreement and the transactions
contemplated hereby; (iv) Sellers'and Purchaser's failure to obtain a Final
Order from the FCC; or (v) Purchaser's failure to obtain the FINOVA Consent, and
Purchaser is not in material breach of its obligations hereunder with respect to
obtaining the foregoing items, then Purchaser shall instruct the Escrow Agent to
return the full amount of the Deposit to it in accordance with the Deposit
Escrow Agreement. In any such event, this Agreement shall become null and void
and have no further effect (except for Sections 17, 18, 20 and 26(i)), without
any liability on the part of the parties hereto or any of their directors,
officers or stockholders in respect of this Agreement
14. Deliveries at Closing.
(a) Sellers. At the Closing, Sellers shall deliver or cause to be
delivered to Purchaser the following, duly authorized and executed by each
Seller (unless otherwise indicated):
(i) an assignment and assumption agreement substantially in
the form attached hereto as Exhibit "F" ("Assignment and Assumption Agreement");
(ii) an instrument of conveyance or bill of sale,
substantially in the form attached hereto as Exhibit "G";
(iii) a certificate of each Seller, as required under Section
7(c) hereof;
(iv) the opinions required under Section 7(d)hereof;
(v) the Deposit Escrow Agreement;
(vi) a Noncompetition, Confidentiality and Nondisclosure
Agreement, substantially in the form of Exhibit "H" hereto;
(vii) all such other endorsements and instruments as Purchaser
may reasonably request for the purpose of (a) vesting in Purchaser good and
valid title to the Assets, free and clear of all Liens and other restrictions
(except those permitted hereunder), (b) transferring the FCC Licenses and the
Leases, and (c) enabling Purchaser to operate the Business.
27
<PAGE>
(viii) a copy of the Billing Software on the appropriate
physical medium as agreed to in good faith by Sellers and Purchaser;
(ix) originally executed UCC-3 termination statements
releasing all Liens with respect to the Assets and the Business;
(x) Sellers shall arrange to have all records relating to the
FCC Licenses, including those held by counsel to Sellers, delivered to Purchaser
within seven (7) days following the Closing;
(xi) The Trade Name License;
(xii) good standing certificates of Sellers from the Secretary
of State of Florida, each dated within ten (10) days prior to the Closing Date;
and
(xiii) proof of payment of all amounts due and owing by
Sellers pursuant to paragraph (d) hereinbelow
(b) Purchaser. At the Closing, Purchaser shall deliver or cause to
be delivered to Sellers the following, duly authorized and executed by Purchaser
(unless otherwise indicated):
(i) the Purchase Price;
(ii) the Assignment and Assumption Agreement;
(iii) a certificate of Purchaser, as required under Section
8(a) hereof;
(iv) the Trade Name License;
(v) the Deposit Escrow Agreement; and
(vi) the opinion required under Section 8(d)hereof.
(c) Further Assurances. At any time and from time to time after the
Closing, at the request of any party and without further consideration, the
other party will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as the requesting
party may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign the properties transferred hereunder and to
effectuate the terms hereof. In addition, Sellers shall use their best efforts
to obtain the prompt transfer of any telecommunications transmissions services
listed on Schedule 5(e)(i) and the Telephone Number Inventory listed on Schedule
5(f) to Purchaser.
(d) Proration. State and local property taxes on the Assets, rents
paid or due under the Leases, regulatory fees paid or due in the ordinary course
in connection with the Business or the Assets (including fees under the
universal service fund and telecommunications relay service), and payments made
or due under the other Contracts assigned to Purchaser hereunder shall be
prorated as of the Closing Date, with Sellers being responsible for all amounts
arising out of occurrences on or prior to the Closing Date and the Purchaser
being responsible for all amounts arising out of occurrences thereafter. To the
extent determinable, such proration shall be made at the Closing, and the
amounts due pursuant to Section 4(a)(i)(1) hereof shall be
28
<PAGE>
appropriately adjusted. To the extent not so determinable, the appropriate
amount shall be paid promptly upon demand of the party entitled thereto.
15. Brokers.
Except for Daniels & Associates, Inc. with whom Sellers have entered
into a separate commission agreement, and which commission shall be paid by
Sellers (the "Sellers Broker Agreement"), Sellers, on the one hand, and
Purchaser, on the other hand, represent and warrant each to the other that they
have not dealt with any broker, sales person or finder in connection with this
transaction. Sellers, on the one hand, and Purchaser on the other hand, each
agree to indemnify, defend and hold the other harmless from and against any
loss, cost, liability or expense suffered or incurred by the other party as a
result of a claim or claims for brokerage commissions, finder's fees or other
similar fees from any party or firm that is based on the act or omission of the
party in breach of the above warranty.
16. Consent of Lender.
Sellers and Purchaser hereby acknowledge and agree that this
Agreement and the transactions contemplated hereunder are subject to and
contingent upon the written consent of FINOVA Capital Corporation (the "FINOVA
Consent"),the senior lender under a credit facility with Purchaser which
Purchaser agrees to make a good faith effort to obtain. Following execution and
delivery of this Agreement by the parties, should Purchaser be unable to obtain
FINOVA Consent for any reason within forty-five (45) days from the date hereof,
this Agreement may be terminated by Sellers or by Purchaser pursuant to the
terms of Section 13 hereof.
17. Expenses.
Except as specifically provided in Section 20 hereof, Purchaser, on
the one hand, and Sellers, on the other hand, shall each pay their respective
counsel, accountants and other expenses incurred in connection with the
negotiation and consummation of the transactions contemplated hereby.
18. Nondisclosure of Confidential Information.
Purchaser, on the one hand, and Sellers, on the other hand, each
agree that if, for any reason whatsoever, the transactions contemplated by this
Agreement shall not be consummated, all information disclosed to the other party
pursuant to Section 9 or otherwise shall remain confidential and each party
shall not use or furnish or divulge the same to any other person, except for
information not deemed confidential as provided in Section (9)(a)(i) hereof.
19. Survival of Representations and Warranties.
(a) Period of Survival. All representations, covenants and
warranties made by Sellers and Purchaser under this Agreement in connection with
the transactions contemplated hereby or in any Exhibit, Schedule, certificate,
list or other instrument delivered pursuant hereto shall survive the Closing for
a period of one (1) year.
29
<PAGE>
(b) Reliance. Notwithstanding any right of Purchaser to fully
investigate the affairs of Sellers relating to the Business and notwithstanding
any knowledge of facts determined determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has the right to rely fully
upon the representations, warranties, covenants and agreements of Sellers
contained in this Agreement or in any document delivered or to be delivered
pursuant to this Agreement by Sellers or any of Sellers' respective
representatives (including, but not limited to, any accountant or attorney
representing Sellers), in connection with the transactions contemplated by this
Agreement except where Purchaser has actual knowledge as to the material
inaccuracy or incompleteness of any such representation or warranty. Each
warranty, representation, agreement and covenant contained herein is independent
of all warranties, representations, agreements and covenants contained herein or
in any Exhibit, Schedule, certificate, list or other instrument or documents
(whether or not covering identical or related subject matter) and must be
independently and separately complied with and satisfied.
20. Indemnification.
(a) By Sellers and Purchaser. Sellers shall jointly and severally
indemnify and hold Purchaser and Group harmless from and against any and all
damages, losses, costs and expenses (including, but not limited to, reasonable
counsel fees and expenses in connection with the contest of any claim by either
or both of Sellers against Purchaser and/or Group or by any third party against
Purchaser and/or Group or otherwise ) paid or incurred by Purchaser and/or Group
and arising out of (i) any inaccurate representations or breaches of covenant or
warranty made by Sellers in this Agreement in connection with the transactions
contemplated hereby (including, without limitation, withdrawal liability
regarding any employee(s) of Seller) or in any Exhibit, Schedule, certificate,
list or other instrument delivered by Sellers pursuant hereto, (ii) any claims
made against Purchaser and/or Group for any liability that Purchaser did not
assume pursuant to Section 2(c) hereof, including, without limitation, the
Retained Liabilities and any of the claims set forth on Schedule 5(dd), or
withdrawal liability regarding any employee(s) of Sellers, or (iii) Sellers'
failure to comply with the Bulk Acts. Purchaser and Group shall have the right,
in enforcing this Section 20(a), first to obtain reimbursement in satisfaction
of any of Sellers' obligations hereunder from the funds (if any) held in escrow
pursuant to the Indemnity Escrow Agreement, in accordance with the terms of the
Indemnity Escrow Agreement.
Purchaser shall indemnify and hold Sellers harmless from and against
any and all damages, losses, costs and expenses (including reasonable counsel
fees and expenses in connection with the contest of any claim by Purchaser
against either or both of Sellers or by any third party against either or both
of Sellers or otherwise) paid or incurred by Sellers and arising out of any
inaccurate representations or breaches of covenant or warranty made by Purchaser
in this Agreement in connection with the transactions contemplated hereby or in
any Exhibit, Schedule, certificate, list or other instrument delivered by
Purchaser pursuant hereto.
(b) Procedure For Claims. Promptly after receipt by any party
entitled to indemnification pursuant to paragraph (a) hereinabove (the
"Indemnified Party") of notice of the commencement of any action asserting a
claim based upon any cause enumerated herein, the Indemnified Party shall, if it
claims the benefits of indemnification pursuant to Section 20(a) with respect to
such action, notify the party from which such indemnification is sought (the
30
<PAGE>
"Indemnifying Party") of the commencement thereof. Upon receipt of such notice,
the Indemnifying Party shall have the option of either assuming the defense of
such action (and the cost thereof) with counsel reasonably satisfactory to both
the Indemnified Party and the Indemnifying Party or participating in the defense
of such action at the sole expense, however, of the Indemnifying Party. In the
event of the Indemnifying Party's assumption of the defense of such action,
counsel selected by the Indemnified Party may, at the election of the
Indemnified Party, participate in any such defense, at the sole expense,
however, of the Indemnified Party. No settlement or compromise to be paid by the
Indemnifying Party shall be entered into without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed.
(c) Time Period for Claims. The indemnity provided in Section 20(a)
shall be limited in time, in that no party may assert a claim in respect of such
indemnity at any time after the first anniversary of the Closing Date.
(d) Minimum Claim. Notwithstanding anything herein to the contrary,
no party shall assert a claim for indemnity pursuant to Section 20(a) unless the
aggregate of all such claims by such Indemnified Party against such Indemnifying
Party shall exceed $27,500.00, in which event the Indemnifying Party's
obligation shall apply to all indemnified losses in excess of such amount.
21. Employees.
Purchaser shall have the unlimited right, but not the obligation, to
seek and secure the employment of any employee of Sellers related to the
Business, and Sellers shall reasonably assist Purchaser in such efforts;
provided, however, that Sellers shall not be required to incur any expense
thereby; and provided, further, that Sellers do not warrant or guarantee the
availability to Purchaser of any of their current employees.
22. Accounts Receivable.
Purchaser will use efforts consistent with standard practice to
collect the Accounts Receivable. Ninety (90) days after the Closing Date,
Purchaser shall give Sellers written notice of any Accounts Receivable that
existed as of the Closing Date that remain uncollected at such date. Sellers
shall then have ninety (90) days to collect such uncollected Accounts Receivable
at their own expense. Sellers shall deliver to Purchaser any amounts either of
them receives during such period from such efforts. At the end of such ninety
(90) day period, to the extent that Accounts Receivable remain uncollected,
Purchaser shall have the right to retransfer and re-assign to Sellers the
Accounts Receivable representing such excess (with respect to accounts which are
not billed on a monthly basis, such amount shall be limited to the amount of
such Accounts Receivable which relate to services rendered through the date of
such retransfer) and to collect from Sellers (or the Escrow Agent) the amount of
such excess. After any such transfer to Sellers, any amounts thereafter
collected by Sellers shall be the property of Sellers.
23. Bulk Sales Compliance.
Subject to Section 20(a) hereof, Purchaser hereby waives compliance
by Sellers with the provisions of all Bulk Acts.
31
<PAGE>
24. Risk of Loss.
From the date hereof through the Closing Date, if any Asset is
destroyed or damaged by fire or any other cause, other than use, wear or loss in
the ordinary course of business and the aggregate amount of such damage exceeds
$5,000.00, or the damage could otherwise adversely affect the operations of the
Business, Sellers shall give written notice to Purchaser as soon as practicable
(but in no event later than five (5) calendar days) after discovery by Sellers
of such damage or destruction. Purchaser shall have the option of (a) having
such Asset delivered to it at the Closing in its destroyed or damaged condition
in which event the Purchase Price shall be reduced by the amount allocated to
such Asset (to the extent of such damage or destruction), as mutually agreed by
the parties, (b) excluding such Asset from this Agreement and the transactions
contemplated hereby, in which event the Purchase Price shall be reduced by the
amount allocated to such Asset, as mutually agreed by the parties, or (c)
replacing or repairing such Asset (any replacement shall be deemed an Asset) at
Sellers' expense; provided, that should Purchaser notify Sellers that it elects
to exclude such Asset from this Agreement and the transactions contemplated
hereby or have such Asset delivered to it at the Closing in its destroyed or
damaged condition, Sellers shall have the right, upon notice to Purchaser, to
repair or replace such Asset at Sellers' expense and have such Asset included in
this Agreement and the transactions contemplated hereby.
25. Notices.
All notices and communications shall be in writing and delivered as
follows (or to such other address as any party may furnish to the other in
writing in accordance with the terms of this Section):
If to Purchaser or Group: Aquis Wireless Communications, Inc.
Aquis Communications Group, Inc.
1719A Route 10, Suite 300
Parsipanny, New Jersey 07054
Tel: (973) 560-8000
Fax: (973) 560-8040
Attention: John X. Adiletta, President
with a copy to: Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Tel: (212) 977-9700
Fax: (212) 262-5152
Attention: Monte Engler, Esq.
If to Sellers: ABC Cellular Corporation
ABC Paging, Inc.
16500 N.W. 52nd Avenue
Miami, FL 33014
32
<PAGE>
Tel: (305) 621-6000
Fax: (305) 521-4477
Attention: Mr. Randy Simon
with a copy to: Bruce Lazar & Associates
2901 Collins Avenue
Miami Beach, FL 33140
Tel: (305) 535-8118
Fax: (305) 673-8865
Attention: Bruce Lazar, Esq.
Any notices and communications pursuant to this Agreement shall be
sent by hand, by registered or certified first-class mail, postage prepaid, by
facsimile transmission or by such other form of delivery as shall provide the
sender with documentary evidence of delivery, and shall be deemed to be
delivered three (3) days after posting by mail or when received by hand delivery
or when sent by facsimile transmission.
26. Miscellaneous.
(a) Severability. If any term or provision of this Agreement shall
to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be
valid and enforced to the fullest extent permitted by law.
(b) Assignment. Neither Purchaser nor Sellers may assign this
Agreement or any rights hereunder prior to the Closing without the prior written
consent of the other party; provided, however, that Purchaser may assign this
Agreement or any of its rights hereunder to Group or to a wholly-owned
subsidiary of Purchaser or Group, provided that Purchaser remains liable for all
obligations of Purchaser hereunder. After the Closing, the terms, provisions,
covenants and conditions of this Agreement shall bind and benefit the parties
hereto and their respective heirs, successors, personal representatives and
permitted assigns.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be an
original instrument, but such counterparts, together, shall constitute a single
agreement.
(d) No Waiver. No waiver of any breach or default under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any party hereto may, at or before the Closing, waive any conditions to its
obligations hereunder which are not fulfilled.
(e) Entire Agreement; Amendments. This Agreement, including the
Exhibits and Schedules referred to herein which are hereby made a part hereof by
reference, contains the entire understanding of the parties hereto with respect
to the subject matter contained herein and may be amended only by a written
instrument executed by the parties hereto or their respective successors or
assigns. There are no restrictions, promises, warranties, covenants or
undertakings other than those expressly set forth herein.
33
<PAGE>
(f) Governing Law, Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York; and the parties
irrevocably submit to the jurisdiction of the United States District Court for
the Southern District of New York, over any suit, action or proceeding arising
out of or in any way related to this Agreement. The parties irrevocably waive,
to the fullest extent permitted by law, any objection which either of them may
have to the laying of venue of any such suit, action or proceeding brought in
such court, and any claim that such suit, action or proceeding brought in such
court has been brought in an inconvenient forum. It is the intention of the
parties that any suit, action or proceeding arising out of or in any way related
to this Agreement be brought only in the United States District Court for the
Southern District of New York. In the event there does not exist federal
jurisdiction, then either party may bring any such suit, action or proceeding in
any court having jurisdiction. In the event that either party shall not have
appointed an agent for service of process in Florida, each party agrees that it
may be served with process by registered or certified mail, postage prepaid,
mailed to the addresses set forth in Section 26 hereof.
(g) Headings. Headings are inserted for convenience and do not form
part of the Agreement.
(h) No Solicitation. Sellers hereby agree that prior to the Closing
or termination of this Agreement, neither Seller shall directly nor indirectly
solicit, hold discussions or negotiate with or otherwise cooperate with any
person or entity other than Purchaser and its representatives concerning any
sale of Sellers, the Assets or the Business.
(i) Public Announcements. No party shall issue a press release, make
publicly available any document or make any public announcement concerning this
Agreement, the terms hereof or the transactions contemplated hereby without
obtaining the prior written consent of the other party, which consent shall not
be unreasonably withheld or delayed, except to the extent that such party, or a
publicly held parent company of such party, is required by law or applicable
regulation or under the rules of a stock exchange (or the Nasdaq) on which such
party's or such party's parent company's securities are listed, to issue such a
press release, to make available such a document or to make such a public
statement, in which case such party shall provide prompt prior notice of such
disclosure to the other party.
34
<PAGE>
IN WITNESS WHEREOF, Purchaser, Group and Sellers have executed this
Agreement as of the day and year first above written.
AQUIS WIRELESS COMMUNICATIONS, INC.
By: ____________________________________
John X. Adiletta
Its: President
AQUIS COMMUNICATIONS GROUP, INC.
By: ____________________________________
John X. Adiletta
Its: President
ABC CELLULAR CORPORATION
By: ____________________________________
Randy Simon
Its: Vice President
ABC PAGING, INC.
By: ____________________________________
Randy Simon
Its: Vice President
<PAGE>
Schedules
2(a)(i) - Radio Paging Licenses (see Schedule 5(q)(i))
2(a)(ii) - Machinery
2(a)(iv) - Furniture, Fixtures and Computer Equipment
2(a)(vii) - Customer List
2(c)(iii) - Customer Deposits
2(c)(iv) - Deferred Revenues
2(c)(v) - Assumed Contractual Obligations
4(b) - Purchase Price Allocation
5(d) - Certificates of Incorporation and By-Laws
5(e)(i) - Equipment and Spare Parts
5(e)(ii) - Telecommunications Transmission Services
5(f) - Telephone Number Inventory
5(g)(i) - Financial Statements
5(g)(ii) - GAAP Compilation Statements
5(h)(i) - Condition of Assets
5(h)(ii) - Liens Affecting Assets
5(i) - Intellectual Property
5(k)(iii) - Audits
5(m)(ii) - Leases
5(m)(iii) - Nonconforming Uses
5(m)(iv) - Existing Conditions
5(n) - Material Contracts
5(o)(i) - Compliance
5(o)(ii) - Litigation, Etc.
5(o)(iii) - Defaults
5(p) - Accounts Receivable
5(q)(i) - FCC Licenses
5(q)(ii) - Service Area
5(r) - Benefit Plans
5(s) - Employees and Compensation
5(t) - Insurance
5(u) - Account Information
5(v) - Consents and Approvals
5(w) - Changes
5(z) - Payments
5(dd) - Violations
<PAGE>
List of Exhibits
"A" - Deposit Escrow Agreement
"B" - Indemnity Escrow Agreement
"C" - Trade Name License
"D-1" - Opinion Letter from Bruce Lazar & Associates
"D-2" - Opinion Letter from Shulman, Rogers, Gondal, Pordy & Ecker, P.A.
"E" - Opinion Letter from Phillips Nizer Benjamin Krim &Ballon LLP
"F" - Assignment and Assumption Agreement
"G" - Bill of Sale
"H" - Noncompetition, Confidentiality and Nondisclosure Agreement
<PAGE>
TABLE OF CONTENTS
Page
----
R E C I T A L S:...............................................................1
1. Definitions of Defined Terms................................................1
(a) Capitalized Terms......................................................1
(b) Defined Terms..........................................................1
2. Acquisition of Assets; Assumption of Liabilities............................6
(a) Sale and Purchase of Assets............................................6
(b) Excluded Assets........................................................7
(c) Assumption of Certain Liabilities......................................7
3. Closing.....................................................................8
4. Purchase Price and Payment/Adjustments......................................8
(a) Purchase Price.........................................................8
(b) Allocation of Purchase Price...........................................9
(c) Purchase Price Adjustments.............................................9
(d) Application of Deposit................................................10
(e) Indemnity Escrow......................................................10
5. Representations and Warranties of Sellers..................................10
(a) Power and Authority...................................................10
(b) Noncontravention......................................................10
(c) Governmental Approvals................................................11
(d) Formation, Good Standing and Qualifications...........................11
(e) Equipment and Telecommunications Transmission Services................11
(f) Telephone Number Inventory............................................11
(g) Financial Statements..................................................12
(h) Assets................................................................12
(i) Business Names and Business Addresses.................................13
(j) Liabilities...........................................................13
(k) Taxes.................................................................13
(l) Inventory.............................................................13
(m) Real Property.........................................................14
(n) Material Contracts....................................................14
(o) Compliance With Laws; Litigation......................................15
(p) Accounts Receivable...................................................16
(q) Licenses; Service Area................................................16
(r) Benefit Plans.........................................................16
(s) Employees.............................................................17
(t) Insurance.............................................................17
(u) Account Information...................................................17
(v) Consents and Approvals................................................17
(w) Changes in the Business...............................................17
(x) Documents Relating to Business........................................18
(y) Books and Records.....................................................18
(z) Payments..............................................................18
i
<PAGE>
(aa) Schedules.............................................................19
(bb) Active Units..........................................................19
(cc) Environmental Matters.................................................19
(dd) Contracts.............................................................19
(ee) Billing Software......................................................19
6. Representations and Warranties of Purchaser and Group......................20
(a) Organization and Good Standing........................................20
(b) Forestallments........................................................20
(c) Authorization.........................................................20
(d) Noncontravention......................................................20
(e) Consents and Approvals................................................20
(f) FCC Qualification.....................................................20
7. Conditions Precedent to Purchaser's Obligation to Close....................20
(a) Representations and Warranties........................................21
(b) Performance and Compliance............................................21
(c) Closing Deliveries....................................................21
(d) Opinion Letters.......................................................21
(e) Governmental Action...................................................21
(f) Consents and Approvals................................................21
(g) Prohibitive Proceedings...............................................21
(h) Accountant's Review...................................................21
(i) Amounts Payable.......................................................22
(j) Zoning................................................................22
(k) UCC Termination Statements............................................22
(l) EBITDA......................................Error! Bookmark not defined.
(m) Board Approval........................................................22
(n) Minimum Gross Revenue.................................................22
(o) FCC Licenses..........................................................22
(p) Due Diligence Review..................................................22
8. Conditions Precedent to Sellers' Obligation to Close.......................23
(a) Representations and Warranties........................................23
(b) Performance and Compliance............................................23
(c) Closing Deliveries....................................................23
(d) Opinion Letter........................................................23
(e) Governmental Action...................................................23
(f) Consents and Approvals................................................23
(g) Prohibitive Proceedings...............................................23
9. Access; FCC Approvals......................................................24
(a) Access................................................................24
(b) FCC Approvals.........................................................24
10. Affirmative Covenants of Sellers..........................................24
(a) Conduct of Business...................................................24
(b) Maintenance of Property...............................................24
(c) Insurance.............................................................25
(d) Performance of Obligations............................................25
(e) Maintenance and Preservation of Business..............................25
ii
<PAGE>
(f) Compliance with Laws..................................................25
(g) Notice of Certain Events..............................................25
(h) Licenses..............................................................25
(i) Satisfaction of Closing Conditions....................................25
(j) Good Standing.........................................................25
11. Negative Covenants of Sellers.............................................25
(a) Material Contracts....................................................25
(b) Inconsistent Agreements...............................................26
12. Affirmative Covenants of Purchaser........................................26
(a) Good Standing.........................................................26
(b) Satisfaction of Closing Conditions....................................26
(c) Compliance with Laws..................................................26
13. Termination...............................................................26
(a) Grounds for Termination...............................................26
(b) Consequences of Termination...........................................27
14. Deliveries at Closing.....................................................27
(a) Sellers...............................................................27
(b) Purchaser.............................................................28
(c) Further Assurances....................................................28
(d) Proration.............................................................28
15. Brokers...................................................................29
16. Consent of Lender.........................................................29
17. Expenses..................................................................29
18. Nondisclosure of Confidential Information.................................29
19. Survival of Representations and Warranties................................29
(a) Period of Survival....................................................29
(b) Reliance..............................................................30
20. Indemnification...........................................................30
(a) By Sellers and Purchaser..............................................30
(b) Procedure For Claims..................................................30
(c) Time Period for Claims................................................31
(d) Minimum Claim.........................................................31
21. Employees.................................................................31
22. Accounts Receivable.......................................................31
23. Bulk Sales Compliance.....................................................31
24. Risk of Loss..............................................................32
iii
<PAGE>
25. Notices...................................................................32
26. Miscellaneous.............................................................33
(a) Severability..........................................................33
(b) Assignment............................................................33
(c) Counterparts..........................................................33
(d) No Waiver.............................................................33
(e) Entire Agreement; Amendments..........................................33
(f) Governing Law, Venue..................................................34
(g) Headings..............................................................34
(h) No Solicitation.......................................................34
(i) Public Announcements..................................................34
iv
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 352
<SECURITIES> 0
<RECEIVABLES> 6,396
<ALLOWANCES> 946
<INVENTORY> 1,850
<CURRENT-ASSETS> 10,475
<PP&E> 10,029 <F1>
<DEPRECIATION> 0 <F1>
<TOTAL-ASSETS> 43,347
<CURRENT-LIABILITIES> 10,168
<BONDS> 0
0
0
<COMMON> 164
<OTHER-SE> 6,714
<TOTAL-LIABILITY-AND-EQUITY> 43,347
<SALES> 623
<TOTAL-REVENUES> 23,195
<CGS> 766
<TOTAL-COSTS> 25,602
<OTHER-EXPENSES> 355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,335
<INCOME-PRETAX> (5,834)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,834)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,834)
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
<FN>
<F1> Fixed assets are reported net of accumulated depreciation in the balance
sheet
</FN>
</TABLE>
